CHILE MINING 2020 EXPOMIN OFFICIAL INVESTMENT GUIDE - Global Business Reports
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GLOBA L BUSINESS REPORTS CHILE MINING 2020 EXPOMIN OFFICIAL INVESTMENT GUIDE
Metso Performance Center
Helping you take control of your site
Mining continues to be more remote and complex than ever.
Dear Reader,
However that is no excuse for a lack of responsiveness. When
things go wrong, ramifications can add up quickly. This
compounds the need for timely and accurate service - or more
Chile, long considered a stalwart of stability in the Latin American region, experi-
so, to get ahead of problems before they start. enced an unusually tumultuous 2019. An eruption of civil unrest and mass protests
over the country’s high rate of inequality and the rising cost of living raised questions
That is the benefit at the heart of our new, state-of-the-art, regarding the stability of the country and its most important industry.
Metso Performance Center. Coupled with intuitive services, Despite the headlines, Chile’s miners continued to invest in large brownfield expan-
you’ll see more and stay ahead, in better control of now and sions and, to a lesser extent, greenfield projects, in hopes of tapping the country’s
vast geological potential for decades to come. According to Consejo Minero, the
ready for what comes next. country anticipates investments amounting to approximately US$72 billion, coming
from projects to be developed in the 2019-2029 time period.
With a team of equipment, process, and technology experts, At the beginning of 2020, things looked promising, as the copper price had began
Metso can provide real-time support to: its recovery on the back of improved trade relations between the US and China. The
general sentiment was that the global economy was on the mend. These dynamics
• Analyze your equipment and operations have since shifted drastically as coronavirus spread around the world. Few, if any,
• Anticipate potential issues countries have been untouched and as a result of government enforced lockdowns,
movement and commerce have come to an abrupt stop. Consequently, demand for
• Accelerate to achieve & sustain performance improvements most metals has fallen substantially.
This is a profoundly complicated problem for Chile at a time when the country is de-
pending on its trusted mining industry to bolster its economy and lead it out of social
The center opens March 2020 in Santiago, Chile. crisis. Across the value chain both local and global companies are eager to deploy
the latest technology and cutting edge engineering approaches to capitalize on the
Learn more at metso.com/performance wealth of opportunities in everything from lithium, copper and gold. However, it is
unclear how the pandemic will affect the overall health of the Chilean mining industry
going forward.
Certainly, conferences have been temporarily put on hold, which is why Global Busi-
ness Reports is releasing its digital format Chile Mining 2020: Official Investment
Guide to EXPOMIN, produced in partnership with FISA, the organizers of EXPOMIN.
As we navigate these uncertain times, it is crucial for both national and international
investors, mining executives, and technical experts involved in Chile's mining industry
to support each other and remain well informed.
This publication offers widespread coverage of the current state of Chile's mining
industry, including its leading producers and operating mines, exploration companies
and their projects, as well as examining the different providers across the value chain,
from engineering to mining equipment and services. We sincerely hope that you have
a great conference, full of business and networking opportunities. Thank you for your
participation in EXPOMIN, and we hope you enjoy reading Chile Mining 2020.
Alice Pascoletti
Managing Director
Global Business Reports
PERU
Introduction BOLIVIA
to Chile CONTENTS / Chile Mining 2020 Arica
Analysis of the political and Iquique
macroeconomic factors
influencing Chile’s miners
Tocopilla
8-17
PARAGUAY
Introduction to Chilean Mining
61. Interview with Black and Veatch
62. Interview with Ingenalse Antofagasta
8. Chilean Miners Display Resilience 64. Interview with Amphos 21
Despite Socio-Political Uncertainty 65. Interview with CDM Smith
10. Interview with Minister of Mining 67. Interviews with Worley and Arcadis
11. Interview with Consejo Minero Taltal
68. Energy and Technology
13. Interview with Cochilco 69. Underground Mining
Chile
Chañaral
14. Factsheet: Macro-Economic Overview 70. Interview with The Institute of Mining
15. Interview with EY Engineers of Chile (IIMCh) Caldera
16. Interview with GL Events Chile 71. Interview with DSI Underground Copiapó
17. Interview with APRIMIN 72. Interview with JRI
Exploration, 73. Interview with Wood Group
74. Construction and Logistics
Production and Production and Development
75. Interview with Echeverría Izquierdo
Montajes Industriales
0 100 200 300 Kilometers
La Serena
0 100 200 300 Miles
Development N
Ovalle
20. Copper: Increasing Necessity for New
An overview of the most Projects Today to Meet Tomorrow’s Equipment and Technology
Demand
influential projects in Chile San Felipe
21. Factsheet: Copper Valparaiso
Santiago
25. Interview with Codelco 78. Equipment: Technology that Offsets
20-55
San Antonio
26. Factsheet: Codelco 79. Autonomous Mining and Teleoperation
29. Interview with Anglo American Chile Rancagua
80. Interview with Komatsu Cummins
32. Gold 81. Interview with Hard-Line Talca ARGENTINA
34. Interview with Gold Fields 82. Interview with Liebherr
35. Interview with Yamana Gold 84. Interview with Epiroc
36. Interview with Barrick 85. Interview with Emerson Chillán
39. Interview with Albemarle 86. Interview with Finning Concepción
88. Interview with American Air Pacific
89. Interview with Michelin Ocean
91. Data and Analytics Temuco
Exploration 92. Interview with Highservice Corp.
