Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Final Report Prepared by: Universidad Santa María Empresas S.A. Client: CORFO Santiago, September 2009 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment CONTENTS Executive Summary ................................................................................... 6 1. 2. Introduction ....................................................................................... 8 Aims................................................................................................... 9 2.1 General aim ..................................................................................... 9 2.2 Specific aims.................................................................................... 9 3. 4. 5 6 Activities .......................................................................................... 10 3.1 Preparation of interview tools ...................................................... 10 3.2 Interviews.................................................................................... 11 3.3 Identification of goods and services ............................................. 13 3.4 Analysis matrix............................................................................ 13 3.5 Identification of current and future projects ................................. 14 3.6 Estimation of amounts ................................................................. 14 3.7 Identification of opportunities for suppliers ................................. 14 Current figures and projections ........................................................ 16 4.1 Chile as a producer...................................................................... 16 4.2 Projected copper-mining investment in Chile ............................... 17 4.3 Main projects .............................................................................. 20 4.4 Mining production in Chile........................................................... 22 4.5 Main copper demanders .............................................................. 26 Identification of main supplies .......................................................... 29 5.1 Identification of main supplies ..................................................... 29 Demand for strategic supplies .......................................................... 34 6.1 Matrix of strategic supply analysis ............................................... 34 6.2 Strategic supplies ........................................................................ 35 b) Tyres ........................................................................................ 48 c) Explosives ................................................................................ 49 6.3 Regional market .......................................................................... 50 Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 1 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment 7 Critical supplies for mining ............................................................... 51 9 Strategies for attraction .................................................................... 58 8 Potentially successful cases .............................................................. 55 10 Concluding remarks.......................................................................... 64 Bibliography ........................................................................................... 65 Annexes ................................................................................................. 67 Annex 1. Websites. Suppliers ............................................................... 67 Annex 2. State of mining investment projects....................................... 69 Annex 3. Methodology for estimating amounts for supplies ................. 70 Annex 4. Relevant mining supplies ....................................................... 76 Annex 5. Value chain in the mining industry......................................... 77 Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 2 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment INDEX OF FIGURES Figure 1: Impact of the mining industry on the economy ........................... 8 Figure 2: Study methodology................................................................... 10 Figure 3: Major copper-producing countries............................................ 16 Figure 4: Major copper-producing countries............................................ 17 Figure 5: Trend in copper grade in Chile.................................................. 18 Figure 6: Major copper-producing countries............................................ 19 Figure 7: Major mining projects ............................................................... 20 Figure 8: Copper-mine production in Chile.............................................. 23 Figure 9: Breakdown of copper production .............................................. 24 Figure 10: Copper-refining capacity ........................................................ 26 Figure 11: Main consumers of copper ...................................................... 27 Figure 12: Main export destinations ........................................................ 28 Figure 13: Breakdown of supplies by consumption .................................. 29 Figure 14: Main chemical reagents .......................................................... 30 Figure 15: Main chemical reagents .......................................................... 31 Figure 16: Main chemical reagents .......................................................... 32 Figure 17: Main mining inputs ................................................................. 