2017 PREVIEW: What to expect from Latin America’s copper, zinc production

Latin American copper mine production is set to grow in 2017, with Peru consolidating itself as the world’s second largest producer and Chile recovering from 2016’s output decline.

Estimates from the International Copper Study Group (ICSG) indicate that the region’s mine production will grow to 8.7 million tonnes next year, up from 8.3 million in 2016.

“Peru and Mexico are the main contributors to growth this year with Chile expected to contribute significantly to growth in 2017,” ICSG said in its latest forecast report.

Peruvian copper production set new record highs in 2016, mainly due to the ramp-up of MMG’s Las Bambas mine and the expansion of Freeport-McMoRan’s Cerro Verde.

The country’s total output is expected to reach 2.3 million tonnes in 2016, a 41% annual increase, according to estimates from Peru’s central bank.

This will consolidate Peru as the world’s second largest producer of the red metal, a position previously occupied by China.

“Peru’s copper production will continue to grow in 2017, but at a more moderate pace, as it completes the ramp-up of large mines that have been developed in recent years,” Juan Carlos Guajardo, ceo of consultancy firm Plusmining and former Cesco director, told Metal Bulletin.

Peru’s copper mine production is expected to reach 2.5 million tonnes in 2017, according to estimates from the country’s central bank.

Chile
While Peru’s output grows on new projects and capacity expansions, the scenario for Chile is quite different.

The world’s top copper producer has seen its production fall short of expectations over the last several years, mostly due to the decline in ore grades.

The low copper price cycle has aggravated this situation, since it led miners to “slow down investments that were expected to offset the lower grades”, Plusmining’s Guajardo said.

Chile’s copper mine production in 2016 until October amounted to 4.6 million tonnes, down by 4.6% on an annual basis.

This is due mainly to lower volumes from BHP Billiton’s Escondida, Anglo American Sur and Freeport-McMoRan’s El Abra.

Yet this has been partially offset by the increased production from Collahuasi mine.

Chile’s state-run miner Codelco has managed to keep production from its wholly-owned divisions nearly stable this year, despite a decline in ore grades.

As of 2017, Chile’s production is expected to reach about 5.8 million tonnes, returning to the level seen in 2015, the country’s mining society, Sonami, estimates.

Next year should also be decisive for the projects which have been “having a very complicated performance”, according to Plusmining’s Guajardo.

That is the case for KGHM’s Sierra Gorda mine and Minera Lumina Copper’s Caserones mine.

“2017 will be a very important year for [these] projects. They have changed executive and technical staff in a final attempt to reach commercial production,” Guajardo said.

In November, a director of Mitsui Bussan Commodities left his position to join Minera Lumina Copper (MLCC) with a mandate to help improve Caserones operations.

And KGHM’s ceo told Metal Bulletin in October that the purchase of the Sierra Gorda mine was a mistake, but the miner had no plans to sell the asset.

Mexico
Another relevant mining country in the region, Mexico has also seen its copper production increase in recent years mostly due to Grupo Mexico’s expansion projects, Guajardo said.

The company has concluded this year the expansion of its Buenavista mine, in Mexico, and continues to advance with its Toquepala project in Peru, which should be completed in 2018.

According to Mexico’s national statistics agency, Inegi, the country produced 414,606 tonnes of copper in the first ten months of 2016, 3% higher on an annual basis.

Prospects for zinc

Peru, Latin America’s largest zinc producer, has seen its output decline this year, mostly affected by the closure of Los Quenuales’ Iscaycruz mine and by lower ore grades at Antamina mine.

Glencore has a share in both operations.

The company, which announced the curtailment of 500,000 tpy of zinc capacity in 2015, has been “taking a very restrained approach to returning suspended capacity”, according to Credit Suisse analysts.

While there are no indications of a resumption at Iscaycruz, Antamina’s zinc production is expected to nearly double in 2017 as mining progresses through a zinc-rich ore zone. This should motivate the country’s zinc production to recover next year, according to Peru’s central bank.

Yet production from other mines such as Milpo and Volcan could continue to experience declines next year due to lower ore grades, Sebastián Espinoza, analyst at Peru-based Kallpa securities, said.

These companies have not yet disclosed guidance for zinc production in 2017.

“There is some interest from miners to keep production stable, given that zinc prices are at multiple-years high levels,” Espinoza added.

In the first ten months of 2016, Peru produced 1.19 million tonnes of zinc, a 8.3% year-on-year decline. 

“There are no large projects expected to come into picture in the short term, so Latin American zinc production should remain fairly stable for now,” Espinoza said.

Mexico’s largest zinc producers are Penoles and Grupo Mexico.

See also:
Will zinc win the popularity contest again or lose to nickel next year?

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