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Chilean miner Codelco says copper price spike will bolster war chest, raise costs

02/22/2021 | 03:26pm EST
FILE PHOTO: A worker monitors a process at the Codelco Ventanas copper smelter in Ventanas, Chile

SANTIAGO, Feb 22 (Reuters) - Chile's state-owned Codelco, the world's largest copper producer, views the recent spike in the price of the red metal as a "good opportunity" to generate cash for investments and hold down debt, but warned it could also drive up the miner's costs, a senior executive told Reuters on Monday.

The price of copper shot above $9,000 a tonne for the first time on Monday since 2011, as a nascent global economic recovery has prompted demand to boom for the commodity, critical to global construction and manufacturing sectors.

In Codelco's first public comments on how rising prices could affect its business, vice president of sales Carlos Alvarado said they would help put the company on stronger financial footing, but were unlikely to radically alter its existing plans.

"Our investment plan is based on long-term decisions that are not altered by specific price situations," Alvarado told Reuters.

The coronavirus pandemic caught Codelco in the midst of a 10-year, $40 billion initiative to upgrade its sprawling but aging mines, which have suffered in recent years from sharply falling ore grades.

"This situation gives us a good opportunity to contribute to our cash flow and to the financing of our investment portfolio, instead of increasing debt," Alvarado said.

But growing expectations would likely also spur goods and service providers to hike prices, Alvarado added, leading to higher overall costs for the state-run miner.

"In price scenario, there are upward pressures in the cost of our production," Alvarado said.

The executive said it was still too early to know if the spike in the global copper price represented a new "super-cycle," similar to that seen in the early 2000s following a tectonic demand boost from industrialization and urbanization in emerging nations. (Reporting by Fabian Cambero, writing by Dave Sherwood; Editing by David Gregorio)

© Reuters 2021
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