Octavio Araneda Osés, executive chairman, Codelco, and his team prepare to head underground at Chuquicamata.

Despite temporary suspensions, production for 2020 remained on track and projects are now moving forward again

By Steve Fiscor, Editor-in-Chief

Chile is the leading copper producing country. A year ago, back in March 2020, all copper miners, including Corporación Nacional del Cobre de Chile (Codelco), the world’s largest, were facing a 1-2 punch: the uncertainty of operating in a COVID-19 pandemic with copper prices briefly falling below $2/lb. Even if they could find a way to safely operate, there were no guarantees copper prices would improve.

Immediately, most mining companies idled or slowed development projects. Some temporarily suspended production and laid off workers, while others persevered. Copper prices rebounded relatively quickly and then some. Today, copper is trading around $4/lb and construction activities on expansion projects have resumed.

The tightening of the copper market speaks volumes about the recovering world economy. Chile’s copper sector depends heavily on Chinese consumption and China’s economy grew by less than 3% in 2020, the slowest level in more than 30 years. But, the Chinese economy grew. While the pandemic didn’t disrupt the demand for copper consumed in manufacturing and construction, it did affect the supply side of the equation, and that drove prices higher. Somehow, many of the mines in Chile found a way to still meet production guidances despite these headwinds.

Codelco Puts Plan in Place, It Pays Dividends

Headquartered in Santiago, Chile, Codelco is the world’s largest copper producer. The company operates seven mining divisions: Chuquicamata, Ministro Hales, Radomiro Tomic, Gabriela Mistral, Salvador, Andina, El Teniente, as well as the Ventanas smelter and refinery. In 2020, Codelco produced 1,727,355 metric tons (mt) of fine copper. That figure, which includes the company’s share of the production from the El Abra (49% owned) and the Anglo American Sur operations (20% owned), was an increase of 21,342 mt, that is, 1.3% more than the total production of 2019 (1,706,013 mt) during the COVID-19 pandemic.

How did they keep production on track when the rest of the world was coming to grips with the global pandemic? Codelco’s executives quickly realized this was an exceptional situation and became proactive, putting the health and well-being of all first. The company consulted with a team of medical experts and they developed a plan for continued operations and communicated with everyone about it.

“[Last year] was very challenging. Facing the coronavirus and its adversities represented an extremely complex task for all companies, and Codelco was no exception,” said Juan Benavides Feliú, chairman of the Codelco board. “The commitment that we observed throughout the year, however, even in the worst months of COVID-19, allowed us to confirm that the entire company fully understood the responsibility of safeguarding operational continuity.”

With its people informed, protected and engaged, and many of the engineers and specialists working remotely, Codelco was able to protect not only the personal health and peace of mind of families, but also the operational and financial health of the company.

Like many companies, they endured months of uncertainty. In some instances, they reduced staff. Some projects were temporarily suspended. Miners and plant workers became accustomed to physical distancing and tight shifts. This did not lead to a drop in Codelco’s production, however, quite the opposite, Benavides explained.

Operating With COVID-19

Codelco put procedures, controls and management in place to mitigate infections, in addition to continuing to support communities in managing COVID-19. “We finally achieved a new normal, ensuring permanent changes,” said Octavio Araneda Osés, executive chairman, Codelco. “For this, we gradually resumed suspended projects and operations. We consolidated the most efficient work practices in all areas and began to capture the savings in contracts with third parties. We focused on exceeding production objectives with lower costs.” Thanks to these changes, Araneda said Codelco generated a surplus of $2.1 billion, 55% more than 2019.

More importantly, Araneda said productivity in 2020 rose to 54.5 mt fine copper per person, a figure that was 11% higher than 2019. Codelco now plans to increase its surpluses in 2021 by $1 billion.

“Collaborative work will be an essential condition to transform Codelco into a competitive company for the future,” Araneda said. “We are building structural projects to extend the life of the deposits for another 40 to 50 years, raising our standards, and increasing our productivity to maintain the current levels of 1.7 million mt of fine copper annually.”

