BHP on rocky ground in Chile after Covid surge

A second wave of coronavirus cases in Chile will make copper mining more challenging in coming months, BHP has warned.

BHP’s Escondida copper mine in Chile. Picture: Reuters

A second wave of coronavirus cases in Chile will make copper mining more challenging in coming months, leading producers have warned.

BHP and Antofagasta each flagged the increasing difficulties in the country, which is the world’s biggest copper producer. Coronavirus cases in Chile hit a record high of more than 9000 a day this month and remain prevalent with hospitals overwhelmed by patients. The surge in infections came despite Chile having one of the most advanced vaccination programs.

Experts have attributed the high COVID rates to the relatively weak protection offered by a single dose of China’s Sinovac vaccination and believe that people may have dropped their guard prematurely before receiving the second dose. In addition, Chile has been hit by the more contagious variant that originated in Brazil.

Copper prices reached 10-year highs in February on hopes of post-pandemic stimulus measures and decarbonisation spending creating higher demand. Concerns over possible supply disruption in Chile are lending further support to prices.

BHP is the world’s biggest mining group, producing commodities including iron ore, copper, coal and oil, and reported profits of $US9.1 billion in the year to June 2020. It said it had achieved record production at its Western Australia iron ore assets and that guidance for the year remained unchanged for iron ore and oil, while coal output would be slightly lower than expected.

The group was less bullish for its prospects in Chile, where it operates the world’s biggest copper mine at Escondida. “The operating environment across our Chilean assets is expected to become more challenging in the June 2021 quarter, given escalating COVID-19 infections, increased pressures on Chile’s health system and border restrictions,” the company said. “Reductions in our onsite workforce are forecast to remain substantial.”

Production at Escondida is down 8 per cent in the first nine months of BHP’s financial year as the reduced workforce leads to lower copper cathode production. Despite this, the group raised its guidance for copper output for the year to June, saying that Escondida was performing better than expected. Total output would remain below pre-pandemic levels, though, and BHP warned that this would remain subdued next year.

Antofagasta said that it had “further reduced” its workforce on sites as Covid cases surged. The group said that it was looking to delay significant maintenance work as a result. Production guidance remained unchanged “assuming no additional nationwide restrictions are imposed” while timescales for growth projects remained intact. Antofagasta, which operates four copper mines in Chile, said in its trading update that “the copper market continues to perform strongly”.

The Times