93. Interview with Technosteel Valdivia
Engineering and 42. Juniors Progress Through Down Market
94. Interview with Normet
95. Comminution and Material Handling Osorno
43. Interview with InvestChile
Construction
96. Interview with FLSmidth
44. Factsheet: Investment Portfolio Puerto Montt
98. Interview with Takraf Tenova
45. Interview with Los Andes Copper 99. Interview with Metso Ancud
Discover Chile’s efforts to drive 46. Interviews with Abraplata Resource Corp. 100. Interview with McLanahan Castro
and Hot Chili
sustainability and cut costs 101. Interviews with Motion Metrics and
48. Lithium: Dealing with Difficult Conditions Hexagon Mining
49. Interview with Wealth Minerals Atlantic
58-75 50. Gold:
Enjoying Favorable Market Conditions
Ocean
51. Interview with Rio2 Drilling and Blasting
52. Prospect Generating:
Rare Dollars for Exploration
53. Interview with Revelo Resources 104. Drilling: Building Resilient Businesses
54. Interview with Minería Activa Through Tough Times
55. Expert Opinion Article: 105. Interview with Griffith Drilling
Is Chile Only for Major Miners? 106. Interviews with Superex and PerfoChile
108. Blasting: Precision and Sustainability
Drive the Market
110. Interview with Dyno Noble
Engineering and Construction
Equipment, 111. Interview with Plasma 4th
112. Interview with ENAEX
Technology and
113. Interviews with Orica and MAXAM CHILE MINING 2020
58. Establishing Value Through EXPOMIN Official Investment Guide
Sound Design Global Business Reports and EXPOMIN
114. Concluding Thoughts Punta Arenas
Services 59. Water and Environment
60. Interview with Stantec
116. Company Directory
118. Credits
This research has been conducted by
Lucrezia Falcidia, Jason Spizer
Insights from Chile’s world leading
and Mariolga Guyon
players across the value chain Edited by Mungo Smith
Graphic design by Gonzalo Da Cunha
78-113
A Global Business Reports Publication
For updated industry news from our
on-the-ground teams around the world,
please visit our website at gbreports.com,
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to our VIP list through our website,
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GBR • EXPOMIN OFFICIAL INVESTMENT GUIDE • CHILE MINING 2020
INTRODUCTION
TO CHILEAN
MINING
» Chile has been a mining country since before the
arrival of the Conquistadors and will be a mining
country for much longer. We want to maintain Chile’s
status as the largest producer of copper in the world. «
- Baldo Prokuriça,
Minister of Mining,
Government of Chile
Image courtesy of Vinícius Henrique on Unsplash
EDITORIAL Global Business Reports EXPOMIN Official Investment Guide EDITORIAL
Chilean Miners Display GDP (PPP)
Source: World Bank 2018
possesses the world’s largest lithium re-
serves, according a U.S. Geologic Study
Mining Minister Baldo Prokuriça is simi-
larly optimistic that the mining indus-
making and earth-moving to advanced
electronic components, a slowdown in
Resilience Despite Socio- US$474 billion
(USGS) report.
It is unclear what, if any, backlash there
try will continue functioning as normal:
“Chile has a long history with a stable
manufacturing was bound to put down-
ward pressure on the commodity price.
Political Uncertainty
will be on heavy industries such as min- mining investment climate and the cur- Adding to the pain was the fact that Chil-
ing in the long-term. The protests caused rent situation will not erase that. There ean copper production fell 2.5% in the
POPULATION
disruption to the typically efficient op- are doubts regarding the referendum first half of 2019 on the back of declin-
Source: Censo 2017 Instituto Nacional de Estadísticas (INE)
erational environment throughout the and the new constitution, but it must be ing copper grades according to a study
18.4 million country, but strikes within the mines were remembered that Chile has very clear by the International Copper Study Group
limited to a few union groups and inter- laws protecting investors and respecting (ICSG). 2020 has seen a precipitous drop
ruptions were overall minimal. private property, freedom of expression in the copper price, due to coronavirus
SOCIAL TURMOIL FORCES RECONSIDERATION OF GDP PER CAPITA (PPP) According to Joaquín Villarino, president and human rights.” and will undoubtedly put producers and
Source: World Bank
PINOCHET ERA DEVELOPMENT MODEL of Consejo Minero: “October and No- It is not just those who took to the streets service providers under extreme pressure
1970 vember 2019 very hard months for Chile. armed with clanking pots and pans who until the disease is subdued and global
US$2,300
We believe that the social unrest is tran- were disappointed in the pace of eco- economic activity begins to recover.
sitory. However, it will mean profound nomic growth in 2019; mining companies Given these dynamics in the market and
2018 changes in certain public policies in the also had high expectations going into the protests that crippled the nations retail
country in order to improve the quality of year. However, predictions of demand economy in October and November
Prior to October 2019, the pervasive view dictatorship, which have enabled con- US$25,222 life of those Chileans who are suffering. outpacing supply for copper and lithium 2019, it is a testament to the dynamism
held amongst Chileans and outside ana- sistent, long-term economic success. We are optimistic that regulation of the never materialized. The demand shortfall of the Chilean economy and sound man-
lysts was that Chile was immune to po- Famed economist Milton Friedman re- mining industry will not change dramati- for these commodities can be blamed on agement practices in its mining industry
litical destabilization and social unrest. ferred to this growth from deregulation
POVERTY RATE cally.” a variety of global economic factors, but that the economy still managed meagre
Source: Ministerio de Desarrollo Social
Although populism was spreading across and open markets as “The miracle of In Chile, mining is taxed at a rate of 40%, the most salient are the China-U.S. trade growth. Although growth was well below
Latin America and several other parts of Chile.” 1989 one of the highest percentages globally. war and economic stagnation in Europe. expectations, it is still far better than that
the world, Chile was viewed as a consis- The poverty rate has fallen from over 40% Villarino continued: “There is not much These have taken a toll on global manu- of its regional peers; Argentina, which is
tently strong economic performer with in 1990 to under 9% today, according to 47.0% room to raise taxes, but it is something facturing activity and, given copper’s in recession, and Brazil, whose economy
relatively moderate politics. At the sus- World Bank figures. The middle classes we are anticipating.” critical end usage in everything from car- has stagnated.
tainable mining conference in Santiago now form a majority, income inequality 2017
in September 2019, the most profound
challenges facing the Chilean mining
is below the Latin American average and
Chile received the region’s highest score
8.6%
industry were outlined: weakness in the on the United Nations Human Develop-
price of copper and lithium, water scar- ment Index, which is predicated on a MINING
city, declining ore grades, social license, blend of life expectancy, education and Source: Banco Central de Chile
high energy and labor costs to name a national income per capita.
