 The Mining Sector In Chile Contracted By 5% In Real Terms In 2008Chile Mining Report Q3 2009 - new market report just published
By: Mike King According to the heads of Chile’s two leading copper companies, the copper industry in Chile is doing well despite the financial downturn. They stated that the industry has been able to sustain itself during the recent period of low metal prices and is likely to continue being able to do so if economic conditions do not worsen. Diego Hernández, the president of BHP Billiton’s base metals division, stated that more than 95% of Chile’s producers were probably operating with positive margins at the prevailing copper prices of roughly US$1.80/lb. However, it did not mean that the profit margins were the same as in H108, he added. The news supports our view that the Chilean economy could potentially be among the best positioned in the region to experience a prompt economic recovery by 2010, in large part due to the substantial fiscal ammunition at the government’s disposal. The build-up of solid public finances over the past five years has been the result of prudent fiscal policy at a time of soaring global metals prices, including copper – in stark contrast to the region’s other large commodity exporters, such as Venezuela. However, in the short-term the mining sector is still facing difficulties. According to data from the central bank, the value of copper exports fell by 61%, y-o-y, to US$1.5bn in March 2009. These poor figures helped to drive down the country’s trade surplus by 63.7%. Chile’s Mine Minister Santiago Gonzalez claimed in April 2009 that copper exports would most likely stay at around the same level as 2009. However, the dismal figures for March suggest that this prognosis may be overly optimistic, as global demand is still in a deep trough. It is believed that as the major stimulus package in China kicks in, the global copper market will recover, however, the effects are not being seen in the sector at present. On a positive note, in May 2009, Canadian mining company Barrick Gold announced that it was proceeding with its Pascua-Lama gold project after a deal was struck with the Chilean and Argentine authorities regarding tax issues. The report views this is a positive development for the mining sector in Chile, as the global economic crisis has recently caused a number of companies to re-evaluate major capital intensive projects in the country. The construction estimate on the mine is US$2.8bn-US$ On page 9 of this report, the phenomenon of increased Chinese activity in the global mining sector is examined and what this means for the industry moving forward. In 2008, the report estimates that the mining sector in Chile contracted by 5% in real terms, and we expect the market to also post negative growth in 2009 before returning to strength in 2010. The CEO of Codelco now believes that copper prices are close to bottoming out. Another key factor will be the impact of the fiscal stimulus package in China, which is the largest consumer of copper in the world. If the Chinese economy can get back to pre-crisis levels of growth it will have a positive upside for Chile’s mining sector. http://www.companiesandmarkets.com/ # # # Browse thousands of market research reports covering major markets, companies and countries. Www.companiesandmarkets.com is a central source of market research reports from the world’s leading analysts and report publishers. End
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