Chile well established as top copper producer

Chile is the worlds largest producer and exporter of copper, accounting for 22% of the Western worlds total production, and about 23% of the worlds copper reserves.

Based on planned production statistics and new project developments, it is expected that Chile will have an annual production of about 1.8 million tonnes of copper, thus retaining its leading role in copper production for the next decade.

The Chilean economy is heavily dependent on the mining sector. Even though its share of the gross domestic product (GDP) decreased during the last decade from 9.2% in 1982 to 7.5% in 1990 the mining sector accounts for about 58% of the total value of exports. About half of this export total is made up of copper.

The Chilean mining industry employs about 90,000 people, or about 2% of the countrys labor force. Of this total, about 35% are employed at the copper and gold mining operations.

Most metallogenic events in Chile are related to two cycles, the Hercynian cycle of Paleozoic age and the Andean cycle of Mesozoic-Cenozoic age. The Hercynian cycle is associated mainly with iron, chrome and nickel deposits, whereas the Andean cycle produced porphyry copper and gold deposits. These deposits are associated with intrusive-extrusive magnetism which produced an east-west zonation of metallogenic belts.

The westernmost belt contains iron-apatite contact metasomatic deposits (E1 Romeral) as well as stratabound copper deposits (Mantos Blancos). The copper-molybdenum porphyries (Chuquicamata, El Teniente) are situated along the central belt. The epithermal gold deposits are associated with andesitic stratovolcanoes situated along the eastern belt.

Chilean copper production is currently at a peak, but is expected to slowly decline during the next decade. Total annual copper production increased from about 1.1 million tonnes in 1979 to 1.78 million tonnes in 1991. However, unless new large deposits are discovered, such as La Escondida with 675 million tonnes of 2.1% copper, the average grade of Chilean copper that is mined will decrease from the current 1.35% to about 1% by the end of this century.

The decrease in production will also be affected by the price of copper. The rise in output was in large part a reflection of a steady increase in the price of copper, from about US61 per lb. in 1984 to US$1.29 in 1989 At present, total reserves from 15 producing mines are reported to be at least 11 billion tonnes at an average grade of 0.87% copper with minor amounts of gold, silver and molybdenum. In addition, total reserves of more than 1.5 billion tonnes at an average grade of 0.91% with minor amounts of gold, silver and molybdenum are estimated at the seven deposits currently under consideration for development.

These figures suggest that Chile could maintain the current annual rate of copper production, of about 1,800,000 tonnes, for at least 60 years. Chiles state-owned Corporacion Nacional del Cobre (Codelco) is the largest copper producer in the country. It produces about one million tonnes per year at an average cost of about US45 per lb. Future production costs, however, may be higher because of current investments in reinforcing tunnels and production galleries at El Teniente.

Codelcos largest mine, also the worlds largest open-pit copper mine, is Chuquicamata. It mines about 600,000 tonnes per day from three mines: Main Pit, Chuqui Norte, and Mina Sur (formerly Exotica). Recently, a new porphyry copper deposit has been discovered by Codelco adjacent to and south of Mina Sur.

At present, Codelco accounts for about 60% of total Chilean copper production, but this figure is expected to decrease with the anticipated decrease in the average grade of reserves as well as an increase in production by private companies by the end of this decade.

El Teniente is Codelcos second largest mine, and the worlds largest underground copper mine, with an 80,000 tpd operation. The mine currently produces about 300,000 tonnes copper per year at an average processing cost of US41.5 per lb. using conventional milling and smelting methods. With the introduction of solvent extraction methods, these costs are expected to decrease.

Codelcos other major mining operations are at El Salvador and Rio Blanco/Andina. In addition to its mines, Codelco owns and operates three copper smelters: one at Chuquicamata, the Potrerillos smelter at Quebrada M and the third at El Teniente.

Created in 1960, the Empresa Nacional de Mineria (Enami) is a state-owned company with the objective of processing and marketing ore material supplied by independent medium to small-sized mining companies or individuals. The company owns and operates two smelters, Ventanas smelter and refinery north of Vina del Mar and Paipote smelter and refinery southeast of Copiapo. The company also owns the Andacollo porphyry copper deposit, with reserves of 275 million tonnes of 0.62%, near the town of Andacollo. Recently, Enami entered into a joint venture agreement with Placer Dome (TSE) whereby the latter can earn an 80% interest in the Andacollo project.

