According to a report released by the Chilean Copper and Mining Research Center (CESCO) on August 17, the world's largest copper producer, Codelco, is at risk of bankruptcy.
Rising costs and mounting debt from projects that fail to meet expected production targets could push the company's debt from $18 billion today to $30 billion by 2030, according to the report. The rare intervention by an industry body, funded by revenues from its organisation's activities, was designed to draw attention to the serious financial problems facing Codelco.
In response to a request for comment, Codelco said: "Codelco has a solid financial position and extensive access to financial markets, which is confirmed by our high credit rating."
"Controlling the future growth of debt is an important focus... It depends on the development of the investment projects and the operating performance, and we put our best efforts in these areas."
Codelco chief executive Andre Sougarret stepped down in June, just a year after taking over the role, at the end of August. The report was released to CESCO members earlier this month. sogarret cited the "complexity" of the business.
Codelco, the heart of Chile's mining industry, needs to boost its copper production from 25-year lows.
Last year's production was 1.46 million tons, 28 percent of Chile's total of 5.33 million tons. Total global copper supply is about 25 million tonnes.
CESCO said Codelco's production had fallen despite investing $15 billion in flagship products, including El Teniente, where cost overruns have so far been 75 percent, and Chuquicamata, where cost overruns have been announced by 53 percent.
Codelco did not comment on the figures.
"The most appropriate thing today is to understand the technical feasibility of the project and see if it is possible to achieve the promised production targets," CESCO said.
This should happen "even before continuing to make investment decisions, because... The cost of debt endangers the financial viability of our country and the value of our major assets."
CESCO also highlighted Codelco's planned involvement in lithium mining as a problem, which could mean the company loses its focus on copper. Copper is key to the global energy transition, and demand forecasts show that copper is a unique wealth opportunity.
In an emailed response, Codelco said, "Codelco has explained... There will be no shift of focus away from copper production, or diversion of resources from other areas."
CESCO said Chile's future prosperity was tied to Codelco's fate and that the state-owned miner needed to focus on improving efficiency in governance, administrative structures and regulation before resuming investment and accumulating more debt.
"Codelco may be experiencing one of the most complex moments in its 52-year history," the report said.
"If production and cost commitments for these [structural] projects are not met, debt levels could reach such a high level that they could drag the company into insolvency and jeopardize its financial viability."
Codelco produced 633,000 tonnes of copper in the first half of 2023, the lowest level in 25 years. In the past five years, its copper production has fallen by 17% and is expected to continue to decline until 2025.