few. One concern absent from that list In the context of the region, this perfor- 10% of GDP
was internal stability. mance is strong. However, compared
For the past three decades, Chile has to its rich country peers in the OECD,
been viewed by investors as a bastion of Chile ranks highest in economic inequal- PRINCIPAL MARKETS
calm in an otherwise politically precari- ity. UN reporting found that the richest Source: Dirección General de Relaciones
ous region. Chile achieved its status as a 1% of the population earns 33% of the Económicas Internacionales Chile
leading mining jurisdiction not only be- nation’s wealth. This fact is one of the
cause of its high quality and easy to ex- principal reasons why there is such wide- China 30%
ploit resource base, but also because its spread anger. Poor and middle class USA 17%
policies toward mining were regarded as people, who rely on public transport,
best in class from an ease of doing busi- feel that the burden of state funding is EU 14%
ness perspective. being unfairly placed on them at a time
In light of the October 2019 protests when middle class wages are stagnating
that shocked the country, questions have and low skilled jobs are being replaced TRADE
Source: Dirección General de Relaciones
been raised regarding Chile’s ability to with technology. Rising expectations that Económicas Internacionales Chile
maintain its status as Latin America’s have gone unfulfilled are surely a part of
most stable and successful country. The this story. 26 FTAs
civil unrest was seemingly triggered by Much of Chile’s economic success has (64 markets)
increased metro ticket prices, but at its come on the back of a robust mining sec-
core the disorder is fuelled by a gather- tor that has been, and will continue to
ing sense of economic inequality. Since be, the lifeblood of the economy. Chile INFLATION (CPI)
Source: IPC June 2019 Instituto Nacional de Estadísticas (INE)
1990, the country’s restored democracy is the world’s top producer of copper and
2.3%
has maintained the broad outline of free- exports of the metal account for approxi-
market policies installed by Pinochet’s mately 10% of the nation’s GDP. It also
CHILE MINING 2020 8 EXPOMIN Official Investment Guide Global Business Reports 9 CHILE MINING 2020
INTERVIEW Global Business Reports EXPOMIN Official Investment Guide INTERVIEW
What are the most important initiatives How is the government incentivizing
and policies the Mining Ministry has pro- efficient use of water and technologies
moted during your term? such as desalination?
The most important initiative was to help Chile is experiencing its worst water crisis Could you provide us with some context about Consejo Minero?
reactivate mining investments in the coun- and its worst drought in the last 60 years. Consejo Minero is an organization that is 22 years old and brings together the major
try and reshape the industry to become From that point of view, there has been a mining companies in the country, which combined produce 97% of copper, 71% sil-
more environmentally friendly and pro- lot of effort on the part of the mining indus- ver; 55% gold and 97% molybdenum in Chile.
ductive. In addition, we have focused on try to reduce continental water usage. To- We have four fundamental targets. The first is to communicate what the mining in-
providing strong support for small and me- day, 8% of Chile's copper mining projects dustry does in terms of investment, profitability and taxes. Second, we try to foster
dium-sized mining companies. During our use desalinated water and we expect that a competitive and sustainable industry. Thirdly, we have the mission to participate
term, the State-backed mining companies number to grow substantially in the future. in the discussion of public policies that affect the mining industry. Finally, we are fo-
began working in lithium and we are work- There is a great effort to recycle water. That cused on promoting the improvement of the skills of workers in the country. We are
ing to improve the situation of the national is why there are projects from companies in contact with educational organizations to ensure that the training and education of
mining company. We want to generate a like Anglo American, that recycle up to 80% workers is keeping pace with technological changes in the industry.
new national mining policy that will help of water and forecast to have 100% recy-
Baldo Chile sustain its competitiveness through
2050 and I believe that we have achieved
cled water in the future.
Joaquín What are the medium and long term prospects for the mining industry in Chile?
Mining production in Chile grew considerably until ten years ago and then stabilized
In the wake of social unrest, how can
Prokuriça Villarino
progress in this area. at around 6 million mt/y of copper, which is 27% of the world's copper, making it the
the government reassure investors that largest producer in the world. This year we will probably see a small decrease, but
What progress is being made in Chile to Chile will remain a leading mining juris- production will be around 5.9 million mt/y. The industry has the capacity to produce
reduce carbon emissions and make the diction in the future? that amount of copper for at least 30 more years.
country a leader in sustainable mining? Chile has a long history with a stable mining From the perspective of investment, we have a pipeline of approximately US$72 bi-
Chile has made it a priority to focus on investment climate and the current situa- llion in new projects to be developed over the next 10 years. 58% of that portfolio
electro mobility. The country has invested tion will not erase that. The record of stabil- is highly likely to happen; the rest will depend on factors, such as the copper price,
US$2,200 million in Codelco and US$80 ity in Chile supports the idea that we will be which has been kept low by the trade war between China and USA. We will have a
million in ENAMI to reduce emissions from able to resolve our differences and that the sustained increase in demand for copper in the world that, with the market projec-
smelters. US$200 million have also been social turmoil we are seeing today will be tions, it will be hard to satisfy, so there should be an upward pressure on the copper
Minister of Mining Executive President
invested in private smelters. We invested solved. I think there are doubts regarding price, which would make it possible to execute all the projects.
GOVERNMENT OF CHILE US$3,000 million in December 2018 in or- the referendum and the new Constitution, CONSEJO MINERO October and November have been very hard months for Chile. We believe that the
der to significantly reduce the emissions of but it must be remembered that Chile has social unrest is transitory, but it will mean profound changes to certain public policies.