During the past decade, numerous multinational mining companies have reinvested in mining projects in Chile. Most of the major American and Canadian mining companies are represented in Chile, either directly or by Chilean subsidiaries such as La Escondida (BHP, RTZ), Mantos Blancos (Anglo American), Quebrada Blanca (Cominco (TSE)), Cerro Colorado (Rio Algom (TSE)) and Collahuasi (Shell, Chevron, Falconbridge (TSE)) among others. In addition, a number of junior Canadian mining companies and medium-sized Chilean private com-

panies are active with explora-tion, development and mining projects. The reason for the dramatic increase in foreign investment in mining projects, as well as in many other industrial projects, is widely regarded to be Decree Law No. 600, modified by Decree Law No.1748 of March, 1977 (known as the Foreign Investment Statute), in order to promote investment. Among the fundamental changes instituted by Decree Law 600 are the allowance for up to 100% foreign ownership of projects as well as repatriation of profits and capital of foreign investors.

Chilean production of gold reached 725,295 oz. in 1989 and current production plans are for almost 990,000 oz. for 1991. Only a decade ago, production was about 220,000 oz., most of it as byproduct from copper ores. This dramatic increase started at the end of the 1970s, with the startup of the E1 Indio mine. Subsequently, a relatively high gold price helped maintain the gradual increase in production of gold in Chile.

Gold in Chile is mined by medium-sized operations, by local and foreign companies, and by small-scale operations, generally by individuals known as pirquineros. Most of the gold produced in 1990 was from four mines: El Indio, El Bronce de Petorca, Choquelimpie and El Hueso. In 1990, these mines accounted for more than 60% of the total production of about 615,000 oz. from gold mines.

By contrast, only 22,500 oz. was produced by the thousands of pirquineros. Current production plans at La Coipa (320,000 oz.) and El Guanaco (40,000 oz.) would bring this proportion to more than 90% of the gold produced from gold mines. As new gold deposits are developed, it is likely that the relative proportion of gold produced by pirquineros will decrease. Most of the recently discovered gold deposits in Chile are located along a belt of volcanoes, of Tertiary to Pleistocene age, that are situated east of the belt of porphyry copper deposits in the high Andes. Further to the west, the stratabound contact-metasomatic copper deposits, such as La Candelaria, are also situated along a separate belt. Most of the new major gold deposits are located in Maricunga district in north-central Chile.

Chilean production of silver reached 17.5 million oz. in 1989 and, based on production plans of the existing mines, silver production is likely to remain at the current level for the next few years.

Silver production in Chile almost doubled from 8.7 million oz. in 1979 to 15.8 million oz. in 1984. Thereafter, the annual production level has ranged from 16 million oz. to 17.5 million oz.

During the last decade, about two-thirds of the silver production has come from porphyry copper deposits, about 25% from primarily from silver deposits and less than 10% from gold, lead and zinc deposits. Recently, the proportion of production from silver mines has decreased to about 10%, with a corresponding increase to 20% from gold, lead and zinc deposits. Codelco is the largest silver producer in Chile and accounts for about two-thirds of the silver produced, with annual production of more than 12 million. Silver is produced as a byproduct.

Compania Minera Mantos de Oro (Placer Dome and TVX Gold (TSE)) has become the second largest silver producer with planned annual production of more than 6 million oz. The third largest producer is Compania Minera El Indio (LAC Minerals (TSE)) with annual production of more than 1.5 million oz. Upon completion of the development of the Esperanza project, Minera Anglo American Chile will become a major silver producer in Chile, with one gold mine and four silver mines.

Mining has historically been the most attractive sector for foreign investment in Chile. Since the foreign investment boom that began in 1982, 46% of total foreign investments have gone into mining. This tendency is even stronger today, with mining accounting for 56% of total (US$629 million) foreign investment in 1990.

During the past decade, mining investment in Chile has been increasing at an unprecedented rate. Many new copper and gold deposits have been discovered and are being developed. When these unusually large projects, such as La Escondida, La Candelaria, Cerro Colorado and Los Bronces (expansion) are complete, Chile will need new projects to continue to attract foreign investment at the current level and bolster its economic growth. Chiles economic potential depends, to a large extent, on the status of 15 large mining projects that are currently considered for development. Six of these projects are copper mining projects and another three are copper smelter/expansion projects. The remaining six projects include gold, aluminum, iron carbide, lithium/mixed sales, ammonium-urea and natural gas projects. Of the 10 copper and gold projects, four are associated with U.S. companies, four are controlled by Canadian companies and two are controlled by European companies.

According to Codelco, Chilean copper concentrate production will exceed copper smelting capacity by one million tonnes by 1995. This anticipated surplus has the potential of increasing international tolling charges at the expense of Chilean copper concentrates. Consequently, Enami plans on expansion projects at its Ventanas and Paipote smelters as well as construction of a new smelter near the cities of Tal Tal or Chanaral. Smelter expansion is also planned at Exxons Chagres smelter, one of the two privately owned smelters in the country.

Hrayr Agnerian is a consulting geologist with Roscoe Postle Associates Inc., Toronto