Máximo Pacheco, President of Codelco: “The energy transition is progressing at a faster pace than mining”

Chile is full of copper. Almost a quarter of all the reddish metal consumed on the planet is produced in the Andean country. The mining industry is defended tooth and nail because of the returns it brings to public finances (in its best times, for every 100 dollars of total fiscal income, between 20 and 25 dollars have come from the sale of the mineral). “That is why, for any head of state, for any finance minister, what happens with Codelco [Corporación Nacional del Cobre de Chile] “It is extremely relevant,” says Maximo Pacheco, president of the company. Today, the company is going through a bitter moment. In 2023, it had losses of 591 million dollars. Added to this is high competition, a transformation of the business towards a less polluting model and global prices that predict problems in the supply. Despite this, Codelco, which has just celebrated 53 years of nationalization, is struggling to maintain its position in the market. Question. What is the role of Chilean copper in the future? Answer. Copper is the most sought-after metal, the most valued and the most in demand today, especially in the context of climate change facing the planet. The world is focused on the energy transition, which involves replacing fossil fuels with renewable energy; the economy is becoming electrified, and this process requires a large amount of copper. In addition, with rising temperatures and an expanding middle class, many more air conditioners will be needed, which are full of copper. In mobility, electric cars, railway networks and, in general, digitalisation and technologies such as artificial intelligence also depend heavily on copper. All this fills us with optimism, because Chile is the world's leading producer, with 5.5 million tonnes, while the second largest producer is Chile. [República Democrática del Congo] Chile produces 2.8 million tons. Chile is therefore in a privileged position. Q. Are you concerned about the price movements we are seeing this year? A. First of all, copper is a mineral used to produce cables, tubes, etc., but it is also a financial asset. Just as some people save in gold or silver, there are those who invest in copper. Financial assets often behave differently from the supply and demand of the mineral; they are more influenced by expectations about the future economy. Those who believe that the economy will improve buy copper today in the hope of selling it at a better price tomorrow. This has influenced prices, creating what could be called a crisis of optimism. On the one hand, the economy seems to be overcoming fears of recession, with the US showing strength, Europe remaining stable and China overcoming fears of collapse. On the other hand, states are having difficulties in developing mining projects, especially in new developments. This will create a gap between supply and demand. Some consulting firms predict a deficit of six or seven million tons by 2030. This difference will determine the future of the market. Q. Why is the progress of projects not keeping pace with demand? A. Mining has a high environmental impact, and that is why society, States and communities are increasingly demanding of this activity. There are more regulations and restrictions, which leads us to the challenge of doing mining differently, using technological innovation and being more aware of the consumption of resources, such as water. Codelco, for example, is the largest consumer of water in Chile, with 5,500 liters per second. We are implementing measures to reduce our water footprint and moving towards a decarbonized energy matrix. We hope that, by 2026, between 70% and 75% of our energy will come from renewable sources, with the aim of reaching 100% before 2030. Q. Are there sufficient inventories in case of any setback? A. Over the past decade, the global copper market has been operating with inventories covering just three and a half days of consumption. Currently, we have around 500,000 tonnes in stock, covering four and a half days of global consumption. While I wouldn’t say we are at risk of immediate shortages, the main problem we face as an industry is that the market wants to move towards new energy faster than is sometimes possible. This change is complex and rapid. Mining projects are long-term; from exploration to production, it can take more than a decade. Therefore, the biggest challenge is to synchronise the speed of the energy transition with copper production. This tension could increase prices, but it can be resolved through recycling. Q. There is a lot of talk about lithium today, what plans does the company have? A. We produce several metals, such as molybdenum and silver. Starting next year, we will also generate lithium revenues in partnership with SQM. However, our name says it all: we are the National Copper Corporation, so our main activity will continue to be copper. The lithium initiative is part of the national strategy promoted by President Gabriel Boric and complements the energy transition. However, our income will continue to depend mainly on copper, so we will maintain our focus on preserving our leadership in its production. Q. How much is the company investing for the future? A. This year, 2024, our investment budget will be 4.3 billion dollars, the highest for a Chilean company. We expect that between 2025 and 2034 this figure will reach 50 billion dollars. Historically, we have invested around 60 million dollars annually in exploration, but this year and next we plan to double that budget. We know that Chile is a country with large resources that are still not sufficiently explored, so we want to significantly increase our investment in exploration. 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