33 Figure 18: Main mining equipment .......................................................... 33 Figure 19: Categorisation of strategic supplies ........................................ 35 Figure 20: Electricity consumption........................................................... 36 Figure 21: Cost of electricity ................................................................... 38 Figure 22: Annual fuel consumption ........................................................ 39 Figure 23: Fuels used in mining .............................................................. 39 Figure 24: Projected energy costs ............................................................ 40 Figure 25: Mineral to be processed.......................................................... 42 Figure 26: Projection of hydrometallurgy reagents ................................... 43 Figure 27: Projected expenditure on reagents for flotation ...................... 44 Figure 28: Projected steel consumption ................................................... 45 Figure 29: Projected material to be removed............................................ 46 Figure 30: Projected mining-truck fleet ................................................... 47 Figure 31: Projected demand for mining equipment ................................ 48 Figure 32: Projected demand for tyres ..................................................... 49 Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 3 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Figure 33: Projected consumption of explosives ...................................... 50 Figure 34: Critical supplies for mining ..................................................... 51 Figure 35: Criticality in the haulage of ore and intermediate material ....... 52 Figure 36: Critical supplies in crushing and grinding ............................... 52 Figure 37: Critical supplies in the flotation process.................................. 53 Figure 38: Critical aspects of personnel at sites ....................................... 53 Figure 39: Critical aspects in prospecting and operation .......................... 54 Figure 40: Number of suppliers with a local presence .............................. 54 Figure 41: Representation of the effect of treatment on the material ........ 56 Figure 42: SWOT analysis to attract investment........................................ 58 Figure 43: Aims, targets and monitoring indicators ................................. 60 Figure 44: Methodology for estimating demand ....................................... 70 Figure 45: Main supplies identified preliminarily ...................................... 76 Figure 46: Value chain of the mining industry .......................................... 77 Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 4 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment INDEX OF TABLES Table 1: List of high-priority contacts ..................................................... 11 Table 2: List of medium-priority contacts ................................................ 12 Table 3: List of back-up contacts ............................................................ 12 Table 4: Breakdown of generation fuel .................................................... 37 Table 5: Unit hydrometallurgy reagent consumption ................................ 42 Table 6: Flotation unit consumption ........................................................ 44 Table 7: Unit consumption of steel balls and steel plate........................... 45 Table 8: Truck performance .................................................................... 47 Table 9: Shovel loader performance......................................................... 48 Table 10: Projected supply market .......................................................... 50 Table 11: Breakdown of mining projects .................................................. 69 Table 12: Projected production ............................................................... 71 Table 13: Copper grade in mining operations in the country .................... 71 Table 14: Mineral and material to be removed ......................................... 72 Table 15: Energy consumption ................................................................ 73 Table 16: Reagent consumption .............................................................. 73 Table 17: Steel consumption ................................................................... 74 Table 18 Demand for mining equipment ................................................. 75 Table 19: Tyre and explosive consumption .............................................. 75 Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 5 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Executive Summary Future investment in mining projects amounts to almost US$33 billion. Some projects seek to further operations with a very low copper grade. This means that their operating costs do not promote their competitive positions, placing them in a life or death situation. Other projects seek to strengthen their position in order to gain a foothold as producers in a country that contributes approximately 35% of the copper produced worldwide. For current and future projects, suppliers are necessary to deliver services, supplies and goods at cost conditions that will ensure the competitiveness of the mining industry in Chile. This report concludes that supplies, goods and services are not served locally in the country, including applied robotics, innovations in mining equipment, innovations in inputs, water management, monitoring