UPDATE 4-Chile mining investment outlook darker, Sonami says

Mon Jan 14, 2013 1:49pm EST

Related Topics

* Lengthens time frame for $100 bln of investment
    * Group warns of regulatory uncertainty, energy woes
    * Leading copper miner Chile's output seen 5.8 mln tns this
year
    * Uncertain demand outlook, higher costs also weigh on
spending


    SANTIAGO, Jan 14 (Reuters) - Chile will attract $100 billion
in mining investment in the next 10 to 12 years, a slightly
longer time frame than previously forecast, as regulatory
uncertainty and energy woes loom as key risks, the Sonami mining
association said on Monday. 
    The influential lobby had said the same amount of spending
would take place over eight years, from 2012 to 2020, an outlook
 many analysts and industry players called too ambitious after
setbacks to key energy and mining projects. 
    "I am worried about the postponement of some mining projects
... these could account for nearly a third of projected
investment," Alberto Salas, president of the Sonami, told
reporters. "Additionally, there is over-regulation and legal
uncertainty surrounding environmental permits."
    Industry experts say Chile, the world's No. 1 copper
producer, is failing to take a firm hand in regulating its
mining and energy industries, leaving billions of dollars worth
of projects exposed to the risk of lawsuits by local
communities. 
    Some global miners are also scaling back investment plans as
operating costs soar and the world's economic outlook remains
volatile. 
    Barrick Gold Corp, for instance, said in November
it had deferred some $3 billion in capital spending over four
years, with about $1 billion lopped off 2013 spending.
  
    The government has faced mass protests as Chileans demand a
bigger share of copper earnings, and some critics charge that a
regulatory vacuum has emerged, allowing opposition groups to
jeopardize approved plans for hydropower projects in Patagonia,
thermoelectric plants across the country and major copper mines
high in the Andes. 
    Chile, which also produces gold, molybdenum, lithium and
silver, is seen amassing copper exports of $48 billion in 2013,
Sonami said. Total mining exports are forecast to reach $55
billion.Sonami added it sees Chile's copper output reaching 5.8
million tonnes this year, which would be a significant jump from
2012's estimated 5.4 million tonnes.
    Analysts see copper production picking up this year in
Chile, which mines a third of the world's red metal, as
investments to launch new mines and expand old ones pay off,
despite dwindling ore grades and legal setbacks.
    "This is going to be the biggest production in Chile's
history," said Gustavo Lagos, mining professor at the
Universidad Catolica in Santiago. "Costs are going to be
complicated; I don't see how they can be reduced this year. All
of them will be high: energy, labor, supplies."
    Lagos added Chile's forecast output increase is unlikely to
upset the market.
    "(Global copper) demand is going to grow too ... I think
stocks will be the same or lower than last year."  
    Chile's shouldn't face tricky labor issues this year, Salas
said. In recent years, labor action had picked up as workers
sought a larger slice of higher copper prices, and contracts in
Chile's massive Chuquicamata and Escondida mines end this year.
{ID:nL2N0AH0PU] 
    State copper commission Cochilco predicts Chile will produce
5.58 million tonnes of copper this year.
    The country produced 5.24 million tonnes of copper in 2011.
    Copper prices should average between $3.60 and $3.80 per
pound this year, the Sonami added. 
    "As the year goes forward, copper prices should rise," Salas
said.
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