Chilean smelters. There are a lot of mining very clear laws protecting investors and re- This will help improve the quality of life for many Chileans who are suffering from not
companies that are using renewable ener- specting private property, freedom of ex- having access to basic services. We expect that violence is going to be controlled and
gy. In 2021, ENAMI will operate on 100% pression and human rights. we are optimistic in our belief that regulation of the mining industry will not change
»
renewable energy. BHP has just made a dramatically. In Chile, mining pays around 40-43% of taxes; it is second only to Aus-
»
public tender of 6 gigawatts to use 100% What potential does Chile have to grow tralia in taxes paid.
renewable energy in 2022. Codelco uses its presence in other minerals such as
renewable energy and electric vehicles in cobalt and to remain competitive as a There is a trend in Chile where open pit mines are transitioning to underground
their mines and the trucks in which they lithium producer? operations. What are the implications of this transition?
transport their workers. Chile is a leading We are promoting investments from com- It is a paradigm change for Chile, which has been characterized by having large open
Chile can maintain and increase
jurisdiction in terms of renewable energy panies in cobalt mines so that this element, Mining production in Chile grew pits, with the exception of El Teniente. Chuquicamata, after being the largest copper
copper production despite adoption. which is key to lithium-ion batteries can be pit in the world for many years, is going underground. The expansion of Los Bronces
ore grade decline, and the aim considerably until ten years ago
marketed and included in foreign invest- is also planned to go underground. This generates challenges and opportunities.
of our government is to help What production level do you expect ments in our country. The ultimate goal is and then stabilized at around The underground deposits imply stopping the exploitation of many mining resources
facilitate an environment that Chile to reach for copper in 2019? Do for Chile to become a supplier of lithium ion 6 million mt/y of copper, which buried, but they have less impact on the surface, so places where there are glaciers or
encourages further investment you expect the country to be able to batteries to the global auto sector. We want is 27% of the world's copper, vegetation remain intact and, in addition, it generates less dust. On the other hand, it
maintain and grow copper production in to jump into the value-added chain. We are making it the largest producer is a great opportunity to introduce technological changes in the field and have more
in the mining industry.
the future? the world’s second-largest lithium produc- in the world. This year we will machinery that is remotely operated, which improves safety and efficiency.
«
We currently extract 5.5 million mt/y of cop- er; we have salt flats, and we would like to
probably see a small decrease,
per and hope that by 2020 we can reach get as close as we can to the manufactur- What are the reasons why Chile has a high cost of production?
6 million mt/y. We believe we can achieve ing of batteries and the manufacturing of but production will be around 5.9 We have a higher energy cost because we had stress in our energy grid for many
this with the upcoming projects that are cu- elements to store energy, which we believe million mt/y. The industry has the years, which led companies to sign long-term contracts at prices of more than US$100
rrently in development and with Codelco´s could create more revenue, more jobs and capacity to produce that amount of per MWh. That is more expensive than in Canada, Australia, US or Peru. This problem
pipeline of investments. Chile can maintain more opportunities for Chilean families. copper for at least 30 more years. is being solved because tenders have changed, and renewable energy is now being
and increase copper production despite Codelco and ENAMI have both signed introduced, which is causing prices to decrease. Another reason for the high cost of
ore grade decline, and the aim of our gov- agreements to develop projects and production in Chile is that our workforce is expensive. Salaries for Chilean miners are
«
ernment is to help facilitate an environment Codelco has committed to invest US$10 similar to the US, Canada and Australia. However, productivity is lower. Lastly, Con-
that encourages further investment in the million for exploration in the Salar de Mari- sejo Minero is working to promote a more reasonable legal framework in which the
mining industry. cunga. ■ approval of projects does not take so long. ■
CHILE MINING 2020 10 EXPOMIN Official Investment Guide Global Business Reports 11 CHILE MINING 2020
EDITORIAL Global Business Reports EXPOMIN Official Investment Guide INTERVIEW
INCOME INEQUALITY IN CHILE YEARLY PER CAPITA INCOME IN LATIN
Source: World Bank AMERICAN COUNTRIES (2018)
Source: World Bank
Jorge
Gini Index
60
Chile $25,222
Cantallopts
58
56 Uruguay $23,530
54
Argentina $20,567
Vice President
52
COCHILCO
Venezuela $18,102
50
48 Brazil $16,068
What is the mandate and mission of Cochilco? of discussion is the use of public infrastructure for desalination.
46 Cochilco is a government institution that was established in We have been working on proposals to create incentives for the
Suriname $15,497 1976. Our main focus is advising the Chilean government on the use of public infrastructure for water projects.
44
implementation and evaluation of public policies, strategies
Colombia $14,999 and actions that contribute to the sustainable development of Is there anything that is being done to try and streamline
42
the national mining sector. Cochilco also aims to safeguard the the permitting process in Chile?
40 interests of the state and its mining company Codelco, super- Cochilco investigated how long it takes a company to obtain
Peru $14,393
1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 vising and evaluating their management and investments. approval and licences. We proposed solutions to the Minister
of Mining to speed up the process. Some of the proposed so-
Chile’s history of churning out success- volves US$4.2 billion in investment over Paraguay $13,570 What areas of mining today are most in need of policy re- lutions have been implemented, but the permitting process is
fully run local businesses devoted to the next five years to extend the life of form? still a challenge. Currently, it can take up to two to three years to
the mining industry is undoubtedly a the copper mine in the Tarapacá re- Ecuador $11,713 Improving the level of engagement between the mining indus- obtain permits for exploration. In addition, environmental and
positive driver of wealth creation. In de- gion. Antofagasta Minerals, meanwhile, try and the community is critical. We believe that previous re- social permits are also required. The entire process can take up
scribing the advantage Chilean compa- will invest US$3.7 billion to expand its lationships between mining companies and communities have to a decade, which is way too long and also gets quite expen-
nies have over large global enterprises, Centinela copper mine, with construc- Guyana $8,568 been more transactional rather than developmental. The mi- sive. This scares investors and thus it is necessary for Chile to
Ivan Rayo, general manager of Chilean tion starting in 2021. The third biggest ning industry should be more involved in the development of streamline the permitting process to attract more investment.
engineering consulting firm JRI, said: project is Nueva Unión, a joint venture Guatemala $8,447 local communities, so we are studying how to improve these Because the permitting process is timely and expensive, the
“Being a Chilean company means that between Teck and U.S.-based Newmont relations. Chilean mining market is dominated by major mining compa-
our clients benefit from increased flex- GoldCorp, that needs US$3 billion over Mining is perceived as a dirty industry, but we need to educate nies and there are too few junior companies operating in Chile.
