Chile: A Mining Country

Challenges facing the mining industry

March 12, 2013 - Sustainable Development in the Chilean Mining Industry, Round Table Chile-Denmark

Jorge I. Zeballos
Research and Policy Planning Department

CONTENT

1. Chiles leadership in the mining industry 2. Mining investment and capacity forecast 3. Challenges for the future

4. Final comments

CONTENT

1. Chiles leadership in the mining industry 2. Mining investment and capacity forecast 3. Challenges for the future

4. Final comments

1. Chiles leadership in the mining industry

A history of success and leadership in mining
A Mining History

1880-1930

Past

Present

1930-2012
Worlds largest Copper producer since 1990

Future

2012-
World`s largest reserves of copper and lithium, and important potassium, gold and molybdenum

Worlds largest Nitrate producer during 1900 - 1920

1. Chiles leadership in the mining industry

Geological potential

Share of world reserves %

Share of world production %

World production ranking

Metals
Copper (MT) Molybdenum (MT) 28 21 52 14 8 32 14 52 5 2 1 3 1 8 14

Rhenium (MT)
Silver (MT) Gold (MT)

Industrial minerals
Natural nitrates (MT)
Lithium (MT) Iodine (MT)
Sources: USGS 2013, Cochilco

100
58 24

100
35 61

1
1 1

CONTENT

1. Chiles leadership in the mining industry 2. Mining investment and capacity forecast 3. Challenges for the future

4. Final comments

2. Mining investment and capacity forecast

Why is Chile attractive for Mining Investment?

2. Mining investment and capacity forecast

Investment Portfolio over the years
120

100 Thousands of Millions US$

80

60

40

20 This years investment portfolio sets a new record in the Chilean mining industry.

0 2008 2009 2010 2011 2012

Project portfolio: US$ 104.3 billion

2. Mining investment and capacity forecast

Forecast: Copper Mine Capacity Production in Chile
9
8 Million MT Copper Content 7 6 5
50%

PREFEASIBILITY

FEASIBILITY

IMPLEMENTATION

4
3 2 1 0 2012 2013 2014 2015 2016 2017 2018 2019 2020
OPERATIONS

Source: Chilean Copper Commission

2. Mining investment and capacity forecast:

A history of success and leadership in mining
A Mining History

1880-1930

Past

Present

1930-2012
Worlds largest producer of Copper since 1990

Future

2012-

Worlds largest producer of Nitrate during 1900 - 1920

10

What challenges we will have to overcome in order to mantain our leadership?

CONTENT

1. Chiles leadership in the mining industry 2. Mining investment and capacity forecast 3. Challenges for the future

4. Final comments

3. Challenges
1. Geological conditions

5. Energy management

2. Human Capital

Challenges

4. Water management

3. Communities

3. Challenges
1. Geological conditions

5. Energy management

2. Human Capital

Challenges

4. Water management

3. Communities

3. Challenges:

3.1 Geological Conditions

Lower ore grades

Mines are getting old

Deeper mines

Longer hauling distances

3. Challenges
1. Geological conditions

5. Energy management

2. Human Capital

Challenges

4. Water management

3. Communities

3. Challenges:

3.2 Human Capital

New projects

Expansion projects

Increase in the workforce

In the year 2020 the large-scale copper mining will demand 64% more workers

Source: Fundacin Chile

3. Challenges
1. Geological conditions

5. Energy management

2. Human Capital

Challenges

4. Water management

3. Communities

3. Challenges:
3.3 Communities

Chileans are satisfied with their lives, but critical to society - UNDP

Environmental awareness

3. Challenges
1. Geological conditions

5. Energy management

2. Human Capital

Challenges

4. Water management

3. Communities

3. Challenges:

3.4 Water management - Use of sea water

Direct use of seawater in benefit process
Need of necessary infrastructure to resist the salinity Pumping infrastructure, high cost of investment and operation Equipment specialization (economic feasibility) Benefit processes modification Depends on mineral characteristics. At old mine sites, its necessary to assess technical and economic feasibility.

