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Leading Copper Producer Announcing ‘Drastic Cuts’

Leading Copper Producer Announcing ‘Drastic Cuts’

Copper is officially below $2 per pound. And that’s caused a flurry of activity in the world’s top-producing nation for the red metal.

Chile.

Concern over tumbling copper prices this week ran all the way up to Chile’s President, Michelle Bachelet. Who took the opportunity at a keynote speech to reassure Chileans that her country’s finances are not falling apart.

Speaking at the opening of Chile’s International Investment Forum 2016, Bachelet stressed the point that her government has been preparing for the possibility of lower copper prices.

She also assured Chileans that the government is managing public finances “prudently” — even as it loses an estimated $40 million in taxes with each penny the copper price falls. Related: Cheap Oil Hits Housing In North Dakota, Texas, and Others

The fact that such a high-profile official would make this speech suggests there’s a lot of concern going over Chile’s copper mining sector. A sentiment that was confirmed by officials elsewhere in the country this week.

Such as reports in local press quoting managers from Chile’s national mining society, SONAMI — who said that small copper miners in the country have been decimated, with more than 200 companies shutting down in 2015.

SONAMI officials also said that medium-scale copper miners have been pushed to the limits at today’s prices. With reports identifying at least five firms that are in a “very complex situation” because of declining mining profits.

Concern over the copper price also spread this week to Chile’s state miner, Codelco — the world’s largest copper producer. With the company’s Chairman, Oscar Landerretche, saying that cuts may be coming soon at the firm’s operations. Related: Saudi Aramco IPO More About Geopolitics Than Finance

“There will be cost adjustments, and they are coming very soon,” Landerretche told attendees at a Codelco corporate function. He added that the cuts could be “dramatic” if the copper price continues to fall.

This suggests we could see layoffs, down-sizing or even mine closures at Codelco’s operations. Landerretche noted that the company is currently evaluating the closure of its Salvador business division, which manages three copper mines — and the response to lower prices could extend beyond that.

All of which shows officials in this key copper nation are leaping into emergency mode. Watch for news on corporate changes from Codelco, and elsewhere in the Chilean mining sector.

Here’s to appropriate responses

By Dave Forest

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