The Chilean government is to grant the country’s State-owned copper-mining company, Codelco, $1-billion over a period of 12 months, to be used in the company’s investment programme. (Codelco is an acronym for the Corporación Nacional del Cobre – National Copper Corporation).

This grant is part of the new Corporate Governance Law for Codelco, which has recently been passed by both the Chamber of Deputies and the Senate. The 12-month period over which the money will be disbursed will start with the promulgation of the law by the country’s President. The grant also forms part of a government stimulus programme for the Chilean economy, which has a total value of $4-billion and was launched at the beginning of this year.

The new Corporate Governance Law also significantly modernises, professionalises and strengthens the top-level management of the company, which will now have more autonomy from government.

For example, previously, the Codelco board had seven members, one of whom was the Minister of Mining (who also chaired the board), while another was the Minister of Finance, and a third was a representative of the armed forces. There were also two representatives of the President, a representative of the workers, and a representative of lower management.

Now the board will have nine directors, seven of them professionals nominated by the President (three directly, and four selected from a list drawn up by the Top Public Manage- ment Council). Only the workers and lower management will keep their representatives on the board.

Previously, the President appointed all board members when he or she entered office and they served for that Presidential term. Now they will be appointed for four-year terms, which will be staggered so that the board cannot be completely changed in one go.

Under the new law, Codelco will be subject to all the requirements of the law governing private-sector companies listed on the stock exchange – the Presidency of the Republic is designated as the shareholder, with authority delegated to the Ministers of Mining and of Finance. The new law also incorporates global best practice for major listed companies and follows the principles recommended by the Organisation for Economic Cooperation and Development. The new law enjoyed broad support in the Chilean Congress.

“We have reasons to celebrate,” enthused Codelco President and CEO José Pablo Arellano on the passing of the law. He affirmed that the new law would help develop the company and, thus, help develop Chile.

The reforms were reportedly stimulated by the fact that, although Codelco is profit- able, its production has stagnated at 1,5- million tons of copper a year since 2004, and it needs to make new investments to meet growing competition, refurbish and further develop its existing operations, and push forward with new projects.

In the January–June semester, Codelco achieved a pretax profit of $722-million (net profit $575-million). However, this represented a dramatic drop in comparison with figures for the corresponding period in 2008, during which the company’s pretax profit had been $4,117-billion (net profit $3,281-billion). Although Codelco’s copper production in the first six months of this year was higher than for the corresponding period last year (783 000 t as against 675 000 t), and molybdenum production stayed the same (10 000 t/y), the average copper price for January–June 2009 was half that for January–June 2008, while the average price for molybdenum fell by more than two-thirds.

The company has been able to reduce its costs by nearly $0,13/lb, from just over $1,82/lb in the first semester of 2008 to just over $1,69/lb in the first six months of this year. These cost reductions were the result of three factors – better management resulting in increased processing and improved recov- eries; the start of production at the 150 000-t/y Gabriela Mistral mine (known as Gaby, for short) last year; and greater productivity from mining inputs.

To subscribe to Mining Weekly's print magazine email subscriptions@creamermedia.co.za or buy now.