Codelco is currently completing the Traspaso Andina (the Andina or Andean Transfer), which will be launched later this year. At the same time, the El Teniente Project Portfolio continues, which will allow the division’s operations to be extended for 50 years and start the development of the El Teniente 9 level. In 2020, the Andes Norte NNM advanced 65%, the early Diamante works advanced 55% and Andesita advanced 65%.

During 2020, Codelco made important progress on the Rajo Inca (Inca Pit) project that could extend the operation of the Salvador Division for 47 years. It’s an important project, given the depletion of the resources currently in operation. Approval of the project was obtained from the Environmental Assessment Commission in February 2020 and early works were completed in March.

Codelco is developing a prefeasibility study for Radomiro Tomic (RT) II Sulphides and reviewing the RT division’s future development strategy. They are also considering a desalination plant for the Northern District, which would likely be engineered and operated by a third party. Feasibility studies are also under way to extend the processing of oxidized minerals until 2027 and to expand the dump and the phase IX secondary waste leaching process. Both could begin in 2022.

The Traspaso Andina project will relocate the existing primary crusher to allow the expansion of the open-pit mine. To do this, Codelco is building a new crushing plant and the necessary infrastructure to support it in the sector called Node 3,500. It will connect to the existing concentrator through a tunnel and a 4.8-km conveyor. The project was temporarily suspended during April to deal with COVID-19. Despite these restrictions, the project reached a global progress of 93% in 2020 and its startup is projected for the first half of 2021.

BHP Maintains Production at Escondida

BHP’s Chilean assets, which includes Econdida and Pampa Norte, operated with a workforce reduced by approximately 30% as a result of the plan the company implemented for COVID-19.

During the second half of 2020, Escondida’s copper production decreased by 5% to 572,000 mt with record concentrator throughput of 386,000 mt/d. As a result of the reduced operational workforce and the need to balance mine development and production requirements, BHP prioritized concentrator throughput over cathode production. That had an approximately 30,000-mt impact on cathode volumes for the second half of 2020. BHP has narrowed its
FY 2021 guidance for Escondida to between 970,000 mt and 1,030,000 mt from between 940,000 mt and 1,030,000 mt. Production is also likely to be affected in FY2022 by reduced material movement in FY2021.

During the second half of 2020, copper production at BHP’s Pampa Norte division, which includes the Spence and Cerro Colorado mines, decreased 22% to 97,000 mt, largely due to planned maintenance at Spence and a reduced workforce. The Spence Growth Option achieved first production in December 2020.

BHP’s guidance for Pampa Norte for FY2021 remains unchanged at between 240,000 mt and 270,000 mt of copper, reflecting the reduced workforce, the startup of the Spence Growth Option and expected grade decline of 5%. BHP’s guidance of an average of 1.2 million mt/y of copper production from its Chilean operations over the next five years, however, remains unchanged.

Collahuasi Posts Record Results

Anglo American reported copper production of 647,400 mt from its mines in Chile for 2020, an increase of 9,400 mt over 2019. Record production at Collahuasi and a strong operational performance at Los Bronces offset the headwinds related to COVID-19 restrictions and expected lower water availability.

At Los Bronces, production decreased by 3% to 324,700 mt, compared to 335,000 mt in 2019, due to expected lower water availability and planned lower grades (0.81% vs. 0.83%). At Collahuasi, Anglo American’s attributable share of copper production increased by 11% to 276,900 mt, compared to 248,800 mt in 2019. This was a record for the operation, driven by strong plant performance, reflecting the plant improvement projects implemented during 2019, as well as planned higher grades (1.24% vs.1.19%). C1 unit costs decreased by 38% to $0.62/lb from $1/lb in 2019, another record, reflecting the solid production performance.

Production at El Soldado decreased by 15% to 45,800 mt compared to 54,200 in 2019, due to planned lower grades (0.84% vs. 0.93%) and water restrictions.

Construction activities resume, such as the trunnions for the grinding line at the QB2 project (above).

QB2 Remains on Track

Teck Resources produces copper from the Quebrada Blanca and Carmen de Andacollo operations. Last year, Carmen de Andacollo’s production was 58,000 mt compared to 54,000 mt in 2019. For 2021, production is expected to be lower, in the range of 46,000 mt to 51,000 mt of copper due to lower copper grades.

