Codelco CEO to stay on after Chile’s new Gov’t reshuffles management

CEO Nelson Pizarro will remain at Codelco’s helm for a few months after President Sebastian Piñera appoints a new chairman and three directors in May. (Image courtesy of Codelco | Flickr.)

The Chief Executive Officer of Chilean state copper company Codelco, Nelson Pizarro, confirmed rumours this weekend that he would stay on at the company’s helm even after the country’s new President, Sebastian Piñera, appoints a new chairman and three directors in May.

The mining veteran, who took the post in 2014, has played a critical role in the drive to reduce spending and force a reduction in costs, while kicking off a major overhaul of Codelco’s aging mines to deal with dwindling ore grades.

Pizarro (77), told local newspaper El Mercurio he had agreed not to retire at the end of his term in May to ensure a smooth transition and normal operations at all the mines and projects the state-owned miner runs.

He also noted there were “three or four” candidates with deep ties to mining to take over his position, including people from and outside Codelco.

Chile’s new government has pledged to overturn a dictatorship-era law that forces Codelco to transfers 10% of its export sales to the military.

He said the company’s new CEO should be someone able to deal with challenges proper of the business, without letting government changes affect his or her decisions.

Sources familiar with the matter told that some of the names in the hat include Alvaro Aliaga, Codelco Norte’s vice-president of operations; Alejandro Rivera; top executive in the finance department; José Robles, vice president of productivity and costs, as well as Octavio Araneda, vice-president of operations Centro-Sur (Andina-El Teniente), who already held the role of interim president in 2014, after Thomas Keller was ousted by the board.

From outside the company, Antofagasta’s (LON:ANTO) CEO Iván Arriagada, who was once Codelco’s CFO, and Collahuasi’s executive president, Jorge Gomez, are considered serious candidates.

Codelco’s new CEO will need to oversee and ambitious investment plan, originally pegged at $25 billion (now sitting at about $18bn) for the next four years, while keeping debt levels in check and securing funding from the government. The spending plan includes major upgrades designed to maintain production levels in the company’s key divisions, including Chuquicamata and El Teniente.

Funding boost?

While Codelco has funding guaranteed through 2019, it will have to negotiate with the government in 2020 for money to complete investments needed to complete the needed project, which is estimated to be around $4 billion annually over the next five years.

The new leader will also have to deal with other major corporate changes Piñera’s administration has promised, including legal changes to prevent the nation’s armed forces using Codelco as a cash cow to finance weapons purchases.

In 2016, the company reported its first half-year loss and had to get into debt to pay for the army’s share of the copper sales — 10% of Codelco’s revenue.

The copper giant holds vast deposits of the red metal, accounting for over 10% of the world’s known proven and probable reserves and about 11% of the global annual copper output with 1.8 million tonnes of production.

However, most of its mines are running out of copper and need heavy investment in order to extend their productive life.