Chilean miner Antofagasta (LON: ANTO) is expecting annual copper production for 2022 to be below last year’s levels, as operations continue to be impacted by the home country’s longest drought in decades.
The company, which already saw 2021 copper production drop by 1.7% to 721,500 tonnes, anticipates churning out between 660,000 to 690,000 tonnes of copper this year due to mix of lower grades at some operations, and water shortages.
Antofagasta’s flagship mine Los Pelambres has been one of the company’s operations hardest hit by the lack of rainfall.
Chile’s central region alone, where the mine is located and home to the majority of both the country’s population and key copper mines, has seen rainfall decrease by more than 30% over the last 20 years.
The drought not only is impacting miners, but also farmers and wine makers, which has led the authorities to reform the nation’s water code.
Chief executive Iván Arriagada noted the company is ready to commission a desalination plant in the second half of the year, which will provide a long-term solution to ongoing water shortages at Los Pelambres.
Arriagada also drew attention to the multiple favourable long-term trends that were in place in the copper market.
“The demand picture for copper continues to be strong as copper is essential to economic activity and green investment initiatives such as electric vehicles, infrastructure and renewable energy,” he said.
Antofagasta is in the midst of expanding Los Pelambres’ concentrator plant, with work slated to be completed in early 2023.
The company, majority-owned by Chile’s Luksic family, one of the country’s wealthiest, noted that it is reviewing the project’s costs due primarily to impacts of covid-19. It already anticipates that capital expenditure this year will increase to between $1.7 billion and $1.9 billion.
Net cash costs this year were estimated at $1.55 per pound of copper, up from $1.20 a pound in 2021, reflecting lower production and increased input costs, especially sulphuric acid.