Costs in Chile's mining industry, which supplies almost a third of the world's copper, are continuing to fall as producers continue to adapt to sharply lower prices for the red metal, a government report showed Tuesday.
According to the study by the Chilean Copper Commission, C1 cash costs at Chile's 19 largest mines fell to an average of $1.285/lb during the first three months of the year, down 13% from the same quarter of last year.
The sample included mines operated by BHP Billiton, Antofagasta Minerals, Codelco, and Teck and represented 88% of Chilean copper production during the period.
Cochilco said the fall in production costs reflected improvement mine management and lower costs for energy and services, offset by lower prices for byproducts and lower ore grades.
But mine managers' success at slashing spending could weigh on copper prices as some analysts have been counting on further production cutbacks on helping to balance new mine openings with slower demand for the metal.
While costs fell at 14 mines, representing 84% of copper production, costs rose at the remaining five.
A graph showed that the gains were greatest at the highest cost operation in the sample, where costs fell from over $3.50/lb to around $2.20/lb, while the most efficient operation brought its costs significantly below $1/lb.
So far cutbacks among large producers in Chile have been limited. Last year, Freeport McMoRan announced it was cutting production from its El Abra pit by 50% to save costs while a 30,000 mt/year SX-EW line at the Collahuasi mine (owned by Anglo American and Glencore) was shut.
Dozens of small and medium-scale mines have also been forced to shut. But others, including state-owned Codelco, the world's largest producer, have preferred to concentrate on efficiency gains rather closing unprofitable capacity.
Production has fallen sharply this year at some large mines, including BHP Billiton's Escondida and Anglo American's Los Bronces, as they process lower ore grades.
Gains are expected to continue. Last week Anglo American said that C1 unit costs at its copper operations in Chile, including the Collahuasi and Los Bronces, fell to $1.36/lb, from $1.66/lb in the previous quarter.