of slopes and inbound logistics services. Others have suppliers that operate in markets with the characteristics of a monopoly, which does not help when it comes to operating with competitive costs either. Critical mining supplies with an impact on various processes were identified; for example, thermal energy, tyres, maintenance and operational services are relevant and influential supplies for the transportation of minerals. Likewise, steel balls, maintenance services and water are crucial for grinding and crushing. Mining companies have been observed to be vigilant in their search for options to improve positions, attracting suppliers on their own. It is a condition to build strategic alliances with very aggressive actions, although these have not yet yielded the desired results. The country's name serves to attract investors and to develop mining in neighbouring countries, thus expanding the market on which suppliers can offer their goods, inputs and services. However, Chile's political, economic and administrative stability does not extend consistently beyond its borders, leading to decisions to postpone local operations. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 6 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment One aspect that has been gaining momentum in the mining industry is the focus on core business, leaving non-strategic aspects to third parties. This means that mining companies no longer seek a product or a good. They are searching for comprehensive solutions that can guarantee availability. And they are prepared to pay for it. Another important issue pointed out by a representative of one of the companies interviewed is the intention of breaking the paradigm of working only with big suppliers. In the future, they may be willing to back small businesses that deliver solutions and to adopt the model of certain Australian companies that generate spin-offs operating under the auspices of the mining company until they can run the operations by themselves. CORFO is working proactively with specific actions such as the mining forum held in October 2009. This included the participation of suppliers from various countries who were shown the projects for mining industry investment over the coming years. At the same time, the strengthening of existing instruments to support investment attraction should continue to allow for easier decision-making with regard to potential suppliers. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 7 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment 1. Introduction Investments add dynamism to a country's economy, generating benefits in all areas, increasing employment and technological inputs, improving management and creating the conditions for personal development. The mining industry is a rich source of national opportunities (Figure 1). Therefore, in an attempt to maintain the country's favourable competitive position in international markets, it would be convenient to strengthen access to new markets, making it essential to further regional potential. It is necessary, then, to identify the potential commercial and business activities that could strengthen Chile's current position. Figure 1: Impact of the mining industry on the economy Source: Authors. Hence, this sector emerges as one of the most crucial for the country's development. Furthermore, the identification of strategic supplies for the sector, as part of the bid to promote and attract foreign investors, is equally relevant. As a result, Universidad Santa María Empresas S.A. has undertaken the project set out in this report using the background information obtained during the study, indicating the necessary guidelines for this national industry. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 8 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment 2. Aims The aims of the project are formulated within the provisions of the tender and are as follows. 2.1 General aim Identify the strategic supplies of leading mining companies for investment projects and operation purchases, and their current suppliers, in order to devise strategies to attract potential investment in Chile. 2.2 Specific aims • Draw up a register of the key inputs and services of the main copper mining projects in Chile related to mine operation and new investment, the costs of which are expected to rise and thus pose a threat to the global competitiveness of this activity. • Identify the structure and current tender conditions, type of threat faced and potential areas of mitigation for each critical input and service. • Select cases in which enhanced competitiveness is associated with the direct presence in the local market of global manufacturers or suppliers of inputs or services, including those whose presence in Chile could be improved. • Propose guidelines for a strategy to promote and attract investment to begin operations in Chile. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 9 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment 3. Activities Under the terms of the technical proposal presented to CORFO by Universidad Santa María Empresas S.A., the following activities were conducted, based on the methodological line shown in the figure below: Figure 2: Study methodology Source: Authors 3.1 Preparation of interview tools The team identified the key concepts to address and the guidelines for conducting the semi-structured interviews. A form-type annex was designed, together with a form for recording more specific information and figures. These documents were presented to and validated by CORFO before the interviews commenced. