MercoPress. South Atlantic News Agency

New mine increases Chile’s state-owned copper company reserves by 20%

Chilean state-owned mining company CODELCO announced last week its discovery of a new mine site near its existing División Andina site (Region V), some 80 kilometres north of Santiago.

The new mine, which has been described by the company as “a large body of minerals,” was discovered following surface and underground surveys carried out as part of an expansion project at the Andina site.

The company pointed out that extraction of the copper found at the new site will be difficult as the mineral is located deep in the ground beneath a range of glaciers – a condition that may worry environmentalists.

CODELCO’s mining activities have been criticized in the past for having a negative impact on the environment and advancing the meltdown of Chile’s glaciers.

Environmentalists have called for more effective legislation to assess the impact of mining projects in Chile.

The new mine is good news for CODELCO, the world’s largest copper producer, which saw its mineral reserves increase by 20% in 2008 to 6,677 million tons, of which 54.6 million tons is refined copper. This increase followed positive results from expansion work at the CODELCO Norte mine in the north of Chile, where tested and potential reserves increased by 26%, and at División Andina, where tested and potential reserves rose by 48%.

Increased copper reserves may also ultimately mean an increase in resources for Chile’s armed forces, as current law requires that 10% of CODELCO’s copper exports must be spent on the military budget.

Copper closed above two US dollars per pound on the London Metal Exchange last week Wednesday, up from US$1.756 per pound in late March. The gradual rise in price of copper on world markets over the past few months is in part due to a 28% decrease in supply since February 25, when it was at its highest level this year.

Supply last week was at 394.425 tons, the lowest level since January 20, 2008. The increase in copper prices is also thought to be due to fresh investment in infrastructure from China and more stable trading in Western economies, possibly due to an unexpected recovery in consumer and business confidence following the global financial crisis.

“We thought that China’s economy would not be capable of such strong growth and that the situation in the West would be worse,” said Juan Carlos Guajardo, executive director of the Copper and Mining Study Center (CESCO).

Still, experts are unsure whether prices will continue to rise, with some speculating that they will fall again once the effects of China’s demand wear off.

“The high price [of copper] is being maintained principally by demand from China and by hopes of economic recovery,” said Juan Cristóbal Ciudad, coordinator of the Chilean Copper Commission’s Market Analysis Division.

“However, it is difficult to see a recovery in demand from the copper sector, which is why the risk of prices falling still exists.”

By Chris Noyce - Santiago Times