Cesco Week and the CRU World Copper Conference, which was held during mid-April in Santiago, Chile, attracted copper miners, smelters and consumers. The lively discussions about the future of the industry generated more questions than answers. Even though copper prices have declined 40% since 2011, the prevailing consensus was that demand for copper would remain healthy and prices should improve in the future. While many speakers questioned whether copper prices would reach the super cycle levels again, it was clear that the trend will head in the right direction for miners and margins could improve significantly by 2017.

With many copper mines located in arid and desolate regions, producers grapple with an increasing need for water and power. Declining ore grades complicate the situation, essentially forcing them to process more rock to produce the same amount of copper. Nelson Pizarro, CEO for Corporación Nacional del Cobre de Chile (Codelco), the largest copper producer, which is also headquartered in Santiago, discussed some of the other challenges and changes Codelco faces, such as environmental concerns, an increasing regulatory burden and labor shortages. Those three areas now require more attention than ever before. He commented on global carbonization policies and its influence on energy prices.

Pizarro also said that risk management is something that cannot be outsourced and in the future Codelco would handle more development projects in-house. Engineering, Procurement and Construction Management (EPCM) providers were skeptical. Over the years, mining companies have reduced their in-house engineering teams and have relied more on EPCM firms for new project development. This is a good time for this discussion as many of the new copper mines, mills and expansion projects have been tabled. A panel discussion with leading financiers for the mining industry reinforced that fact. The lenders basically said they were not lending a lot of money presently because of a lack of construction. They also said they recognized the industry’s potential and would make capital available when it’s needed.

On the final day, more than 2,000 people gathered for the Cesco Dinner at Club Hipico, a horsetrack that dates back to the late-1800s. It was a pleasant evening that began with a reception that included fine Chilean wines and appetizers. The keynote speaker was former Chilean President Ricardo Lagos, who touched on many of the same themes discussed throughout the week. He also talked about environmental issues and regulations and the need for Chile to remain competitive in world copper markets. He delivered his speech in Spanish. Near the end, however, he broke cadence and in perfect English said Chile should enjoy the same rights as other nations.

In addition to being the largest copper miner, Codelco is also a sovereign wealth fund; it provides for the people of Chile. The need for power and water will ultimately constrain Codelco’s ability to compete. Expensive power from renewable programs will increase operating costs and it will not provide enough capacity for the industry to expand during the next major production push. To remain competitive, Chile needs to invest in its infrastructure and build new electricity-generating plants. Ultimately this will make Codelco more profitable and the people of Chile wealthier. Otherwise, the expansions will take place where power is affordable and water is plentiful.

Steve Fiscor, Editor-in-Chief, E&MJ