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 10 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment 3.2 Interviews A list was drawn up for the interviews containing the figures of reference in the mining industry. The names were classified into three groups based on the impact of their contribution to the project results. As above, these lists were checked and validated by CORFO prior to contact. High priority The most relevant names to the project and representatives of the country's leading mining operations were defined as high priority. This list contains 17 people directly linked to mining supplies and constitutes the basis of the sampling. Alta Prioridad Prioridad Empresa Codelco Regic Sicep Quadrem MEL Cesco Collahuasi Anglo American (Santiago) Barrick Enap Soquimich Altonorte (Xstrata) BHP Billiton Codelco Teniente Esperanza Mantos de Oro Anglo American (Los Bronces) Encuestado Fernando Marchant Daniel Barreda Álvaro Tapia Iván Braga Marcelo Ocampo Juan Carlos Guajardo José Cifuentes (Santiago) Juan Alberto Ruiz Carlos Lobatón William Montes Rodrigo Copano Julio Agurto Ricardo Reyes Héctor Soto Alejandro Treuer Pablo Villarroel Eduardo González Table 1: List of high-priority contacts Source: Prepared by USM S.A. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 11 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Medium priority This category corresponds to the group identified as being of medium importance, comprising individuals with a vast knowledge of the subject from the companies considered in the above list. Prioridad Media Prioridad Empresa Codelco Codelco Norte Collahuasi BHP Australia MEL Polpaico (Holcim) Melón (Lafarge) Encuestado Alex Caqueo Nallib Jodor Giancarlo Bruno Cristhian Allende José Bouza Juan Carlos Agullo Mauricio Herrera Table 2: List of medium-priority contacts Source: Prepared by USM S.A. Back-up This was a back-up group of people to be contacted if any of those listed above were not available. Back up Prioridad Empresa Encuestado Quebrada Blanca Daniel Bolados Pucobre Ignacio Ruiz Consejo Minero Alejandro Plaza Independiente Alfredo Pérez Transporte Santa Marta Juan Carlos García BHP Pierre Kehrkoffs BHP Andrew Callahan Andina Ricardo Fernández BHP Osvaldo Urzúa Anglo American (Los Bronces) Mario López Anglo American (El Soldado) Eric Urrutia Anglo American (Mantos Blancos) Carlos Tolmo Anglo American (Chagres) Juan Carlos Olguín Table 3: List of back-up contacts Source: Prepared by USM S.A. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 12 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Some stumbling blocks were identified during contact with the companies, which had an impact on the performance of the project at the information-gathering stage, as summarised below: • When the mining companies were contacted directly, they stated that both the interviews and the information had to be requested by CORFO. • This is because mining companies work internally on these issues, allocating resources and establishing strategic agreements with suppliers. As a result, they are not always willing to share information with other companies, despite the collaborative context of relations between mining companies. • It is necessary to establish a single channel of communication between CORFO and the mining companies for this type of initiative, in the light of certain risks such as: o Submission of incomplete or differing information or information updated at different times when required from different areas of a single company. o Overlapping of CORFO-led initiatives in the mining industry, resulting in confusion among mining companies. 3.3 Identification of goods and services By gathering information from public sources (corporate reports of the companies, COCHILCO, Cesco, IIMCH and websites, among others) and data obtained through interviews, the team was able to identify a set of goods and services defined as strategic for national mining companies. In some cases, it was possible to identify some suppliers, the websites of which are listed in Annex 1. 3.4 Analysis matrix We determined the basic elements for segmenting the supplies identified as strategic or high priority for mining companies. Based on these parameters, we developed a qualitative four-quadrant matrix allowing the different services, Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 13 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment inputs, goods and services to be grouped into the categories of consumption, strategic and maintenance, repair and operations. 3.5 Identification of current and future projects Additionally, based on information from public and private sources, we were able to identify the main mining projects, both those underway and those which have been postponed or are at the preliminary study phase. This allowed us to predict the country's copper production and estimate strategic demand over a 10-year timeline. Annex 2 contains the list of projects with their investment totals and likely date of implementation. 3.6 Estimation of amounts A method based on projected production, unit consumption and price was used to estimate costs. This used long-term price changes in order to keep the long-term trend above the cyclical effects experienced by copper consumer economies around the world. For somewhat more complex estimates (mining equipment and inputs), an estimate was made both of the ore to be treated and the material to be removed. Forecasts of mineral grade, recovery rates and sterile/mineral ratio were thus used. With this and unit consumptions it was possible to estimate the level of demand (Annex 3). 