| SANTIAGO, April 11
SANTIAGO, April 11 The high cost of energy in
Chile is threatening the competitiveness of the country's copper
industry and poses a major challenge for new development,
industry executives at a copper convention in the Andean nation
said on Thursday.
Electricity costs in Chile, the world's top copper producer,
have risen 11 percent per year since 2000, making it one of the
most expensive places in the world to secure energy for mining
With regulatory gaps making it difficult to permit new power
infrastructure, the situation could get critical, Diego
Hernandez, chief executive of Antofagasta Plc, said at
the CESCO/CRU copper conference in Santiago -- the world's
biggest gathering dedicated to the metal.
"I think Chile can continue to have a huge advantage in
mining," he said. "We have the deposits, but if we don't solve,
among other things, the fundamental issue of making energy
happen at a competitive price, it's not going to succeed."
Chile has the world's richest reserves of copper, which is
used in construction and wiring, among other things. It expects
to produce some 5.58 million tonnes this year, up 2.6 percent
from a year ago.
But grades are falling at the country's massive copper
mines, making it difficult to maintain output and putting
pressure on costs. The problem has been compounded by high labor
costs and a steep increase in power rates.
While copper mining costs around the globe rose 30 percent
on an average from 2007 to 2012, it climbed 60 percent over the
same period in Chile, according to data from metal consultancy
High energy prices, caused by delays in bringing new
capacity online, play a major role in boosting costs. The mining
sector consumes about a third of Chile's power.
"The big issue today, that we did not see a few years back,
is the difficulty in permitting new electricity projects,"
Mining firms and power producers are pushing the government
to resolve the regulatory issues. They warn of major output
problems if the issues are not resolved.
Power demand on Chile's northern grid, home to many copper
projects, is expected to rise by 8.4 percent over the next 10
years, but no major new plants are set to come online until
2016, according to data from CRU.
The central grid, used by mining projects and the city of
Santiago, is expected to see demand increase by 5 percent, with
new supply coming online this year.
Part of the delay with new plants is an unclear regulatory
process for approving new developments, whereby projects can be
derailed by lawsuits from local communities who do not want the
infrastructure built in their backyards.
To combat that issue, the industry needs to do a better job
of getting communities on board with developments by involving
them in the process, said Jose Antonio Valdes, chairman of the
Generators' Association of Chile.
"Let's be proactive, that is the task of the industry," he
said. "This problem needs to be solved among all of us, it
cannot be solved behind closed doors."