Copper Production at Chile's Codelco Slipped 5 Percent in The January to September Period

Reuters reported that copper production at Chile's Codelco slipped 5 percent in the January to September period from a year earlier to 1.189 million tonnes as dwindling ore grades at ageing deposits dampened output.

The state run miner now expects to produce a little under 1.7 million tonnes of copper this year, from a previous forecast of around 1.7 million tonnes ebbing from 2011's levels as ore grades stubbornly decline.

Codelco said that profits before tax and extraordinary items jumped 27.3% during the period from a year earlier to USD 6.777 billion boosted by its purchase of a stake in Anglo American's Sur properties in Chile.

Mr Thomas Keller CEO of Codelco said that this year's production will be below 1.7 million tonnes fundamentally due to lower ore grades. Ore grades dropped around 9% on average, though they tumbled more than 19 percent at the Chuquicamata mine.

Century old, massive Chuquicamata is emblematic of world No.1 copper producer Chile's tired deposits. The mine produced 249,000 tonnes of copper in the January to September period of this year, a 23.6% tumble in output compared with the same period of 2011. Codelco has an ambitious plan to invest USD 27 billion from 2012 to 2016 to increase annual copper production to over 2 million tonnes.

Codelco forecasts its 2013 output of the red metal will top this year's as the new Ministro Hales mine comes on line.

Mr Ryan Belshaw analyst of Macquarie said that "In 2013 we are not expecting much additional growth from Codelco or indeed Chile as a whole. Codelco's January to September production figures were broadly in line with estimates.

Mr Keller said that Chuquicamata hasn't been the only Chilean mine to experience worse than expected grades this year, Collahuasi and Los Bronces have also come in lower than guidance all of which has kept a cap copper supply growth in 2012. Codelco is also gearing up for labor negotiations at Chuquicamata in 2013. We're approaching this collective labor negotiation with seriousness and optimism.

In addition to lower grades, Codelco was also hit by steeper energy and fuel prices and lower prices for molybdenum, a by product of copper. The company's direct cash costs were USD 1.567 per pound of copper in the January to September period, a 40.4% increase compared with 2011 levels.

If the extraordinary gain stemming from the purchase of a slice of Anglo's coveted Sur deposit is discounted, Codelco's profit before tax and extraordinary items falls to USD 3.260 billion, a 38.8 percent decrease from the same period of 2011. The hefty drop is due to lower prices for copper falling ore grades, steeper costs and a fall in production.