Top Copper Producer Delays Full Restart of Chile Smelter

(Bloomberg) -- Top copper producer Codelco is again delaying the return to normal operations at its Chuquicamata smelter.

Some parts of the smelter are operating normally, including the flash oven and one acid plant, a Codelco official said in an email in reply to questions from Bloomberg. A second acid plant will start ramping up within the next six days and the whole facility is expected to be up and running within the third quarter, the company said.

In April, Codelco Chairman Juan Benavides said the plant would be fully operational by mid-year at the latest. The facility has remained shut for more than seven months, as Codelco failed to complete the works necessary to comply with tougher environmental standards that were implemented in December.

The facility is unlikely to return to normal capacity until mid-August, Rolando Milla, president of Chuquicamata Union No. 3 and union coordinator at the smelter, said in an interview Wednesday. The cancellation of Codelco's contract with engineering firm SNC Lavalin Group Inc. forced the company to push back the timeline for the restart, he said.

‘All Sorts of Delays'

The smelter's flash oven is now processing 70 to 80 tons of concentrate per hour, well below its normal capacity of 180 tons per hour, Milla said. Other parts of the plant aren't fully operational, he said in an interview in nearby Calama.

“The use of contractor companies instead of Codelco's own workers has resulted in all sorts of delays over the last few months,” Milla said. “We are asking our workers to get the smelter and the rest of the operations up and running as soon as possible – the company can't blame us for these delays.”

A majority of Chuquicamata workers downed tools for two weeks last month amid a labor contract dispute with the company. Before the strike, Codelco had canceled its contract with SNC-Lavalin amid delays in the construction of two new acid plants at the smelter. Codelco took over the work after the contract was rescinded. Copper in London was little changed at $5,919 a ton on Thursday.

‘More Stringent'

The delay will likely result in another month of higher-than-normal concentrate shipments from Codelco, Colin Hamilton, a BMO Capital Markets analyst, said in a research note on Thursday. “Given that environmental legislation in Chile is only becoming more stringent, we would not be surprised to see smelting facilities in the country close over time.”

The Chuquicamata mine was working at very limited capacity during last month's strike, said Milla and Union No. 2 president Liliana Ugarte, contradicting an earlier company statement that it had been running at over 50% capacity.

During the strike, 14 trucks were operating at the mine's pit -- the world's largest in size -- compared with 70 to 80 trucks during normal times, Milla said. Workers are struggling to ramp up output to normal level as the two-week stoppage resulted in a backlog in some parts of the operation, Ugarte said in a separate interview in Calama on Wednesday.

To contact the reporter on this story: Laura Millan Lombrana in Santiago at lmillan4@bloomberg.net

To contact the editors responsible for this story: Luzi Ann Javier at ljavier@bloomberg.net, Steven Frank

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