Codelco, Chile’s leading copper producer and a state-run miner, has recently reported a decrease in quarterly production. 

The decline is attributed to lower ore grades at its ageing mines, marking another challenge in the ongoing supply-side struggles, which have contributed to the surge in copper prices to their highest levels in two years. 

In its latest results, Codelco reported that output totalled 295kt, marking a 9.6% decrease from the same period last year. And despite rising copper prices, its pre-tax profits dropped 29% year-over-year to US$849m. This outcome was anticipated, as Chairman Maximo Pacheco had earlier indicated that the first quarter's performance aligned with internal projections. Earlier in April, Codelco provided an estimate for its production figures. Chairman Pacheco and CEO Ruben Alvarado expressed optimism about achieving a slight increase in output for 2024, aiming to reverse a prolonged downturn caused by setbacks in various projects and mines. Alvarado has initiated management restructuring efforts to expedite the completion of the delayed projects crucial for accessing higher-grade ore reserves.

While Codelco has witnessed some improvements in its financial performance due to reduced operating costs and increased metal prices, it still faces challenges. A closer look at the year-over-year output from January to February reveals disparities within Codelco's divisions. Chuquicamata, Radomiro Tomic, Ministro Hales, and El Teniente experienced declines in production (~-14%), while Andina and Gabriela Mistral saw growth during the same period (19.7% and 15.9% respectively),  highlighting internal operational discrepancies within Codelco. Moreover, when comparing Codelco's performance with other major miners in Chile, it becomes apparent that the struggles are largely specific to Codelco. Escondida, Collahuasi and Los Pelambres, for instance, experienced strong year-over-year production increases (17.5%, 12%, 45.8% respectively) for the same period. These unique challenges facing Codelco include the slow ramp-up of production at its Radomiro Tomic mine following a fatal accident in March, temporary production halts due to operational incidents, and maintenance closures at key operations like Chuquicamata. These factors collectively contribute to the uncertainty surrounding Codelco's ability to meet its annual production target of 1.33Mt – 1.39Mt.

Codelco's struggles reflect broader supply concerns about the industry's ability to meet growing demand, particularly from green energy transition sectors. The recent bid by BHP for Anglo American underscores the preference of many mining companies to buy rivals and acquire existing assets rather than accept the risk of developing new mining projects.