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Chuquicamata strike, weaker copper prices weigh on Codelco's H1'19 profit

Chilean state-owned copper miner Codelco's pretax profit for the first half of 2019 plummeted 74% year on year to US$318 million from US$1.24 billion amid lower copper prices, bad weather and a strike at its flagship Chuquicamata operation in Chile, Reuters reported Aug. 31.

The two-week strike cost Codelco an estimated US$2.5 million per day on missed daily production of 500 tonnes. As a result, the company's copper production from own mines dropped 13% to 710,000 tonnes, short of its guidance of 762,000 tonnes.

Production costs totaled US$1.42 per pound of copper, according to Reuters.

Total output, including production from joint ventures with Anglo American PLC and Freeport-McMoRan Inc., stood at 769,000 tonnes for the period ended June 30, which was down from 875,000 tonnes a year ago and short of its goal of 822,000 tonnes, according to a company presentation on the results. First-half EBITDA fell to US$1.59 billion from US$2.69 billion a year ago due to declines in copper prices and production.

Codelco is still on track to achieve its annual production guidance of 1.7 million tonnes, the report said, citing outgoing CEO Nelson Pizarro. The company is aiming to increase second half production by 30% compared with the first half as it expects higher ore grades from Chuquicamata, Bloomberg News reported.

In an update on a potential foray into the lithium sector, Codelco will make an investment decision by early 2020 on whether to proceed with its planned Maricunga lithium joint venture with Lithium Power International Ltd.'s 51%-owned Minera Salar Blanco SpA, Reuters reported separately, citing Alejandro Rivera, Codelco's vice-president for administration and finance.

In early August, Codelco and Minera Salar signed a memorandum of understanding to develop the project, which was valued at US$940 million based a January definitive feasibility study.