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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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These Backroom Talks Could Seal The Fate Of The World’s No.1 Copper Miner

Codelco Andes Mine

Whispers of a possible game-changing deal in the copper market yesterday. Arising out of emergency talks being held for the world’s top mining firm.

Chile’s state miner Codelco.

Local Chilean press reported that Codelco’s chairman Oscar Landerretche was summoned Wednesday to appear before the national Chamber of Deputies. To discuss a “structural recapitalization” of the troubled firm.

Chile’s lawmakers are reportedly making some big strides in coming to Codelco’s aid. Including discussions about sweeping changes to the so-called Copper Law — which mandates that most of Codelco’s profits are stripped annually by the government in order to cover expenses for national defense and other items.

Reports this week indicate that the federal government may look to completely scrap this law. Or revise it, to allow more profits to stay inside of Codelco, in order to fund capital costs for sustaining existing mines and building new ones.

The move is coming after Codelco’s third-quarter profits were reportedly hit hard by lower copper prices — as well as a costly “environmental incident” at the company’s operations.

All of which caps months of rising concern over Codelco’s ability to sustain production going forward. With company executives and observers in the mining community saying that the company is going through the worst crisis it has ever seen.

If a rescue deal does come through from the government, it would go a long way in helping Codelco’s operations get back on their feet — and allowing the company to retain its dominant position in global copper output.

But it’s far from a done deal. With lawmakers saying that state finances are stretched right now, which may make it difficult to pass any meaningful reforms that would see more cash stay with Codelco.

This could well be a make-or-break moment for this critical producer — and for the copper market in general. Watch for news on any rescue packages, and for the ensuing political debate that will almost certainly go along with such controversial measures.

Here’s to paying the piper.

By Dave Forest

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