Codelco to Fulfill Obligations Amid Deteriorating Financials, JPMorgan Reports

SANTIAGO (Reuters) – Chile’s Codelco, the largest copper producer globally, is expected to meet its financial obligations despite facing several operational challenges, high debt levels, and significant investments, according to JPMorgan’s recent analysis.

Codelco’s copper output in 2022 fell to its lowest point in 25 years, primarily due to delays in critical projects aimed at extending the life of its mines. As a consequence, the company has revised its production estimate for 2023 to a range of 1.31 billion to 1.35 billion metric tons.

JPMorgan analyst Ian Snyder expressed confidence that Codelco will fulfill all its financial commitments, noting the elevated capital expenditure budget and operational difficulties that have resulted in reduced production and increased unit costs. The firm anticipates that the Chilean government may support Codelco, which allocates all of its profits to the state, through direct capital injections or by decreasing upstream dividends to facilitate necessary investments.

However, the report cautions that credit metrics are likely to decline further as the company may incur additional debt to finance parts of its capital expenditure budget.

In a separate report, Chile’s Center for Copper and Mining Studies (CESCO) highlighted the potential risk of insolvency for Codelco, citing escalating costs and a growing debt burden linked to projects that have not met their output targets.

Recently, Codelco’s Chairman Maximo Pacheco reassured lawmakers that the company remains "financially solid," dismissing CESCO’s forecasts as unfounded.