Desalinated water pumping

Transport over long distances Transport to high altitudes above the sea level Transportation demands high energy consumption Environmental problems in the discharge of salt

3. Challenges
1. Geological conditions

5. Energy management

2. Human Capital

Challanges

4. Water management

3. Communities

3. Challenges:

3.5 Energy Management - Energy consumption

160.000 140.000 5000 Energy Consumption (TeraJoules) 120.000 4000 100.000 80.000 60.000 2000 40.000 1000 20.000 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Copper Production Produccin Cu fino

6000

3000

Fuel Consumption Consumo de Combustibles

Electricity Consumo de Consumption Energa Elctrica

Total Energy Consumo de Energa Total Consumption

Source: Chilean Copper Commission

Copper Production (KTMF)

3. Challenges:

3.5 Energy Management - Energy consumption

Evolution
45 40 35 30 Energy (TWh) 25 20 15 10 5 0

Forecast

39,4 TWh

Source: Chilean Copper Commission

3. Challenges:
45 40 35 30 Energa (TWh) 25 20 15 10 5 0 2012 2013

3.5 Energy Management - Energy consumption

Desalination e impulsin Desalinizacin Others Servicios Refinery Refinera Smelter Fundicin SXEW SXEW Concentrator Concentradora Mine Mina

2014

2015

2016

2017

2018

2019

2020

Source: Chilean Copper Commission

3. Challenges:
100% 90% 80% 70% 60% 50% 40% 30% 20% 48 49 25 3 5 2 8 4 5 2 7

3.5 Energy Management - Energy consumption

5 5 2 7 10 5 1 7 10 5 1 6

16 4 1 6 16

15
4 1 5 15

15 4 1 5 13

14 4 1 5 12 Desalinizacin Desalination e impulsin Servicios Others Refinera Refinery Smelter Fundicin SXEW SXEW

27

24

21

20

50

49

50

50

52

55

56

Concentrator Concentradora Mine Mina

10%
8 0% 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: Chilean Copper Commission 8 8 7 8 7 7 7 7

3. Challenges:

3.5 Energy Management Non-Conventional Renewable Energy

Company Barrick Los Pelambres Codelco-Gaby Los Pelambres

Project Punta Colorada Belt conveyor

Energy Wind Solar Solar Thermal Wind

Power (MW) 20 22 1 22 121

Codelco-Chuquicamata Photovoltaic solar plant Solar Thermal El Arrayn

Source: Chilean Copper Commission

CONTENT

1. Chiles leadership in the mining industry 2. Mining investment and production forecast 3. Challenges for the future

4. Final comments

Final comments:
Critical situations
Energy Water Workforce

By the year 2020, the copper mining industry will need an additional electric power of 3,000 MW in order to produce 39.4 TWh, 80% more than in 2010. Critical factors: Costs, matrix diversification, development of NCRE (NonConventional Renewable Energy) and Energy Efficiency

Copper mining globally consumes about 12,6 m3/sec of fresh water. New projects demand more water in arid areas. Critical factors: Costs, Diversification of sources (seawater), Reuse.

New projects demand more qualified staff in all ranks of qualification. Critical factors: Costs, Recruitment, Training and Maintenance

Final comments
Despite the delays in energy generation projects, mining investment portfolio will be developed.

Reasonable and efficient use of water is key to the future of mining business.
Desalination appears as already being explored. an attractive option,

main hurdle: energy supply

In the last decade, the mining sector has increased its energy consumption, a trend that will intensify in the future by the aging of currently operating mines. The aging of mines is a structural issue and very difficult to reverse. The environmental awareness is and will be a big problem in the future, specially for the energy generation projects.

Chile: A Mining Country

Challenges facing the mining industry

March 12, 2013 - Sustainable Development in the Chilean Mining Industry, Round Table Chile-Denmark

Jorge I. Zeballos
Research and Policy Planning Department