KGHM says Chile protests, potential tax changes could impact business
Polish miner KGHM Polska Miedz SA on Thursday flagged ongoing protests in Chile as a “great concern” to the company and said potential changes to the South American country’s tax law could impact its business.
Chile, the world’s top copper producing country, has been rocked by weeks of nation-wide protests against costs and inequality, and is studying changes to taxes levied on miners.
KGHM owns a 55% stake in Chile’s Sierra Gorda copper-molybdenum mine in the Atacama Desert that produces around 110,000 tonnes of ore per day. It also operates the smaller Franke copper mine in the country’s northern Antofagasta region.
The situation in Chile is “very serious and we are very closely monitoring the proposed changes both to the constitution and tax law … because they might greatly the impact the financial position of our assets,” Pawel Gruza, KGHM’s executive vice president of foreign assets, told Reuters in an interview.
KGHM has “not been directly impacted by the protests” in Chile, with no strikes or major disruption at its mining sites, Gruza said on the sideline of the Asia Copper Week, where there was a lower-profile delegation than usual from Chile.
However, the company has faced difficulties in transporting its workforce, contractors and supplies, resulting in some delays in shipping, Gruza said.
He added that there was no impact on KGHM’s yearly output or sales.
A number of changes are being discussed, aimed at making the tax system more efficient from a Chilean revenue point of view, that are “very worrying” for KGHM, he said.
Sierra Gorda is the one overseas producing asset KGHM definitely plans to retain as it looks to trim its portfolio to focus on strategic projects. Another strategic resource base for the future is the Victoria copper and nickel mine in Canada.
KGHM, which also has projects in the United States, will consider offloading its other overseas assets but not immediately due to a “pessimistic sentiment” in the market, he added.
“We do not see a major upswing in the first half [of 2020],” Gruza said, but added China’s infrastructure investment might drive some demand for copper next year.
“Maybe, there is some cause for optimism in the second part of the year.”
Gruza declined to give a copper price forecast for 2020 but said there was not “too much room for going below where we are right now on the screen.”
Benchmark three-month copper prices on the London Metal Exchange are currently at around $5,825 a tonne.
(By Tom Daly; Editing by Saumyadeb Chakrabarty)