Chile Mining Report Q2 2015
Our View: Chile’s mining sector will see modest average annual growth of 1.6% in 2015-2019. The country’s stable political and business environments, combined with its significant mineral reserves, will encourage continued investment. Nevertheless, older mines will still face lagging productivity, while subdued copper and precious metal prices will limit sector growth and miners’ expansion plans.
The Chilean mining sector will be dominated by copper production for the foreseeable future. In 2014, the metal accounted for approximately 92% of mining exports as measured in dollar terms and nearly 55% of the country’s total exports. However, the latter represents a decline from 2010, when copper accounted for slightly over 58% of the country’s total exports. Ultimately, we expect the mining industry to be hit by lower copper prices, which we forecast will see only a modest recovery in the years ahead. For 2015, we forecast prices will average USD5,750/tonne. Still, the pipeline of copper projects and the country’s global dominance in copper production will ensure the country maintains its lead despite falling ore grades and lagging productivity. Moreover, lower oil prices and a weaker Chilean peso on the back of US dollar strength will cap growth in input costs, providing a boon to miners facing subdued metal prices.
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