In anticipation of a global supply shortage for copper, BHP plans to invest up to US$14.7Bn over the next decade to boost production from its core Chilean assets. The investment focus will include major expansions at Escondida and smaller Spence mine and the restart of the Cerro Colorado mine in Chile. Through this investment, BHP can potentially increase its Chilean copper production by 430-540ktpy by the early 2030s.

Chile is the largest producer of mined copper globally with Project Blue expecting it to have mined nearly 5.2Mt of copper in 2024, representing 24% of the global supply. However, production levels from Chile have experienced annual declines since 2019 with major operations facing persistent challenges including falling ore grades, aging infrastructure, and a skilled workforce shortage. As such, Chile’s share of global production has fallen from over 30% a decade ago.

Source: Project Blue Copper Extractive Cost Tracker

Declining ore grades especially have been a major contributor to rising production costs at Chilean copper mines, with average mined grades dropping from 0.90% in 2015 to 0.74% in 2023. According to Project Blue’s Copper Extractive Cost Tracker, during this same period, the average All-In Sustaining Cost for producing copper concentrate in Chile increased to over US$2.22/lb Cu from US$1.65/lb Cu. Despite rising costs, Chile has remained more competitive compared with the global industry average and on par with its South American peers.    It is clear that declining ore grades and aging infrastructure at existing mines have resulted in a structural change for Chilean miners. Without necessary upgrades in aging facilities and improvements in recovery and operational efficiency, the unit cost of producing copper will only increase for existing operations.

Source: Project Blue Copper Extractive Cost Tracker  

Note: All-in sustaining costs (on a co-product basis) include mining costs, processing costs, G&A costs, royalties, realisation costs, corporate overheads, reclamation & remediation costs, exploration costs, and sustaining capital expenditure. 

Despite these challenges, BHP’s announcement highlights its commitment to the Chilean copper sector. This is echoed by state-owned copper major, Codelco, which also plans to invest nearly US$6Bn to upgrade its mines. These include Chuquicamata and El Teniente in 2025 and reflects the company’s aim to revive its output from a 25-year low. More investment plans are likely to follow soon with support from the Chilean government.     

Apart from plans to rejuvenate old mines, copper majors are developing new processing technologies to unlock resource potential. Traditionally, leach-based methods are used only to process primary oxide and secondary sulphide ores, while primary sulphide actually accounts for the majority of the identified copper resources. 

Innovative sulphide leaching technologies such as Rio Tinto’s Nuton and Antofagasta’s Cuprochlor-T could open up the primary sulphide space and help the industry to produce copper more efficiently by reducing energy consumption. As the world’s largest holder of copper reserves, Chile can potentially benefit from this technology (if proven at the commercial scale) to unlock its abundant low-grade copper sulphide resources in the coming decades. 

For these investments to materialise, a stable and clear regulatory framework will be crucial over the longer term. The political landscape in Chile is changing fast ahead of the 2025 general election. In the short term, this can impose some additional risks to projects still waiting for environmental approval and permits to make the final investment decisions.