Boston, MA -- (ReleaseWire) -- 01/07/2014 -- We forecast Chile's mining sector will grow at a moderate pace through 2017, though more slowly than in previous years. Major miners will continue to develop several large projects, though rising costs and falling prices will lead to more conservative expansion and acquisition plans. Our forecast is for Chile's mining sector to expand by 1.6% on average per annum from 2014 through 2017.
The Chilean mining sector will continue to rely on copper production for the foreseeable future, with it accounting for 60% of the country's total exports. The pipeline of copper projects and the country's global dominance in copper production will ensure the country's lead despite falling ore grades and more modest production growth. With future global supply looking relatively robust though and Chinese fixed asset investment slowing, we forecast falling demand growth and hence lower prices. Indeed, we see prices averaging US$6,800/tonne in 2014, which will heavily affect the Chilean economy. Despite weakness in 2013, copper prices remain elevated by historical standards, encouraging production for the time being as major miners and smelters maintain profitability
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Precious Metals To Contribute To Growth
Chile's mining sector will also see investment in gold and silver mining, diversifying the sector away from copper. We forecast Chile's gold output will grow by an annual average rate of 2.3%, reaching 1.76moz (mn ounces) by 2017. Gold's share of Chile's mining exports in US dollar terms rose from 1.4% in 2007 to 3.5% in 2012. Though we forecast prices to continue to weaken, averaging US$1,250/oz in 2014, various projects remain in the development stage. However, the largest such, Barrick Gold's Pascua Lama mine, was indefinitely suspended due to rising costs and legal challenges. Goldcorp though continues to develop a major gold project, although the firm may experience further delays. Codelco and Antofagasta, among others, have reported rising labour, energy and water costs forcing the companies to increase pre-production expenditure estimates on mine projects. These factors, in addition to falling prices, are leading some firms to question investment and expansion, which presents a downside risk to our forecasts.
Both Large & Mid-tier Key Players
Chile's mining sector will remain dominated by state-owned copper miner Codelco. Other large global diversified miners, such as Glencore Xstrata and Anglo American, are developing and investing heavily in mine projects in Chile. The rest of Chile's mining sector is made up of mid-sized miners that specialise in the production of a single mineral, such as copper or gold. London-headquartered Antofagasta is a growing copper producer that is expected to continue ramping up production at one of its flagship mines through the end of 2013, allowing it to increase total 2014 production.
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