Chile Copper Mining Industry At a Turning Point -BHP Executive

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Chile Copper Mining Industry At a Turning Point -BHP Executive
11/16/2012| 10:07am US/Eastern

SANTIAGO, Chile--The Chilean copper mining industry, which accounts for a third of the world's copper, is at a turning point as ore grades are retreating and bigger capital expenditures are needed to maintain production levels, a BHP Billiton Ltd. executive said Friday.

As mines in Chile age, ore grades decrease, the minerals mined become harder and are located farther away from the surface, thus increasing mining costs and reducing copper production.

In addition, Chile is grappling with high power costs and a future energy crunch as many of the largest planned electricity projects are suffering setbacks in the local courts.

"Mining in Chile is at a turning point as the industry requires large expenditures just to maintain throughput," said Peter Beaven, head of BHP's Base Metals Division.

Speaking at an industry event, Beaven said mines like the BHP-operated Escondida, the world's biggest copper mine, started out with ore grades at 3% and now they're mining ore with around 1% copper.

At state copper giant Corporacion Nacional de Cobre de Chile, or Codelco, ore grades in 2012 will average less than 1%.

"We're nearing the end of the first stage and must now begin a second and different stage, and there's a lot of competition from countries such as Peru and Mongolia," Mr. Beaven told reporters on the sidelines of the industry event.

He noted that energy costs in Peru are much lower than in Chile and that the country must deal with the energy issue.

In Chile, BHP controls and operates Escondida and wholly owns the Spence and Cerro Colorado mines.

Write to Carolina Pica at carolina.pica@dowjones.com

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