Logo Gobierno: 160x162px. Ministerio, Subsecretaría, Organismo, etc.:160x145px
THE WORLD COPPER MARKET AND THE
IMPACT IN CHILEAN ECONOMY
Sergio HernándezEVP– Chilean Copper Commission
May 17th, 2016
• Economic context and mining investment• Quaterly copper market• Impact on Chilean mining activity
Agenda
Mining Ministry| COCHILCO
• Economic context and mining investment
Agenda
Mining Ministry| COCHILCO
Economic context and mining investment
Latest news for mineral commodities
Entrada producción
Mining Ministry| COCHILCO
Economic context and mining investment
And copper is not an exemption
Mining Ministry| COCHILCO
Source: COCHILCO, CRU Copper Monitor
150
170
190
210
230
250
270
290
310
01-2015 02-2015 03-2015 04-2015 05-2015 06-2015 07-2015 08-2015 09-2015 10-2015 11-2015 12-2015 01-2016 02-2016 03-2016 04-2016
c/lb
COCHILCO’s copper price forecast
285 c/lb (2015)280 c/lb (2016) 277 c/lb (2015)
270 c/lb (2016)277 c/lb (2015)270 c/lb (2016)
253 c/lb (2015)250 c/lb (2016)
215 c/lb (2016)220 c/lb (2017)
IMF: lowerChinese GDP
Oil: production push downcommodities prices
Greece: reformsacceptance
Atacama: productioncuts due heavy rains
FED: rise in interestrate should wait
China: signs of notreaching GDP growth goal
China: stock market crash
China: decreasecopper imports
China: yuan devaluation
China: lowest manufacture levels since 2009
China: reduce GDP goal
China: stock market crash
China: yuan devaluation
FED: rise of interest rate Iran: lifting
tradesanctions
FED: hold of interest rate
China: expansionary
policy
Chile: Pessimismon coppermarket
Economic context and mining investment
Supply reaction didn’t wait…
Mining Ministry| COCHILCO
Source: COCHILCO, CRU Copper Monitor, Companies press releases
150
170
190
210
230
250
270
290
310
01-2015 02-2015 03-2015 04-2015 05-2015 06-2015 07-2015 08-2015 09-2015 10-2015 11-2015 12-2015 01-2016 02-2016 03-2016 04-2016
c/lb
Production cut or closure
Investment delay or change
Asset sales
Relincho(Chile)
El Abra(Chile)
Lomas Bayas III(Chile)
Los Pelambres IV(Chile)
El Abra Mill(Chile)
Mopani(Zambia)
Katanga(Congo DR)Miami
(USA)Ray
(USA)Tyrone(USA)
Boseto(Botswana)
Sierrita(USA)
Troy(USA)
Anglo Norte(Chile)
Zaldívar(Chile)
Kamoa(Congo DR)
Cloncurry(Australia)
Collahuasi(Chile)
Baluba(Zambia)
McCreedy West(Canada)
Andina 244 (Chile)
Collahuasi Expansion(Chile)
Mt Gordon (Australia)
CSPT(China)
Nchanga(Zambia)
Huckleberry(Canada)
Chibuluma South(Zambia)
Minto(Canada)
Jiama(China)Skouries(Greece)
Quebrada Blanca, fwdclosure(Chile)
Cemin(Chile)
Sagasca(Chile)
EncuentroÓxidos(Chile)
Tenke(Congo)
Economic context and mining investment
Copper mining costs
Source: Wood Mackenzie 2015
Mining Ministry| COCHILCO
0
50
100
150
200
250
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
C3 (c/lb) C1 (c/lb)
Country 2000 2010 2015 2020 2025
Chile 6° 13° 17° 15° 12°
China 24° 14° 21° 19° 17°
Peru 12° 3° 11° 11° 9°
USA 21° 11° 22° 22° 18°
Australia 8° 21° 15° 27° 20°
Congo 32° 22° 28° 26° 14°
Rusia 5° 24° 10° 7° 4°
Zambia 29° 28° 31° 34° 24°
Canada 20° 27° 19° 23° -
Indonesia 1° 2° 1° 1° -
C1 Ranking Top Producers
• Quaterly copper market
Agenda
Mining Ministry| COCHILCO
Quaterly copper market
Latests price trends
Source: LME
Mining Ministry| COCHILCO
25
27
29
31
33
35
37
39
41
43
45
190
195
200
205
210
215
220
225
230
235
Cobre (c/lb) Petróleo (WTI, US$/barril)
Copper Oil
Average anual copper price 214,3 c/lb
Copper (c/lb) Oil (WTI, US$/b)
Quaterly copper market
World refined copper consumption
Mining Ministry| COCHILCO
22%
-15% -4% -12%
-75%
3% 6%
China USA Europe Japan Russia Others World
CONSUMPTION GROWTH RATEJAN 2015 VS. JAN 2016
24%11%
35% 37%
11% 15%
0%
18%
3%12% 9% 14%
-5%2% 4%
-3% 0% 0% 3%-3%
3% 1%8% 3%
22%
CHINA : CHANGE IN ANNUAL COPPER CONSUMPTION RATE
1,3% 1,4%-2,9%
-7,4%
-47,9%
4,3%-0,3%
China USA Europe Japan Russia Others World
CONSUMPTION GROWTH RATE 2015
Source: WMS
Quaterly copper market
Copper mine supply
Mining Ministry| COCHILCOSource: WMS
0,3%2,3%
-0,7%
23,6%
4,4%
-0,9%
4,3%
Chile China USA Peru Congo DR Australia World
2015: Mine production growth rate
Quaterly copper market
COCHILCO’s forecast: demand
Mining Ministry| COCHILCOSource: COCHILCO
3,0
1,5
1,0
2,32,5
1,01,2
1,8
China USA Europe World
Demand 2016 f (%)
January March
3,0
1,5 1,5
2,62,5
1,5
1,0
2,1
China USA Europe World
Demand 2017 f (%)
January March
Country 2015 p 2016 F 2017 FKTMF KTMF DIFF. KTMF DIFF.
