October marked another difficult month for Codelco, the Chilean state-owned copper miner. More executive resignations and a credit rating downgrade compounded already mounting pressure from rising costs and subdued output. Cost pressures and higher taxes have become a headwind for many miners operating in Chile, the world’s top copper exporting nation.
Teck Resources just disclosed the latest jump in costs associated with the development of the company’s QB2 copper project, along with a need to re-file environmental permit applications for a multi-billion dollar expansion. Delays and increased costs associated with copper mining could threaten to continually dampen production in Chile.
Related ETF: Global X Copper Miners ETF (COPX)
Chilean state-owned miner Codelco has struggled to retain its management since June, following former CEO Andre Sougarret’s departure from his post (effective at the end of June) after a tenure that lasted just a year, citing “complexities” in running the world’s leading copper supplier. Not long after Sougarret’s replacement, Ruben Alvarado, took over as the company’s third CEO in just over a year’s time, Codelco is now dealing with further executive shakeups. Earlier this month, CFO Alejandro Rivera disclosed that he would be stepping down from his post and departing Codelco’s copper business for a yet undefined role related to the company’s lithium mining operations. The company’s Head of sustainability, Nicole Porcile, also resigned her position. Chile is the world’s leading copper-exporting nation and Codelco the top global supplier of the red metal.
These resignations followed shortly after Codelco faced a credit rating downgrade by Moody’s Investor Service. The miner’s baseline credit assessment was cut two notches to ba2 from baa3. The outlook assigned to Codelco was negative, suggesting more turbulence may lie ahead. The rationale behind the downgrade was straightforward, with Moody’s citing “lower production volumes, consequently higher costs, and higher capital spending requirements”. All of these were factors that MRP highlighted earlier this year in our coverage of Chile’s copper mining woes, noting that Codelco’s second-quarter production dropped -17% from a year earlier, and its expected annual projection was…
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