New Market Report: Chile Mining Report Q3 2016

Chile's mining sector value will continue to contract through 2017, on the back of weak mineral prices and elevated operating costs. Nonetheless, country will remain the top global copper producer by a wide margin over our forecast period to 2020.

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We forecast Chile's mining industry value to edge higher, increasing from USD26.7bn in 2016 to USD27.9bn by 2020, averaging 0.2% annual growth. Miners in the country will come under increasing environmental scrutiny from the regulatory body, facing fines, project delays and operational disruptions.

Chile, the largest copper producer, will experience relatively flat growth over 2016 to 2020, as weak copper prices, weather-related operational disruptions and declining copper ore grades curb output. We forecast Chile's annual copper production growth to average 1.1% over this period, increasing in volume from 5.7 million tonnes (mnt) in 2016 to 6.1mnt by 2020.

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Chile's gold sector will experience limited growth over our forecast period to 2020 due to persistently low gold prices. We expect production to increase at an average y-o-y rate of 0.6% between 2016 and 2020, with output growing from 1.38 million ounces (moz) to 1.42moz.

Elevated operating costs, notably water and power costs, will weigh on Chile's extractive sector, deterring investment particularly in light of lower costs in neighbouring Peru. While lower oil prices and a weaker Chilean peso on the back of US dollar strength will cap growth in input costs, providing a boon to miners facing subdued metal prices, the benefit will be outweighed by rising operating costs.

Climbing rates of mining sector layoffs along with declining investment levels provide further evidence of Chile's mining sector (largely copper) malaise. For instance, in Q116, mining sector layoffs totalled 76.1 thousand people, compared to 66.7 thousand people in Q115. State copper commission Cochilco estimates copper project investment of USD44.1mn 2016, down significantly from USD75.1mn the previous year.

The Chile Mining Report has been researched at source and features BMI Research's mining and commodity forecasts for metals, minerals and gems, covering all major indicators including reserves, production, exports and values. The report also analyses trends and prospects, national and multinational companies and changes in the regulatory environment.

BMI's Chile Mining Report provides industry strategists, service companies, company analysts and consultants, government departments, trade associations and regulatory bodies with BMI's independent forecasts and competitive intelligence on the mining industry in Chile.

Key Benefits
Use BMI's independent industry forecasts on Chile to test other views - a key input for successful budgeting and planning in this mining market.

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