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Spread of new coronavirus strains inject volatility into the copper market: Chilean Codelco

By Fabián Andrés Cambero

SANTIAGO, Apr 7 (Reuters) – The spread of new strains of the coronavirus would bring volatility to the copper market, which has so far been buoyed by expectations of a global economic recovery from the coronavirus pandemic, a senior executive from the coronavirus pandemic told Reuters. Chilean state company Codelco.

The value of copper has hit a decade-high in 2021 and rose this week after the largest global producer of the metal tightened restrictions on a rise in COVID-19 infections despite having one of the fastest vaccination plans in the world. .

The president of the copper company, Juan Benavides, said in an interview that although prices are still expected to remain strong hand in hand with the economic growth of Southeast Asia, China and the United States, we still have to be attentive to the evolution of the sanitary issue.

“We must bear in mind that there is much talk about the incursion of these new strains (of the coronavirus) and this can bring volatility in the markets,” he commented.

“There is a lot of concern around the world about the worsening of the health crisis as a result of the volatility generated by the new strains,” he added.

However, the executive said that Codelco’s learning during the restrictions due to the pandemic that led them to have a good operational and financial performance, allow them to keep the objectives for this year unchanged, while advancing in the ambitious investment plan.

“We kept the structural projects among the priority projects because they are essential to sustain Codelco’s production,” he said, detailing that they remain aligned.

Despite this, he acknowledged that he expects the company’s production level to register “slight drops” in 2022 and 2023 “especially in the case of Rajo Inca (Salvador), which generates a loss of a few months while the new concentrator plant is accommodated” .

CASH SURPLUS

Benavides affirmed that during the past year the company increased its cash “strongly”, which will allow them to finance the operation and debt maturities 2021-2022 without resorting to new financing.

“With the cash that exists, plus the generation of resources as a result of current prices and the cost reductions that we have made, we have a cash surplus. So as it is a surplus, there is no need to resort to the markets,” he said.

In addition, with plans to improve productivity, going forward he sees “very positive” cash flows that will allow the firm to reduce its debt, he emphasized.

The executive, who will end his term in May 2022, is optimistic that despite the possible expectations that the current rise in the price of copper may generate, the austerity guidelines that have marked his recent contract negotiations will be maintained.

“Raising costs today due to bad negotiations may mean mortgaging divisions for tomorrow, which are not viable,” he said.

Codelco still has labor discussions pending at its flagship El Teniente mine and at Andina, where workers recently rejected an early contract offer.

On the other hand, Benavides acknowledged that a lengthy bill on glaciers that has been under discussion could affect projects such as the future development of Andina if the true contribution of the periglacial environment and permafrost in the availability of water is not analyzed.

“It would be necessary to analyze for each case the true contribution of the water reserve they have. If it is something immaterial, it should not affect Andina’s operation,” he said.

“Mining extraction always has an effect on the environment (…) in the case of periglaciers and permafrost it can be something very minor compared to what the contribution of mining is,” he added.

(Reporting by Fabián Andrés Cambero. Editing by Javier Leira)

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