Mining Industry

An Expert's View about Mining and Quarrying in Chile

Posted on: 18 Jul 2012

Summary

Chile is the world’s largest copper producer, with 34% of total market share. It is followed by Peru, with 8% and the U.S. and China, with 7% each. It also ranks first in the world in terms of mining potential among 79 different districts in the world, according to The Fraser Institute.

There is a portfolio of 192 mining projects in Chile, including both the public and the private sector. This portfolio is worth USD$ 75,481 million.

From this portfolio, the most relevant projects are related to the construction of open pit and underground mines, mineral processing plants (for minerals other than copper) and the installation of machinery and equipment. These projects are at different stages of development.

The main driver of local demand for mining equipment and services (mainly copper, silver and gold) is the growth in production that will take place through 2015.

There are approximately 1,500 suppliers to the mining industry; 84% of which are Chilean companies.

The U.S. is the largest supplier of mining equipment, with over 34% market share, although there is a significant presence of European suppliers as well, such as Atlas Copco, Sandvik and Universal Drill Rigs. The mining market continues to be the most dynamic import-intensive sector for industrial equipment, machinery and components. It represents one of the best export opportunities for U.S. companies, and the best prospective is related to the supply of machinery, equipment and mechanical components for the stages of drilling, blasting, transportation, processing, smelting, refining and packaging of copper.

Market Demand

Chile ranks first in the world on mining potential. This was reported by the Frasier Institute (www.fraserinstitute.org) after surveying top executives from 494 mining companies in 79 districts worldwide.

The Policy Potential Index serves as a report card to governments on how attractive their policies are to invest in a given country, from the perspective of a mining exploration manager. Even though the Policy Potential Index is focused on governments, it describes very accurately the business environment prevailing in a given market.

As a consequence, Chile is the world’s largest copper producer, with 34% of the total production. Peru follows in second place, with only 8%. The U.S. and China are equally placed in third place. Other countries with remarkable levels of copper production are Indonesia, Australia and Zambia.

Chile’s economic, financial and sectorial policies, enhanced by the extremely high price of mining commodities experienced between 2006 and 2008, allowed the country to experience a fast-paced expansion of its mining investments. This expansion was mostly realized by way of enlarging existing mining operations (brown field projects) and the addition of several small mines, rather than by the addition of large new mine discoveries (green field projects).
The current scenario offers very attractive opportunities to new-to-market companies. Some of the companies that form this new wave of investors are: PanPacific Copper (Japan), Quadra FNX Mining (Canada), Far West Mining (Canada), PanAust (Australia), Vale (Brazil) and Goldcorp (Canada).

The investment driver of Chile’s economy will continue to be the mining industry, according to Corporación de Bienes de Capital (www.cbc.cl). The mining industry has important investment initiatives that will continue, but at a much slower pace, because of the prevailing global financial situation.
The main driver of local demand for mining equipment and services (mainly copper, silver and gold) is the growth in production that will take place through 2015. According to statistics from Business Monitor International (www.businessmonitor.com) based on data provided by World Bureau of Metal Statistics (www.world-bureau.com), the combined production of copper, silver and gold is projected to grow at a rate of 2.5% annually through 2015.

In Chile, there are approximately 1,500 suppliers to the mining industry; 84% of which are Chilean companies. These companies are evenly distributed in terms of activities, with a slight tendency to services. Most of the suppliers are headquartered in the Santiago Metropolitan area.

The U.S. is the largest foreign supplier of mining equipment, with over 34% market share. There is also a significant presence of European suppliers as well, such as Atlas Copco, Sandvik and Universal Drill Rigs.

The prominent role that the U.S. has as a key supplier to the mining industry can be explained as follows:
• Local buyers perceive U.S. equipment and supplies as premium-quality, highly reliable products.

• Chile’s portfolio of on-going and future exploration and extraction projects. According to the Chilean Copper Commission, Cochilco (www.cochilco.cl), there is a total of US$50 billion worth of investments for the 2011- 2015 period.
• The signing of the US-Chile Free Trade Agreement that entered into effect in January 2004. All U.S. manufactured products enter duty free.

The US$50 billion worth on investments for the 2011-2015 period is an unprecedented sum for Chile. CODELCO, the state-owned mining company and largest producer of copper in the world, is strongly investing on structural projects for the sustainability of its projects portfolio in the long run. Similarly, the private mining sector is also investing on expansion projects for their operations. They are also investing on new exploration projects.

This scenario has brought a number of new actors to the market. Thanks to the current environment, gold mining has started to make an important contribution to the economy. Industry specialists expect Chile to become one of the main gold producers in the world within the next 15 to 20 years.

Read the full market research report


Posted: 18 July 2012

See more from Mining and Quarrying in Chile

Expert Views    
Mining sector in Chile   By UK Trade & Investment
Water Sector Opportunities   By UK Trade & Investment
Mining Industry   By U.S. Commercial Service