Bolivia $7,859
ibility. For example, many operations five years for construction of a copper- communities that mining can be sustainable, environmentally
are struggling to stay profitable with a gold mine. friendly and contributes significantly to the economic develop- How does Cochilco see the ability of Chile to offset some of
depreciated copper price. Local busi- These new investments are needed to Honduras $5,129 ment of Chile. Good public policies are necessary to build a the more mature ore bodies?
nesses excel in responding quickly to offset a potential decline in production new system that encourages companies to build relationships The best way to fight the decreasing grade of ore bodies is by
adjust costs and implement solutions.” from some of Chile’s largest and most with local communities. We also believe that the government increasing exploration. This is one of the reasons why we want
Another locally run business, PerfoChile, reliable sources of copper. After 104 48% of the world’s lithium reserves, ac- should have a more active role in early stages of mining pro- to create incentives for exploration in Chile. Another way for
has 35 years experience as a drilling ser- years of production, Codelco’s Chuqui- cording to Invest Chile. Furthermore, jects to promote and incentivize sustainability and efficiency mining companies to offset declining ore bodies is to improve
vices provider. General manager Os- camata, the largest open pit mine in the the quality of these reserves is often de- through the implementation of technologies. their processes and to become more efficient in implement-
valdo Carmona outlined his approach to world, closed its surface operation and scribed as best in class. In light of the ing technology. Declining ore grades are a huge challenge,
weathering turbulent times: “We have commenced its underground phase, civil unrest, political sensitivities have What is Cochilco’s view on automation and digitization? because it leads to greater demand for water and power. It is a
focused on building our cash reserves and there is uncertainty surrounding the become a more important part of the One of the issues with automation is that you are taking the great advantage that electricity prices in Chile are decreasing
over time in order to invest through mine’s ability to maintain current pro- discussion regarding mining in Chile, worker out of the mine, which can be a great thing in terms of and this is impacting the decisions of mining companies oper-
good and bad economic and political duction levels, particularly in the near- but given the role that the mining in- safety and cost efficiency. The problem is that automation is ating in the country.
climates.” term. Codelco is expected to invest dustry can play in delivering a better often viewed as a threat to today’s workforce. It is the respon-
Although mining is not experiencing US$5.58 billion according to Consejo future for Chileans, it is important that sibility of the industry to educate people that automation is not Do you foresee that the civil unrest in Chile will have any
its best year, companies continue to Minero in order to achieve a production it prevails in the face of any populist replacing human capital, but rather creating different and safer backlash on the mining industry and business climate in
invest. Almost US$66 billion has been level of 140,000 mt/d of ore, with an ap- backlash. Jorge Maldonado, general jobs. general?
earmarked for Chilean mining projects proximate mine life of 45 years. manager of Superex, a leading company I believe that we are going to see some big changes in the near
for the period of 2018 to 2027, and 43 At the end of the day, it is important to in sonic and diamond drilling, summed Can you highlight some of the policy proposals Cochilco future. How politicians develop and implement new policies will
mining projects will be built or will be- keep in context the sheer size of oppor- this sentiment up: “Sometimes Chile for- has made over the last three years? be one of the major changes. We have to be careful as we do
gin production by the end of 2023, ac- tunity the Chilean market represents. gets how vitally important a strong min- We are working on developing our long-term vision, which in- not want to deter investment, but at the same time we want the
cording to the Ministry of the Economy. Chile holds 22% of the world’s copper ing sector is to the health of its broader volves improved engagement between mining companies and money to be spent in the right places. Now is the right time to
The biggest project is Teck Resources’ reserves, 11% of molybdenum reserves, economy. We must not miss our oppor- the communities. We are also proposing a new mining code implement policies, which will empower and uplift communi-
Quebrada Blanca phase II, which in- 5% of silver reserves, 7% of gold and tunity to lead in mining.” ■ which will incentivise new exploration in Chile. Another topic ties. ■
CHILE MINING 2020 12 EXPOMIN Official Investment Guide Global Business Reports 13 CHILE MINING 2020
FA C T S H E E T Global Business Reports EXPOMIN Official Investment Guide INTERVIEW
CHILE WEALTH GROWS WITH MARKET-FRIENDLY POLICIES (GDP) Can you provide a brief overview of of doing business in the country with the
Source: The World Bank the services EY provides to the mining Constitution, tax structures, royalties,
USD Billion
sector in Chile? and property rights, investments will
300 EY has four major lines of service. We slow. Investors are not yet pulling out of
provide consulting, audit, transaction their commitments in Chile, but they are
and tax advisory services. Consulting certainly acting with extreme caution at
or advisory services focuses on strategy the moment.
and innovation for the mining sector
and how to apply it. We help organiza- When you look at Chile as a jurisdic-
tions with operational projects to reduce tion from a tax and regulatory per-
200
costs and become more effective and spective in mining, what are the ad-
efficient. Also, we assist in supporting vantages?
businesses by implementing new tech- Chile is a great place to do business.
nologies such as robotic processes auto- We have trade agreements with 150+
mation and data analytics. We recently countries and we are very global in our
Eduardo
1990
Pinochet voted out in a 1988 bought a Chilean company called Met- thinking. We see big potential for more
referendum and steps down
in 1990, capitalist policies ric Arts, that was built to work with cli- renewable energy investment, desali-
stay in place
Valente
ent data to improve their business using nation, water, and infrastructure invest-
100
1973 artificial intelligence and mathematical ments. China is looking to invest a lot in
Allende is ousted by military
coup. Augusto Pinochet, models. The last area of our business Chile. In the past three years Chile has
military head, comes to power
and enstates free-market
provides management services. For seen a huge increase in Chinese busi-
1970 economic policies some clients we run their supply, finan- nesses purchasing Chilean infrastructure
Socialist leader Salvador
Allende is elected president cial and accounting and HR processes. companies.
Additionally, we provide IT, supply chain
management, and customer relationship EY listed license to operate as the
0 consulting. biggest risk facing the global mining
1960 1970 1980 1990 2000 2010 industry. If you could tailor this list
Chile Advisory Managing Partner
How has social unrest impacted the specifically for Chile, what would be
EY investment climate for investors? the biggest risks?
