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Chile Mining Report Q2 2010
Market |
Agriculture, Farming & Raw Materials |
Report Type |
Market Research |
Country |
Chile |
Published |
10 March 2010 |
Number of Pages |
77 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
With improving commodity prices aiding the recovery of Chile’s mining sector, many companies are seeking investment projects in the mineral-rich country. In December 2009, it was reported that a relatively unknown Guangdong-based mining company Shunde Rixin Development had acquired a 76% stake in three iron ore mines in Chile. Li Zihao, chairman of the company sees the development as a significant step in breaking the international stranglehold on high-quality iron ore currently held by Rio Tinto, Vale and BHP Billiton.
In addition to copper, gold could also be a potentially attractive investment prospect for Chile. Indeed, it was reported in November 2009 that Chile intends to triple its gold production over the following five years according to the Chilean National Copper Commission. A number of developments have already begun on gold assets in Chile, such as Australian-based Barrick Gold’s Pascua Lama gold mine and the Lobo Marte gold mine by Canada’s Kinross.
Although Chile is experiencing a renewed interest in the development of mining projects within the country, in December 2009 it was reported by Reuters that approved foreign investment in Chile had slumped by 40% in 2009 based on a y-o-y comparison. The contraction of the mining industry was a key factor in this result after the sector attracted a significant amount of foreign investment in 2008. Total foreign investment for 2009 stood at US$6.8bn but investments in mining projects accounted for only 2.9% of this total. In contrast, in 2008 mining projects accounted for 43.3% of the country’s foreign investment. However, as commodity prices continue to recover, and delayed projects once again become profitable prospects, we are confident Chile will see a resurgence in foreign investment in the mining industry.
But, rebounding copper prices have also resulted once more in the threat of industrial action as copper miners increase wage and bonus demand. In December 2009, labour negotiations began between union officials and employers at Corporación Nacional del Cobre de Chile (Codelco)’s Chuquicamata mine. No resolution could be found throughout December, which caused supply concerns around the world; Chuquicamata supplies 4% of global copper production. As the end of the month approached, numerous wage offers were rejected and strikes appeared imminent which would have potentially cost Codelco US$8mn of lost revenue daily. In early January, a two-day strike did begin but this was quickly ended after a new wage and bonus offer was accepted by union officials.
BHP Billiton was also plagued by employee discontent in the final quarter of 2009 resulting in a 42-day strike at the company’s Spence mine in Chile, which finally ended in November 2009. The wage deal was agreed shortly after Chile’s Federation of Miners announced they would consider striking at other mines owned by the company as a show of solidarity to Spence employees, which would have disrupted production throughout the country. Workers resumed operations at the end of November with extraction and crushing operations recommencing in early December. A spokesperson for BHP Billiton estimated that the strike had resulted in daily production losses of 500 tonnes, meaning an estimated loss of 20,500 tonnes for the duration of the strike. The deal included a 4% pay increase, as well as bonuses and benefits. Supply threats caused by the strikes caused copper prices to rally further on the back of already recovering prices and in November it reached a 14-month high of more than US$7,000 per tonne. Industry Forecast
According to our forecasts, Chile’s mining industry will reach a value of US$55.99bn in 2014, up from US$29.8bn in 2008. These forecasts have been downgraded accordingly owing to lower prices for most mineral commodities, especially copper.
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