Mining in Chile: Copper solution (The Economist – April 27, 2013)

The mining industry has enriched Chile. But its future is precarious

ANTOFAGASTA – TOURIST shops sell polished copper trinkets. Building after building sports a bit of copper cladding. Even the taxi-drivers in Santiago, Chile’s capital, know the price of copper. It is not hard to guess what the country’s biggest export is.

Copper has been kind to Chile. It provides 20% of GDP and 60% of exports. Thanks to it, Chile’s economy is expanding by nearly 6% annually, while inflation and unemployment are enviably low. Poverty rates have tumbled; public services are mostly good. Chile has other strengths, such as agriculture, tourism and even high-tech. But small shifts in the copper price make headlines.

The copper mines themselves are far from the capital. Escondida, the world’s biggest (and the source of over 5% of global supplies) is a 1,300km (800-mile) trek north, in the middle of the Atacama desert. BHP Billiton, the world’s biggest mining company, operates two gigantic pits there.

The deeper one is 3.9km from side to side and 650 metres from brim to bottom. Trucks as big as houses, working non-stop, haul 1.5m tonnes of rock out of Escondida each day. Managers may drive 150km in a shift. Last year the mine disgorged 1m tonnes of metal. Overall, Chile produces a third of the world’s copper.

BHP has 4,000 workers on site, plus another 13,000 contractors nearby. All live in a settlement built specially to serve the mine. There they can enjoy Zumba dance classes, a swimming pool and a pub with a jukebox and pinball but, alas, no booze. (Hard liquor and heavy machinery don’t mix.) The nearest town is the port of Antofagasta, 170km away, where ships are loaded with copper sheets and ore

Copper demand has boomed since China’s rural population started moving to cities. The migrants need homes with copper wires and pipes. Emerging markets everywhere are gobbling up copper to put in bridges, cars, fridges and more or less anything that uses electricity. China’s recent slowdown has caused copper prices to slide by 15% since the beginning of the year, but they are still high (see chart).

BHP and other miners have invested heavily in Chile. Big deposits of copper ore are rare. Big copper-ore deposits in stable countries with business-friendly governments are even rarer. Zambia and Congo are not in the same league.

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