CHILE PERFORMANCE OVERVIEW 2019
Before October 18th, miners were stay- Every year it is becoming harder to com-
Source: Global Competitiveness Index 4.0
ing on track with their plans to invest. In municate to the world the importance
High-income group average Latin America and the Caribbean average fact, we saw an acceleration of invest- of mining to our economy, society, the
Overall Enabling Human Markets Innovation
ment in the mining sector and we were way that we consume things, and its im-
Score Environment Capital Ecosystem having a good year in terms of new in- portance in creating jobs. We still have a
vestments and projects. We had a lot of lot of room to improve how we connect
Best: Singapore Finland Singapore Korea (33) (4) Switzerland Hong Kong Singapore Hong Kong China USA Germany
companies investing in digital transfor- with society, the environment and how
Score
100 mation programs, automation and ro- we transform mining into a greener and
»
botics technology. At the same time, we more sustainable process by reducing
90 saw a lot of interest from companies to water consumption, carbon footprint,
keep investing in brownfield operations. and waste. At the same time, the license
80
We didn’t see a lot of greenfield projects to operate means companies need to
70
but a lot of projects were focused on im- consider how to best connect with the
Chile is a good place to proving existing operations. After Octo- government and the broader ecosys-
60 invest, but if you change ber 18th, everything changed. Although tem of suppliers, and universities. This
the fundamentals of doing the mining sector has not been affected broad concept is a big risk, because we
50
business in the country with to the same extent the retail or banking are seeing a big shift in how people view
sector has, mining is affected by the so- the mining industry. The same goes for
40 the Constitution, tax structures,
cial environment. Chile.
royalties, and property rights,
30 Right now, if you have a change in the The second biggest risk is about attract-
investments will slow. Investors way that the mining properties are regu- ing the right people and how the compa-
20 are not yet pulling out of their lated in Chile, it will have a big impact nies can transform themselves to make
commitments in Chile, but on investment and the way we calculate workers jobs more attractive. Mine sites
10
they are certainly acting with projects. Investors are waiting to see are not attractive places to live because
what will happen with the Constitution. they are far from big cities and good in-
0 extreme caution at the moment.
Rank We are seeing a two year timeline where frastructure. The ability to bring in and
33rd 32nd 42nd 56th 1st 37th 47th 10th 53rd 21st 46th 47th 53rd
«
/141 we expect to see the market slow down retain talent in the world of digital trans-
Overall Institutions Infrastructure ICT Macro- Health Skills Product Labour Financial Market Business Innovation
adoption economic market market system size dynamism capability quite a bit. Chile is a good place to in- formation is one of the most important
stability vest, but if you change the fundamentals risks companies face. ■
CHILE MINING 2020 14 EXPOMIN Official Investment Guide Global Business Reports 15 CHILE MINING 2020
INTERVIEW Global Business Reports EXPOMIN Official Investment Guide INTERVIEW
Francisco What kind of activities does APRIMIN There has been a positive change. The
Sotomayor carry out to promote the develop-
ment of the mining industry in Chile?
mining community has been criticized
in recent years for resisting innovation,
APRIMIN's mission is to be a strategic but the reality is that there has been a
partner within the mining sector in or- lot of innovation and the attitude of mi-
der to make Chile an attractive country ning companies has evolved. This posi-
for sustainable mining investments. Our tive change has resulted in more interest
goal is to help Chile become a devel- and willingness to create the necessary
Managing Director oped country through the mining sector agencies to be able to do pilot testing.
GL EVENTS CHILE and its suppliers. There is an ongoing initiative to achieve
Most of the suppliers in Chile are very more innovation in the mining industry
involved in mining operations and seek in Northern Chile. Companies such as
to have permanent support that ensures CODELCO, BHP, Anglo American and
What is GL Events experience in the What are the main challenges for the How is Chile positioned as an R&D hub Pascual the continuity and sustainability of the
business in the long term. APRIMIN pro-
Collahuasi are working with the Funda-
cion Chile (Chile Foundation) and the
organization of trade and industry Chilean mining industry, and how do for the mining industry?
Veiga
vides support in this regard. Expande organization.
events such as EXPOMIN? you plan to address these within EX- EXPOMIN is the largest mining fair in There are startups dedicated to the cre-
GL events is a French business group POMIN? Latin America, and that gives us the op- Has Sebastián Piñera's government ation of innovation for the mining indus-
founded in 1978, that is currently pres- Within the framework of EXPOMIN, we portunity to present to the community carried out actions to create a more try in Chile. There are large companies
ent in 26 countries and had revenues have the XVI International Congress, un- the technological advances that are set- favorable environment for the Chilean that are doing many innovation improve-
of US$ 1.2 billion in 2018. We have 40 der the slogan “Mining facilitating the ting industry trends. These are the ones mining industry? ment initiatives that use Chile as a labo-
years of experience in the events indus- future.” 13 seminars will be held with that generate changes and transforma- Yes. There has been a very special em- ratory due to the many different types
try, and we employ 10,000 staff. Some 120 speakers who will make presenta- tions that increase the mining potential phasis on trying to facilitate the ap- of operations, variation in the mine loca-
of the events produced by the group in- tions on issues such as projects, regional of the different countries, improving ef- proval of projects through the Oficina tions and diversity of rock type. Experi-
clude the Rio Olympics in 2016, the Pan mining, innovation and productivity, di- ficiency and productivity. de Gestión de Proyectos Sustentables ments and differentiated products have
Chairman
American Games in Toronto in 2015, the gital transformation, logistics, markets, At the XVI International Congress, we (Sustainable Project Management Of- been made in Chile. Medium-sized sup-
2014 World Cup in Brazil, G8 and G20 inclusion and diversity, and environ- will promote important areas of discus- APRIMIN fice) and attempts have been made to pliers are promoting and making signifi-
summits, and COP summits. ment. sion and analysis on the key trends in our facilitate permit approval processes cant innovation and improvement in the
GL Manages more than 300 own fairs industry. The seminars will be focused through government policies. The main process, transportation and information
and sets up over 4,000 events per year Has the recent social unrest affected on how mining has developed in the mission of this is to reduce permitting systems sectors. These local companies
in industries such as the food, mining, the country's attractiveness for for- region, so we will examine issues, such time without leaving the quality stan- use technology from other parts of the
culture, fashion, gastronomy, environ- eign investment in mining? as innovation and productivity, the de- dards and environmental regulations be- world but apply it in Chile and create
ment, and more. In Chile, we have op- According to a COCHILCO report on velopment of mining activities, and the hind. Some attempts have been made their own system and methodology.