China 11.451 11.737 286 12.030 293USA 1.792 1.810 18 1.837 27Europe 3.330 3.370 40 3.404 34World 22.736 23.151 415 23.645 494
Quaterly copper market
COCHILCO’s forecast: supply
Mining Ministry| COCHILCOSource: COCHILCO
19.955
20.542
20.250
20.846
2016 E 2017 E
Change in copper mine productionjan Vs mar 2016
(000’ tonnes)
January March
1,5%
1,5%
19.265
20.250
20.846
2015 2016 f 2017 f
Copper mine production(000’ tonnes)
5,1 %
2,9%
Quaterly copper market
COCHILCO’s forecast: copper price
Mining Ministry| COCHILCOSource: COCHILCO
249
215220
2015 p 2016 f 2017 f
COPPER PRICE FORECAST2016-2017
C/LB
20155,494
2016 f4,740
2017 f4,850
2015 2016 f 2017 f
COPPER PRICE FORECAST2016-2017US$/TON
• Impact on Chilean mining activity
Agenda
Mining Ministry| COCHILCO
Impact on Chilean mining activity
Chilean copper mining portfolio 2016
Mining Ministry| COCHILCO
Source: COCHILCO
Mill US$ 2.0427 projects
Under review
• Pascua (Gold, mill US$ 4.500)
• El Abra Mill (Cu, mill US$ 5.000)
• Relincho (Cu, mill US$ 4.500)
• Andina 244 (Cul, mill US$ 6.524)
Mill US$ 44.08423 projects
• Orcoma(Min. Ind., mill US$ 230)
• Expansion Molynor (Met. Plants, mill US$ 240)
New
Budget constraints
• Quebrada Blanca Hipógeno (Cu, mill US$ 5.000 (-mill US$ 590))
• Marginal Expansion Los Pelambres (Cu, mill US$ 1.600 (+ mill US$ 410))
• Arbiodo(Ind. Min., mill US$ 396 (- mill US$ 107))
Mill US$ 3.9845 projects
Gold and met. Plants
Iron Ore & Ind. Min.
Copper
Mining Ministry| COCHILCO
Source: COCHILCO
High investment
probability
Low investment
probability
POTENTIAL: 15,3%mill US$ 7.691;
2 projects
POSSIBLE: 34,4%mill US$ 17.235;
12 projects
PROBABLE: 19,8%mill US$ 9.915;
10 projects
BASE: 30,5%mill US$ 15.269;
11 projects
Impact on Chilean mining activity
Investment by condition
Mining Ministry| COCHILCO
Source: COCHILCO
Greenfield
MMUS$ 17.62016 proyectos
Brownfield
MMUS$ 32.49019 proyectos
Impact on Chilean mining activity
Investment condition
Source: COCHILCO
Mill US$ 44.08423 projects
81,9%14 projects 3%
4 projects
15,1%5 projects
Copper
Milling projects
Leaching projects
Copper projects by proccessing type
Impact on Chilean mining activity
0%0 projects
Smelting projects
Impact on Chilean mining activity
What should we expect from…?
Mining Ministry| COCHILCO
• Chilean copper production:
• Copper price:
• Chilean mining investment:
Chilean copper production could reduce its potential to produce 6.0million tonnes at current prices. Around 50% of total production hascosts (C3) under 200 c/lb.
Cochilco’s forecast for 2016 considers a copper price of 215 c/lb (4,740US$/ton) and 220 c/lb (4,850 US$/ton) in 2017. Long term copper priceis expected to be around 287 c/lb (6,330 US$/ton).
Several projects are under review given market conditions, but 50% ofmining investment projects in Chile have a good probability of beingdeveloped.Most of copper production will come from browfield milling projects,given natural depletion of leaching deposits.
Logo Gobierno: 160x162px. Ministerio, Subsecretaría, Organismo, etc.:160x145px
THE WORLD COPPER MARKET AND THE
IMPACT IN CHILEAN ECONOMY
Sergio HernándezEVP– Chilean Copper Commission
May 17th, 2016