Quebrada Blanca produced 13,400 mt of copper cathode in 2020, compared to 21,100 mt in 2019. Mining operations at Quebrada Blanca ceased in the fourth quarter of 2018, and mining equipment and personnel have been redeployed to the Quebrada Blanca Phase 2 (QB2) project. The operation now extracts secondary copper from previous leach piles.

During Q4 2020, QB2 continued its staged ramp up of the construction workforce to pre-COVID-19 levels in line with the plans developed in Q2 2020. Teck said the project achieved its overall progress goal of 40% by year-end 2020. First production is expected in the second half of 2022, but that is dependent on the operation’s continued ability to successfully manage through the impacts of COVID-19, among other things.

FCX Mulls Major El Abra Investment

During 2021, Freeport-McMoRan (FCX) plans to increase operating rates at the El Abra mine (51% FCX, 49% Codelco) to pre-COVID-19 levels, subject to ongoing monitoring of public health conditions. Incremental copper production associated with increasing El Abra’s stacking rates from 65,000 mt/d of ore to more than 100,000 mt/d of ore, could generate 70 million lb/y of copper beginning in 2022.

FCX continues to evaluate a large-scale expansion at El Abra to process additional sulphide material and to achieve higher recoveries. They believe that El Abra’s large sulphide resource could potentially support a major mill project similar to facilities constructed at Cerro Verde in Peru. Technical and economic studies continue to be advanced to determine the optimal scope and timing of the project in parallel with extending the life of the current leaching operation.

Antofagasta Switches to Renewable Energy

During 2020, Antofagasta plc produced 733,900 mt of copper and its net cash costs were $1.14/lb. This reflects the company’s agility in changing operating conditions, said Antofagasta plc CEO Iván Arriagada.

“Last year was challenging, but we have successfully kept our people safe and healthy, achieved our production and exceeded our cost targets…” Arriagada said. “I am proud of how everyone at Antofagasta has worked together and adjusted to overcome the year’s challenges.”

Antofagasta now expects to power all of its mines in Chile with renewable energy. Over the past few years, its Chilean mining operations have renegotiated their power purchase agreements, switching from conventional sources — principally coal — to renewables. In July 2020, Zaldívar became the first of the group’s mining operations to use 100% renewable energy and by the end of 2020, 19.4% of the mining division’s energy came from renewable sources.

Zaldívar will be followed by Antucoya, Centinela and Los Pelambres, and during 2022, the company expects that its mining division’s electricity consumption will be supplied entirely from renewable sources.

As a result of the COVID-19 pandemic, the Los Pelambres Expansion project was temporarily suspended from March to August. Work resumed with approximately 75% of the original planned workforce on-site and it is assumed that these manpower levels will continue throughout 2021.

The Los Pelambres Expansion project is divided into two phases. Phase 1 is designed to optimize throughput within the limits of the existing operating, environmental and water extraction permits.

During 2020, the decision was made to change the scope of the project and double the planned capacity of the desalination plant that is part of Phase 1 of the project, from 400 liters per second (l/s) to 800 l/s. The amount of work that can be done on the expansion of the desalination plant during Phase 1 is limited by what is allowed under the permits that have already been issued.

Following the change of scope and the delays due to COVID-19, the project reached 45% overall project completion by the end of the year and is now expected to be completed in the second half of 2022.

As mining progresses at Los Pelambres, ore hardness will increase. The expansion is designed to compensate for this, increasing plant throughput from the current capacity of 175,000 mt/d of ore to an average of 190,000 m/d of ore. The plant expansion includes not only the desalination plant and pumping infrastructure, but also an additional SAG mill, ball mill and six additional cells in the flotation circuit. Copper production will be increased by an average of 60,000 mt/y over 15 years.

The 400-l/s desalination plant includes a 62-km pipeline from the coast to the Mauro tailings storage facility, where it will connect with the existing recycling circuit that returns water to the Los Pelambres concentrator plant. To complete the expansion of the desalination plant to 800 l/s, additional permits will be required.

The capital cost of the project was revised to $1.7 billion during the year to include the direct costs related to COVID-19 and the delay caused by it, and the investment in enabling the future expansion of the desalination plant.

