Codelco reports bumper year for profits despite pandemic

Chile´s Codelco, the world´s top copper producer, reported pre-tax profits of $2.078bn in 2020 and said it had upped output from its own mines by 2% to 1.618mn tonnes, despite being forced to rely on skeleton crews for almost half the year amid strict measures aimed at curbing the coronavirus outbreak.

The 55% increase in profits came amid a surge in global metal prices and higher sales as global markets including Chile’s main buyer China begin to rally from the pandemic, reports Reuters.

The company, which turns over all its profits to the Chilean state, told Reuters earlier this week that the recent spike in the price of the red metal as a “good opportunity” to generate cash for investments and hold down debt, but warned it could also drive up the miner’s costs.

Codelco said an 8.6% drop in direct cash costs to $1.294 per pound had also helped bolster profits, attributing these primarily to the lower price of inputs, a strengthening peso, upped production and a cash-saving drive by managers.

Codelco said its own copper sales increased by 1.5% year-on-year, and a higher ore grade generated positive performances in its Ministro Hales, Andina, Chuquicamata and Salvador mines, making up for declines in other divisions.

The company views the recent spike in the price of the red metal as a “good opportunity” to generate cash for investments and hold down debt, but warned it could also drive up the miner’s costs, a senior executive told Reuters.

The price of copper shot above $9,000 a tonne for the first time last week since 2011, as a nascent global economic recovery has prompted demand to boom for the commodity, critical to global construction and manufacturing sectors.

Codelco vice president of sales Carlos Alvarado said the growing expectations would likely also spur goods and service providers to hike prices, leading to higher overall costs for the state-run miner.

The executive said it was still “too early” to know if the spike in the global copper price represented a new “super-cycle,” similar to that seen in the early 2000s following a tectonic demand boost from industrialisation and urbanisation in emerging nations.