»
erated since 2014 through the FISA and the 2019-2028 period, the expected promotion of women in mining. In addi- to avoid repetitive processes.
Tarpulin subsidiaries. FISA is the main investment in mining for the next 10 tion, we will have technological events, What is your vision for the Chilean mi-
organizer of fairs in this country, with years amounts to US$ 72.5 billion. This where companies will present their ex- What is the biggest challenge that ning industry in the next three years?
events such as Expomin, Expo Vivienda, includes 23 private, large and medium- periences in areas such as water man- service providers currently face in the The mining industry will continue to be
Expo Hospital, Expo Naval, Edifica, Se- sized copper mining projects, for US$ agement, hydrometallurgy, solutions mining industry? Chile's main source of income and ex-
guridad Expo, Expo Andes, and others. 28.3 billion, and eight Codelco projects, and innovations in electromobility and There is no solution to climate The relationship between mining actors port due to its size, geological potential
Meanwhile, Tarpulin is the leading play- amounting to US$ 23.1 billion. Other energy, environment, lithium and cobalt change mitigation without the and communities has greatly improved, and experienced work force. There is no
er in temporary infrastructure solutions minerals such as gold, silver, iron, lithi- processing in Chile and elsewhere, and mining industry. Challenges but there are still situations where peo- solution to climate change mitigation
and also industrial solutions. um and industrial minerals account for the potential development of these in- ple view mining as a problem because without the mining industry. Challenges
such as the lack of water, the
another 13 projects worth US$ 6.9 bi- dustries. of a failure of contextual understanding. such as the lack of water, the cost of
What are your expectations for EXPO- llion of investment. Therefore, mining cost of energy and the cost of Sometimes people do not see the ben- energy and the cost of labor in Chile will
MIN 2020? is a very relevant sector and can be a Would you like to add a final message labor in Chile will continue to efit that the projects bring to the com- continue to be increasingly high and less
The goal for 2020 is to host more than driver for economic recovery, as high- for the readers? be increasingly high and less munity. Regarding the water shortage competitive compared to other mining
1,300 exhibiting companies and more lighted in the latest executive commit- EXPOMIN 2020 is a great opportunity competitive compared to other issue, the Antofagasta region has the countries, so improving productivity will
than 70,000 professional visitors from tee of EXPOMIN that was headed by to showcase new technologies and ex- mining countries, so improving largest desalination plant in Chile for be a must. The lack of support and posi-
Chile and overseas. We expect the par- minister of mining, Baldo Prokuriça, and change ideas and experiences on rel- the benefit of the population and mining tive perception of citizens is an obstacle
productivity will be a must. The
ticipation of over 5,000 foreign visitors, which included high industry represen- evant topics such as the environment, companies. Now, desalinated water has that must be solved. It is true that there
from over 35 countries, with more than tatives. It was reiterated that EXPOMIN innovation, productivity, digitalization lack of support and positive been used for most projects due to the have been environmental problems
20 international pavilions. Our estima- is a key event in this context, because it and automation. This exhibition allows perception of citizens is an country's water limitations. caused by the mining industry, but this
tion is that there will be 2,500 business showcases the strength of this industry us to project what is coming in the fu- obstacle that must be solved. has changed over the last decades and
«
meetings during the framework of the and the interest it generates at a global ture in order to innovate and thus move How has the mining industry’s atti- more environmental awareness is be-
fair, resulting in approximately US$ 1.7 level. towards the mining industry that the tude towards innovation evolved in ing developed. Chile has the capacity to
billion in business deals. world needs. ■ Chile over the last two years? continue operating for many decades. ■
CHILE MINING 2020 16 EXPOMIN Official Investment Guide Global Business Reports 17 CHILE MINING 2020
GBR • EXPOMIN OFFICIAL INVESTMENT GUIDE • CHILE MINING 2020
PRODUCTION AND
DEVELOPMENT
» The last couple of years have been slow globally, but
we are starting to see an increase in mining investment.
Compa- nies that had put projects on hold have decided
to move ahead with the invest- ments. The current
project pipeline for mining projects in Chile for the
period 2018 to 2027 is close to US$66 billion, which is
encouraging. Considering the current social and political
juncture that Chile is facing, we are confident that the
country is and will continue to be a good destination for
foreign investment, especially in the mining sector. «
- Christoff Janse,
Investment Promotion Officer,
Invest Chile
Image courtesy of Black & VeatchEDITORIAL Global Business Reports EXPOMIN Official Investment Guide EDITORIAL
Copper ELECTRIC VEHICLES WILL CAUSE HIGHER DEMAND FOR COPPER
Source: Anglo American
GLOBAL COPPER CONSUMPTION BY MARKET SECTOR
Source: Wood Mackenzie, Copper Outlook December 2018
Electric vehicles Combustion engines
Growth in total consuption from 2017 to 2040
is estimated to be 1.8% per year and will
Copper demand
million metric tons 2017 reach 43.8 million metric tons, underpinned
7 by electrification in transportation, buildings
and manufacturing. In addition,
INCREASING NECESSITY FOR governments continue to establish targets
CONSTRUCTION for renewable energy, which results in
NEW PROJECTS TODAY TO MEET 6 30% 25% higher copper demand.
- power cables
TOMORROW’S DEMAND - building wire 29.1
5 - transformers MILLION METRIC TONS
- non-electrical Total Consumption
11%
4
24% 10%
CONSUMER AND GENERAL
3
- home air conditioners
- regrigerators
2 - washing machines
ELECTRICAL NETWORK
2040 - televisions
- mobiles
- computers
1 - power grid
- power generation
22%
0
28%
2015 2020 2025 2030 2035 2040 2045
43.8
MILLION METRIC TONS
Take a flight to the north of Chile and, as the plane descends, ...AND DEMAND WILL KEEP STRONG DUE TO THE Total Consumption
TRANSPORT
you may notice one of the many deep holes that dot the land- DECARBONIZATION COMMITMENDS AND NEW TRENDS
18%
scape. Of the top 20 highest producing copper mines globally, Source: CRU - auto/trains/ships
seven are located in Chile: Escondida, Collahuasi, El Teniente, INDUSTRIAL MACHINERY - infrastructure
Los Bronces, Los Pelambres, Chuquicamata, Radomiro Tomic million metric tons 23% - electric vehicles
7 - industrial motors 9% - EV charging facilities
are all stars in the global mining constellation. Maintaining
high production from these large mines, along with additional
new production, is essential as the world transitions to a new 6
energy economy. Simply put, the green economy is far more
metal intensive than the fossil fuel economy. So long as de-
mand continues to rise for electric vehicles and solar and wind 5
energy, demand for copper will rise synchronously.
