By MICHAEL SMITH
SANTIAGO -- Codelco, the world's largest copper producer, has halted a
to boost output by about 15 percent, battered by spending cuts and prices for the
metal at 12-year lows.
The Chilean government-owned producer said it has delayed for at least
plans to increase output at its new open-pit Radomiro Tomic in the northern
Atacama Desert mine by 70,000 metric tons, or almost half. Codelco also is
shelving efforts to open up new areas of production at its underground El Teniente
mine south of Santiago, which could add 150,000 tons of output, said Codelco
President Marcos Lima.
``We've totally paralyzed all our projects,'' said Lima.
The move is a reversal for Codelco which had invested hundreds of millions
dollars in the 1990s to boost copper production by roughly half. For much of last
year, even as copper prices sunk to their lowest levels since the mid-1980s,
Codelco vowed to proceed with its expansion, as Lima predicted a quick
turnaround in prices he said were held artificially low by metals speculators.
Codelco still is far from cutting production.
Codelco produced just under 1.5 million tons of copper last year, and production
probably will surpass 1.5 million tons in 1999 as a recently completed expansion
of the high-altitude Andina mine bears fruit, Lima said.
Codelco estimates mines that produce 6 million tons of copper -- or two-thirds
global output -- are losing money at current prices of around 65 cents a pound.
Codelco's highest cost mine, Salvador, produces a pound of copper for less than
``Codelco isn't going to cut production,'' Lima said. ``It would be absurd
Codelco to bear the cost of that contraction when there are other mines with costs
above prices and that should have closed a while ago.''
Lima hopes its decision will lead other producers to close mines or otherwise
production. Copper prices probably will remain depressed for some time because
almost every important copper consuming region of the world is facing economic
slowdown, or even recession, he said.
``It worries me that we're not seeing significant reductions in production
know that part of the industry is losing money,'' Lima said. ``Codelco has to take
the leadership and evaluate the signals coming form the market, with respect to
valuation, price, stocks, demand.''
Though low prices, knocked down by the prospect of weakening demand from
builders, carmakers, and other big users as the world's economic expansion slows,
discouraged Codelco's expansion, the real culprit were budget spending cuts.
The government, seeking to head off a budget deficit this year, cut Codelco's
investment budget by roughly one-third, to $450 million this year from $680 million
in 1998. That forced Lima to put the $200 million expansion of Radomiro Tomic
Codelco will spend one-third of the money it gets on environmental projects,
including plants at two mines designed to remove sulfur from the smoke spewing
The rest will go to cost-cutting new equipment, redesigning mines and other
programs aimed at lowering costs.
Those efforts bore fruit last year, when Codelco cut the Salvador mine's
roughly 17 percent, or 12 cents per pound of copper produced, by shutting down
more costly parts of the mine, mechanizing processes, as well as other steps.
Copyright © 1999 The Miami Herald