Codelco boosting output amid a Chile Covid surge
Codelco has stated that a Covid-19 surge in Chile will not have an impact on the production of copper.
“Definitely not,” Chairman Juan Benavides said when asked if a tightening of restrictions this week would interrupt the company’s operations or shipments. In an interview, he said Codelco managed to increase first quarter output despite a surge of infections in Chile. “So far this year, we have a production increase.”
Through the pandemic, Chilean mines that account for more than a quarter of global supply have been able to maintain high levels of production by introducing shift changes, testing and tracing and delaying non-essential activities, reports Bloomberg. That’s been a blessing for Chinese smelters hungry for material amid supply disruptions elsewhere and recovering demand.
Still, in the past several months, Chilean output has come in slightly lower than year-ago levels, suggesting mines such as BHP Group’s giant Escondida operation may be experiencing fatigue from the Covid-fighting measures.
Now the industry is facing another stern test. Despite rolling out one of the fastest vaccination programs in the world, Chile has seen cases and hospitalizations jump to records, prompting authorities to close borders to citizens and foreign residents and require all truck drivers to present a negative test before entry. While the government says the new measures won’t disrupt mining or sea transport, traders aren’t convinced, with supply jitters helping send futures to a two-week high.
“The program we initiated at the beginning of this pandemic, which we’ve perfected over time, has given us excellent results,” Benavides said. While there may be nervousness over the border closures, “in no way does that affect our operations or productive processes.”
While Chile is yet to disclose copper output for March, on Wednesday the central bank reported export revenue from the metal reached an eight-year high last month, supporting Benavides’ upbeat tone.
Copper surged to the highest in almost a decade in late February on the prospect that vaccinations and stimulus would unlock a sharp global recovery. Since then, prices have eased amid fresh lockdowns and a rising dollar.
Still, many analysts see a further rally as demand rebounds globally and supply falters. Bolstering the outlook is the Biden administration’s $2.25 trillion US infrastructure plan.
The metal’s rally is also being accompanied by a surge in demand for goods as the pandemic stymies services. While copper is well supported going forward by the shift toward clean energy and electro-mobility, demand for goods may wane as economies normalize and services open back up, Benavides said.
The metal’s fundamentals are strong, but that doesn’t mean it’s entered a new supercycle, he said. Demand is likely to grow 2-3% a year over the next five years, just outpacing supply growth of about 2%. That compares with China’s double-digit growth in consumption in the last big price upswing.
“There could be a small deficit there, but markets always adjust with technologies and substitutes,” he said. “Also, this price is an incentive maybe to develop new projects that are marginally higher costs.”
In the past several years, Codelco has engaged in the copper industry’s heaviest investment program after decades of underspending at its aging deposits. A new underground mine at Chuquicamata is ramping up as planned, while projects at Andina, El Teniente and Salvador are on target despite the pandemic, he said.
The state-owned company’s goal is to maintain annual production around 1.7 million metric tons.
“All that, for now, is more than enough, but we are permanently evaluating how to convert resources into reserves and going through to production,” he said, mentioning more expansions at the Radomiro Tomic and Andina mines as potential projects. “Today, there’s nothing defined.”
Vale invests $150mn to extend life of Manitoba operations
Vale has announced a $150mn CAD investment to extend current mining activities in Thompson, Manitoba by 10 years while aggressive exploration drilling of known orebodies holds the promise of mining well past 2040.
Global energy transition is boosting the market for nickel
The Thompson Mine Expansion is a two-phase project. The announcement represents Phase 1 and includes critical infrastructure such as new ventilation raises and fans, increased backfill capacity and additional power distribution. The changes are forecast to improve current production by 30%.
“This is the largest single investment we have made in our Thompson operations in the past two decades,” said Mark Travers, Executive Vice-President for Base Metals with Vale. “It is significant news for our employees, for the Thompson community and for the Province of Manitoba.
“The global movement to electric vehicles, renewable energies and carbon reduction has shone a welcome spotlight on nickel – positioning the metal we mine as a key contributor to a greener future and boosting world demand. We are proud that Thompson can be part of that future and part of the low carbon solution.”
Vale continues drilling program at Manitoba
Coupled with today’s announcement, Vale is continuing an extensive drilling program to further define known orebodies and search for new mineralization.
“This $150mn investment is just one part of our ambitious Thompson turnaround story. It is an indicator of our confidence in a long future for the Thompson operations,” added Dino Otranto, Chief Operating Officer for Vale’s North Atlantic Base Metals operations.
“Active collaboration between our design team, technical services, USW Local 6166, and our entire Thompson workforce has delivered a safe, efficient and fit-for-purpose plan that will enable us to extract the Thompson nickel resources for many years to come.”
The Thompson orebody was first discovered in 1956 by Vale (then known as Inco) following the adoption of new exploration technology and the largest exploration program to-date in the company’s history. Mining of the Thompson orebody began in 1961.
“We see the lighting of a path forward to a sustainable and prosperous future for Vale Base Metals in Manitoba,” said Gary Annett, General Manager of Vale’s Manitoba Operations.