COPPER PRODUCTION IN CHILE CHILE’S GLOBAL PRODUCTION RANKING
Source: Consejo Minero Source: Consejo Minero
Wind and solar energy requires three to 15 times as much
copper per unit of output as fossil fuel generation, according 4
to the Financial Times. A report from Deutsche Bank expects
1ST 6TH
31.5%
the global electric vehicle market to grow 22% annually to
3 global rank global rank
Cu Ag
2030, led by China’s 25% market growth. Estimates are that
copper demand for electric vehicles, which was 0.9% of the
global total in 2017, will rise to 8.2% of total copper demand
state owned 27% share of global
production 5% share of global
production
2
in 2030. Given these dynamics, it is increasingly important
that Chile continues to invest and innovate in order to offset
production declines.
Although Chile is considered a mature mining jurisdiction,
1
68.5% 2ND global rank 14TH global rank
Timothy Beale, CEO of Revelo Resources, a prospect genera-
tor with a portfolio of copper and gold-silver projects focused 0
private companies
Mo 20% share of global
production
Au 1% share of global
production
in Chile, described the quality of the country’s mining assets: 2015 2020 2025 2030 2035
22>>
CHILE MINING 2020 20 EXPOMIN Official Investment Guide Global Business Reports 21 CHILE MINING 2020EDITORIAL Global Business Reports EXPOMIN Official Investment Guide
“World class means long life of mine and scalability of pro- overall progress. It will also be a critical part of funding a new additional government spending in December 2019 and the
duction, and Chile has several truly world class mines. These wave of social spending into the future. state owned miner will be expected to help fund a larger
huge mining districts in Chile will all be mining for decades welfare system in the country. The company can also antici-
into the future.” pate a much more tightfisted response from the state in its
A prolonged period of high production is imperative, because Codelco allocation of funds to meet Codelco’s financing needs.
copper mining plays an instrumental role in the development Same mission, New urgency On the spending side, Codelco is now looking to shrink its
of the country. Consejo Minero data shows copper accounts project budget through 2028 by US$8 billion or 20%. Ac-
for more than 90% of the country’s mining exports, has been Before the protests and riots began in October 2019, Codelco cording to the companies Q3 2019 reporting, there are no
the economic sector with the highest contribution to fiscal was already facing the difficult task of having to invest bil- plans to suspend any planned projects. At the same time,
revenue and has contributed 12.1% of GDP over the last de- lions just to maintain production levels and keep costs from the company is looking to generate an additional US$1 bi-
cade. There are efforts to diversify the Chilean economy and rising. Now, as the government faces a long list of spending llion in gross earnings from 2021 onward. According to CEO
grow exports in other areas, but it is clear that copper will demands to appease protesters, the challenge is more for- Octavio Araneda, Codelco is making a “great effort” to help
continue to play an outsized role in its contribution to Chile’s midable. Piñera’s administration announced US$5.5 billion of generate the cash Chile needs to address social demands.
To achieve the capex savings Codelco will simplify project
design and reinforce operations maintenance and supply.
LARGEST COPPER MINES “Codelco’s future depends on finishing structural projects
BY ESTIMATED PRODUCTION on time and at lower costs. Without them, our production
Source: International Copper Study Group; Wood Mackenzie will fall significantly,” Araneda said.
Fortunately for Codelco, the company owns a portfolio of
Thousand mt some of the most prodigious copper producing assets in the
0 200 400 600 800 1,000 1,200 world.
Chuquicamata has been in operation for over 100 years
Escondida, Chile and is now entering into a new phase underground. Codel-
co reported that, although the ramp up period of the un-
Kamoa-Kakula, DR Congo derground mine is projected to take seven years to reach
Grasberg, Indonesia 140,000 mt/d, work to maximize process efficiency aims to
shorten this period to five years (2024).
Oyu Tolgoi, Mongolia
El Teniente produced 465,000 mt of copper in 2018 and
Morenci, US has now completed 54% of development on its New Mine
Level work. The plan is to boost production at the mine to
Buenavista del Cobre, Mexico
more than 500,000 mt/y by 2025. This ramp up in output
Collahuasi, Chile would place the mine as a top five producer globally and
Cerro Verde II (sulphide), Peru
the company intends to invest US$3.4 billion to carry out
the expansion.
Polar Division (Norilsk-Talnakh mills), Russia At Radomiro Tomic, a mine producing 310,000 mt/y of cop-
Antamina, Peru per, Codelco filed an updated environmental impact assess-
ment (EIA) for an US$882mn, mine life extension plan in An-
Las Bambas, Peru tofagasta region.
El Teniente, Chile Overall, 2019 was a difficult transitional year for the com-
pany as it struggled to boost production and earnings. The
Los Bronces, Chile
world’s largest copper producer had 1.12 million mt of cop-
Los Pelambres, Chile per output from January to September 2019, which repre-
sented a fall of 6.7% in relation to the same period of the
Kansanshi, Zambia
previous year. Company reports also showed a drop of 57%
Quellaveco, Peru in pre-tax earnings year on year. Driving these results were
Chuquicamata, Chile February rains, a 14-day strike at Chuquicamata, lower head
grades and lower levels of treatment.
Kamoto, DR Congo Although this past years’ performance was below compa-
Radomiro Tomic, Chile ny expectations, there is no denying the historical impact
Codelco has had on the pace of development in Chile. For
Bingham Canyon, US almost half a century, it has provided a reliable stream of rev-
Sentinel, Zambia enue to the country. Moving toward the future: “The hope is
to transform ourselves in order to continue contributing to
Toromocho, Peru
the progress of Chile for at least 50 years more,” Araneda
0 200 400 600 800 1,000 1,200 said.
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