CAIMANES, Chile—The future price of copper and the growth of companies that produce it could hinge on a single precious resource: water.
Mining the important industrial metal requires huge volumes of water to control dust and separate copper from the earth. But a seven-year drought enveloping Chile, the world’s largest producer, is forcing big mining companies to curb output and pitting them against small communities like this one high in the Andes.
Water-related production problems are one reason some analysts say copper prices aren’t likely to lose much more ground after falling nearly 20% so far this year. Over the long term, they say, the price of copper could move higher as global production fails to keep pace with rising demand.
Anglo American PLC of the U.K. has said water shortages could curb as much as 18,000 tons in annual production starting this year at its Los Bronces mine.
Freeport-McMoRan Inc. is scrambling to secure water supplies for its Morenci copper mine in Arizona—a state that accounts for a third of the company’s copper output.
And here in Caimanes, a decadelong legal fight over water has unfolded between local farmers and Chilean mining company Antofagasta PLC. The farmers say an Antofagasta tailings dam, used to create a reservoir for mine waste, has created a water shortage. Antofagasta says the drought is to blame.
A judge this year sided with the farmers and ordered Antofagasta to demolish the dam for the nearby Los Pelambres mine, which produces 2% of the world’s copper. The mine is still operating as the company appeals.
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