Antofagasta warns Chile drought could hit copper production

Santiago — The long-running drought in Chile could hit production at Antofagasta's Los Pelambres copper mine, one of the world's largest, the London-listed copper producer warned July 21.

Presenting its production results for the second quarter of the year, the company said it remains on track to produce 730,000-760,000 mt of copper this year, compared to 733,900 mt in 2020.

"Guidance assumes minimum required precipitation levels resume over the balance of the year and is therefore subject to water availability," the company explained. "However, so far this year precipitation at Los Pelambres has been significantly less than in 2019, which was itself the driest year of the current 12-year drought."

The company said that strict water management protocols had been put in place and that it is evaluating options "to mitigate the risk of the impact of the reduced rainfall, in case this situation continues."

The Los Pelambres mine, in which Antofagasta holds a 60% stake, produced 84,400 mt of copper in the quarter, down 0.6% from the previous quarter largely due to lower ore grades.

The company is currently building a desalination plant to provide water to the mine and local communities.

In total, the company produced 178,400 mt of copper during the second quarter of the year, down 2.5% from the previous quarter, as it faced lower grades at its Zaldivar mine and lower recoveries at its Centinela cathode operations.

Production during the first six months of the year fell 2.8% to 361,500 mt.

Gold production rose 3.9% to 61,400 oz in the quarter, on higher grades at Centinela while production of molybdenum, a key by-product, fell 200 mt to 2,800 mt.

Cash costs before by-product credits rose to $1.77/lb during the quarter, up 9 cents from the previous quarter, reflecting the stronger Chilean peso, higher energy and diesel prices and the drop in copper output.

Another risk is the ongoing pandemic, but the company said it expected its impact to fade in the coming months.

"We expect that as the successful national vaccination rollout continues in Chile, the restrictions that have been imposed will continue to be lifted, leading to a loosening of region-specific restrictions on movement," said CEO Ivan Arriagada.