Codelco pre-tax profits down despite output increase

Codelco pre-tax profits down despite output increase in 2014

Nelson Pizarro, a mining engineer with over 50 years of experience in the industry.

Production of Chilean state-owned Codelco, the world’s No.1 copper miner, went up by 8% last year compared to 2013, but lower metal prices ate into pre-tax profits, company chief Nelson Pizarro said Sunday.

In an interview with local newspaper El Mercurio (in Spanish), the executive said that despite the company’s unprecedented efforts to maintain output despite lower grades, pre-tax profit for the year was a bit over US$3 billion, a decline of $760 million when compared to 2013.

Falling copper prices were partially offset by a 7% drop in production costs, Pizarro said.

The red metal, Chile's main export, ended the year down 17%, weighed by signs that demand for copper is faltering as China's economy runs out of steam.

And while some analysts predict prices could slide further this year, Pizarro doesn’t seem concerned. He thinks the metal will settle at around $3 a pound between 2015 and next year, recovering by the end of 2016.

"I think the projected price of copper for 2018 will be around $3.20 to $3.50 a pound," Pizarro said.

Codelco expects to invest about $22 billion by 2018 in its mining operations. "It is the biggest investment in history. The amount being invested in this five-year period is practically what was invested between 2003 and 2013," Pizarro told El Mercurio.

A mining engineer with over 50 years of experience in the industry, Pizarro received unanimous support from Codelco’s board when named CEO in August last year.

One of his most recent achievements was the development of the $4.2 billion Caserones copper mine in the Atacama Desert for Japan’s Pan Pacific Copper Co.

He also once worked for London-listed copper firm Antofagasta Plc (LON:ANTO) and ran Codelco’s Andina and Chuquicamata mines, both more than a century old, between 1990 and 1997.

Copper accounts for 60% of Chile's exports and 15% of its gross domestic product.