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Escondida copper production declines on falling ore grade

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Escondida copper production declines on falling ore grade

Highlights

Nine-month output falls 8.4% on year

Copper concentrates, cathode also slide

Decline reflects expected drop in ore grades

Santiago, Chile — Falling ore grades have continued to pummel production at Escondida, the world's largest copper mine, the BHP-controlled operation said Thursday.

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In its latest financial results filed with Chile's financial regulator, the mining company said it produced 870,970 mt of copper from January through September, down 8.4% from the same period of 2018.

The company said that the fall reflected an expected drop in ore grades at the open pit operation, which is located in northern Chile's Atacama Desert.

BHP operates and owns 57% of the mine. Rio Tinto owns 30% while two Japanese consortia own the balance of shares.

Production of copper in concentrates fell 8.8% to 689,210 mt while production of copper cathode fell 6.7% to 181,760 mt.

Production at Escondida surged last year, reflecting commissioning of a third concentrator mill and a new desalination plant and the impact of a lengthy strike at the mine in 2017.

The drop in production, as well as a lower copper price, caused the mine's revenue to fall 12% while non-financial costs fell 6% to $3.5 billion. As a result, taxes fell 25% to $476 million while profits fell 20% to $1.1 billion.

Escondida added it planned to record a provision of about $660 million in its annual financial results relating to cancellation of existing power purchase agreements.

In October, BHP announced that it had signed new power purchase agreements to supply its Escondida and Spence copper mine with electricity produced from renewable sources. Energy companies Enel Generacion Chile and Colbun each will supply 3 TWh a year over 15 years starting August 2021 for Enel and 10 years from January 2022 for Colbun.

The new contracts are expected to reduce energy prices at the two mines by 20%, the company said.

-- Tom Azzopardi, newsdesk@spglobal.com

-- Edited by Valarie Jackson, newsdesk@spglobal.com

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