Copper Veteran Has Unfinished Business at Biggest Open Pit

(Bloomberg) -- Nelson Pizarro wants to remain at the helm of the world’s biggest copper company until he can cut the ribbon on a project to convert its flagship pit into a giant underground mine.

He’s been in mining for most of his 77 years, with the last four spent guiding state-owned Codelco through a painful downturn. With a change of government in Chile this year and a return to profitability thanks in part to Pizarro’s cost and spending cuts, speculation has been rife on how long he’ll stay.

Copper Veteran Has Unfinished Business at Biggest Open Pit

Being there to see the first metal produced at the Chuquicamata underground project would be a “mission accomplished,” he said in an interview in Santiago. “But that depends on me, my health and my family. I have the determination to be there until that date.”

That date is mid-2019, according to the company’s latest estimate.

Chuquicamata represents both Codelco’s plight and its transition under Pizarro.

The century-old operation is the biggest open-pit in the world -- by physical size if not by production. Chuquicamata was once Codelco’s crown jewel and a symbol of Chile’s mining might. But it’s running out of profitable ore and has to switch to a modern underground operation.

Copper Veteran Has Unfinished Business at Biggest Open Pit

About 60 percent complete, Chuquicamata underground will be the first of Codelco’s current batch of major projects to come into production. While the mine is scheduled to start mid-2019, conveyor belts that will transport ore to a concentrator plant won’t be ready until year-end, Pizarro said. Until then, material will be transported by truck. The project will allow Chuquicamata to keep output at current levels of about 330,000 metric tons a year.

The new mine will need 1,700 fewer workers, partly because of the use of the conveyor belts instead of trucks. Its smelter also is going through a $1 billion upgrade to meet tougher emissions standards.

“This is hard for Chuquicamata’s culture because it was always the flagship,” Pizarro said. “But that’s history now. Either we do the transformation or there’s no more Chuquicamata.”

Relations between Codelco and its unions at the mine soured in the past few months as the company revealed cost-cutting plans. In April, union leaders accused the company of having an “arrogant attitude” and threatened to strike. Pizarro says “the time of mourning has passed” and Codelco is talking to its unions on a daily basis.

Nicknamed “scissor-hands,” Pizarro has overseen a 15 percent decline in production costs since he become CEO in 2014 and the focus remains on controlling costs even as copper prices recover to near four-year highs.

Pizarro’s other focus has been streamlining a record pipeline of projects as the company battles to maintain output levels after decades of under-investment. Codelco is now budgeting $21 billion through 2022. The main projects include:

  • Teniente Nuevo Nivel Mina, which is 46 percent complete
    • After review, now expected to start operating 2023-2024
  • Andina expansion, 53 percent complete
    • Expected to start 2021
    • Second expansion may take output to 140,000 tons from 88,000
  • Salvador Inca pit
    • Would take production to more than 80,000 tons from 60,000 tons

©2018 Bloomberg L.P.