Phase 2 of the expansion requires two separate Environmental Impact Assessment (EIA) applications, one for the desalination plant expansion and one for mine life extension.

In addition to the desalination plant expansion, Antofagasta Minerals will have to construct a new water pipeline from the Mauro tailings storage facility to the concentrator plant. This EIA will be submitted in the first half of 2021 and is expected to be approved in approximately two years with the project being completed by 2025. The desalination plant will be able to supply Los Pelambres with more than 95% of its water needs.

The current mine life of Los Pelambres is 14 years and is limited by the capacity of the Mauro tailings storage facility. The scope of the second EIA will include increasing the capacity of the tailings storage facility and the mine waste dumps. This will extend the mine’s life by a minimum of 15 years, accessing a larger portion of Los Pelambres’s 6 billion mt of mineral resources. The EIA will also include the option to increase throughput to 205,000 mt/d of ore, increasing copper production by 35,000 mt/y. This EIA will likely be submitted in 2022.

Esperanza Sur is 4 km south of the Esperanza pit and near Centinela’s concentrator. The deposit contains 1.4 billion mt of reserves with a grade of 0.4% copper, 0.13 g/mt of gold and 0.012% of molybdenum.

Stripping was expected to start in early 2020, but was rescheduled in response to COVID-19 to the third quarter, and is now expected to be completed in the first half of 2022 at an unchanged capital cost of $175 million. The stripping cost is being capitalized and is being carried out by a contractor. Once it is completed, autonomous trucks operated by Centinela will be used to mine the deposit.

Zaldivar’s ore stacking system now runs on renewable energy.

Opening the Esperanza Sur pit will improve Centinela’s flexibility to supply its concentrator and, over the initial years, the higher-grade material from the pit will increase production by some 10–15,000 mt/y of copper, compared to how much would be produced if material was solely supplied from the Esperanza pit. This greater flexibility will allow Centinela to smooth and optimize its year-on-year production profile, which has in the past been variable.

Antofagasta is currently evaluating the construction of a second concentrator and tailings deposit about 7 km from the existing concentrator in two phases.

Phase 1 would have a capacity of approximately 90,000 mt/d of copper ore, producing copper, and gold and molybdenum as byproducts, with an annual production of approximately 180,000 mt of copper equivalent. Once Phase 1 has been completed and is operating successfully, a further expansion (Phase 2) is possible and would involve increasing the capacity of the concentrator to 150,000 mt/d of ore with annual production increasing to 250,000 mt of copper equivalent, maximizing the potential of Centinela’s large resource base.

Ore for the second concentrator would be sourced initially from the Esperanza Sur deposit and later from Encuentro Sulphides. The latter lies under the Encuentro Oxides reserves, which are expected to be depleted by 2026.

The EIA for both phases of the project was approved in 2016 and the initial feasibility study for Phase 1 was completed during 2020 with further detailed and supplier engineering progressing during 2021.

In late 2020, a tender process was started to invite third parties to provide water for Centinela’s current operations, by acquiring the existing water supply system, and building the new water pipeline. This process is expected to be completed during 2021.

Zaldívar’s Chloride Leach project was rescheduled in response to COVID-19 in the third quarter of 2020 and completion is now expected in the first half of 2022. The project is expected to increase copper recoveries by approximately 10% with further upside in recoveries possible, depending on the type of ore being processed. This will increase copper production at Zaldívar by approximately 10,000 to 15,000 mt/y over the remaining life of the mine. The project requires an upgrade of the solvent extraction (SX) plant, new reagents facilities and the construction of additional washing ponds for controlling the chlorine levels, at an estimated capital cost of $190 million.

The current disposition in the Chilean copper market is positive. Copper demand is expected to recover the volumes lost in 2020, and to grow further. While there is some uncertainty about the pace of the Chinese economy, the economic recovery expected in the USA, Europe and elsewhere, supported by fiscal stimulus packages, will have a positive impact.

Chilean copper production is expected to grow as several projects are completed, but the COVID-19 risks are still present and could affect production, maintenance and construction activities. In general, the copper market is expected to remain tight for a few years as several of these large projects are completed.

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