3.7 Identification of opportunities for suppliers Based on the estimates of projected demand, associated costs and the local presence of competitors in the industry, we identified the relevant items for the mining industry that have the greatest potential for attracting companies to Chile. In this case, we identified four supplier company categories, namely those: a) Without a presence on the national market. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 14 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment b) With up to three companies with a local presence. c) With between 4 and 6 companies. d) With more than 7 companies. This breakdown was carried out for both strategic supplies and for support services and goods. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 15 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment 4. Current Figures and Projections The report will now describe the results of the current dimensioning of the copper mining industry in Chile and of projected future production, based on the different projects currently underway and their development phase. 4.1 Chile as a producer Globally, world copper production has increased by an annual average of 13.4% in recent years, now standing at 15.5 million tonnes. In this context, Chile, with a production of 5.3 million tonnes of fine copper, has contributed 34% to global production, as shown in the figure below. Producción de Cobre en 2008 kton de cobre fino 6000 5000 4000 3000 2000 1000 0 Figure 3: Major copper-producing countries Source: Compendio de la minería chilena 2009. At producer level, five global producers account for 36%, some of which have operate mines in Chile, namely, Codelco, BHP Billiton and Anglo American. The breakdown of production for these producers in recent years is provided in the following figure. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 16 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Principales Productores 2000 kton cobre fino 1500 1000 500 0 2004 2005 2006 2007 2008 Figure 4: Major copper-producing countries Source: Compendio de la minería chilena 2009. 4.2 Projected copper-mining investment in Chile Overall, the portfolio of projects underway or about to be implemented amounts to US$32.7 billion over a likely timeline of the next ten years. While all of the projects identified have already passed the preliminary assessment stage, the sharp fall in copper prices produced delays and even the reassessment of some projects in the portfolio. It is important to note that copper reserves in Chile amount to 360 million tonnes. Codelco, with a total investment of US$10.35 billion, is the company with the biggest investment in projects over the next decade, explained largely by the progressive deterioration in the mineral grade at some of its sites, which is linked to the age of the latter. Hence, projects such as the expansion of Andina, the new level of the El Teniente division and the underground Chuquicamata, in Codelco Norte, seek only to prolong the useful life of the sites while keeping production levels up. Figure 5 illustrates the trend in copper grade in Chile, signalling a downward course over recent years, from 1.41 in 1999 to 0.99 in 2009. This behaviour is normal since the operational strategy of mining is to start extraction in the area Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 17 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment with the best grade so as to optimise results in the shortest time possible. In order to maintain the production rate, this grade reduction requires an increased movement of earth, increasing the distances of movements and leading to the use of slag and other waste with a % of copper. Porcentaje de Cobre Ley de Cobre Promedio 1,70 1,60 1,50 1,40 1,30 1,20 1,10 1,00 0,90 0,80 0,70 Concentradora Lixiviación Promedio Chile Figure 5: Trend in copper grade in Chile Source: Anuario de Estadísticas del Cobre y Otros Minerales 1989-2008, COCHILCO, 2008. Of the total investment figure, US$5.281 billion have been paid out up until December 2008, while the investment to be made over the next five years stands at US$23.319 billion. These values fall dramatically to US$8.63 billion for the following 5 years, since the number of confirmed projects is lower, given that there are several projects in the exploration phase that have not yet undergone a technical-economic assessment. This trend in grade translates to increased development costs, production costs and, ultimately, a decline in competitiveness, as illustrated in the figure below. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 18 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Pérdida de competitividad Figure 6: Major copper-producing countries Source: Compendio de la minería chilena 2009. Other aspects that competitiveness are: • also have a significant impact on the decline in Supply and logistics • Stock shortages in the face of peaks in demand (as occurred a few years ago). • High transport costs (associated mainly with Chile's geographical location). • Longer turnaround times (due to the distance from the supply centres). • • Increased costs (associated, for example, with rising fuel prices). Lack of resources • • Shortage of water and fuel. Increasingly distant operations. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 19 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment 4.3 Main projects The thirty-one projects in the investment portfolio for the coming years, at varying stages of completion, amount to US$32.7 billion (2009 to 2018), of which 28% are Codelco initiatives. The nine most important projects are together worth US$21.054 billion, representing 68% of the total investment for 2010-2019, as shown in the figure below. Inversión Mayores Proyectos 6000 US$ Millones 5000 4000 3000 2000 1000 0 Figure 7: Major mining projects Source: Compendio de la minería chilena 2009. Esperanza Site located in the Sierra Gorda area, with reserves of 786 million tonnes (0.53% Cu and 0.2 gpt Au) in sulphides. Estimated production is 195 kt per year of fine Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 20 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment copper in concentrates, containing 200 thousand ounces of gold. It is expected to begin operation in 2010. Los Bronces expansion Project that seeks to increase the ore processing capacity by 100 kt per day, representing a 175 kt increase in fine copper per year. This increased processing includes the addition of a new crushing and grinding line plus a material transport system for taking the latter to concentration plants with a greater capacity. The estimated launch date is 2011. Caserones This site (formerly Regalito) is located south-east of Copiapó 4,200 metres above sea level. It has reserves of over 600 million tonnes of leachable copper, mainly sulphides and a small quantity of oxides. Annual production is estimated at 30 kt of cathodes through electrowinning and 120 kt per year of concentrate. It is set to begin operation in 2012. El Morro Copper-gold deposit located in the municipality of Alto del Carmen, 84 km from Vallenar. It has reserves of 487 million tonnes of copper and gold (0.56% and 0.44 gpt, respectively). Estimated production is around 195 kt of fine copper in concentrate and 353,000 ounces of gold, for a period of over 15 years. It is expected to begin operation in 2013. Escondida Phase V The aim of this expansion is to maintain production levels in the medium term, given the impoverished grade of the ore in recent years. It provides for the construction of a third concentrator plant, which would increase the mineral processing capacity. It is currently postponed, so will not be launched until at least 2015. However, in the light of improved copper prices, it could be reactivated before this date. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 21 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Sierra Gorda Deposit located in the Atacama region with a presence of copper, molybdenum and gold. Its measured resources total 251 million tonnes in oxides, with average grades of 0.42% copper, 0.03% molybdenum and 0.07 gpt gold. Its useful life is estimated at 25 years and operations are expected to begin in 2014. Andina Expansion Phase II Project seeking to maximise Andina's productive capacity, ramping it up to an extraction and processing level of 230 kt of ore a day. To do so, underground production is to be maintained at current levels, a pit is to be developed and the processing plants will be relocated. This will increase concentrate production by 320,000 tonnes. It is expected to begin operation in 2015. New level of El Teniente mine Project that seeks to keep the site operating for another 50 years by maintaining current production levels. The pre-feasibility study has been completed and early works are at the implementation stage. Operations are expected to begin in 2017. Chuquicamata underground mine Project seeking to exploit the mineral resources located below the current pit, which is estimated to become unprofitable by the end of the next decade. The estimated investment is US$2 billion and involves the transformation of the opencast mine to an underground operation. Production capacity is estimated at 340 kt of fine copper per year for at least 50 years. It is at the pre-feasibility stage and operations are expected to begin by 2018. 4.4 Mining production in Chile The country's copper mine production has increased by 21.4% over the past 10 years from 4.4 million tonnes in 1999 to 5.3 million tonnes in 2008. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 22 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment This increased production is largely due to the strong demand for commodities driven by consumption in China, which has led to the study and implementation of new initiatives and the maintenance or reopening of sites that had not been profitable in previous scenarios. For the same reason, following the onset of the contractionary phase in the business cycle in late 2007, production levels fell by 4.1% following mine closures or a reduction in the level of production, with the aim of adapting rising costs to market prices. According to estimates, a production of almost 6.1 million tonnes of fine copper is projected for 2019, which represents an increase of 19% on current levels. The future trend, based on COCHILCO figures and USM S.A. estimates, can be seen in the figure below. Kton de Cobre Producción de Cobre Fino 5.000 4.500 4.000 3.500 3.000 2.500 2.000 1.500 1.000 1995 2000 2005 2010 2015 Concentrados Concentrados Proy. Cátodos Sx-Ew Cástodos Proy. 2020 Figure 8: Copper-mine production in Chile Source: Anuario de Estadísticas del Cobre y Otros Minerales 1989-2008, COCHILCO, 2008. However, a gradual decline in the production levels of current sites is expected in aggregate terms over the coming years, in line with the aging of certain emblematic sites (Chuquicamata, El Teniente) and the impoverishment of ore grades, which will lead to an adjustment in production levels due to rising costs. Production replacement projects, as is the case of the new level of the El Teniente mine, the Chuquicamata underground project and the extension of Lomas Bayas, whose investment aim is based on maintaining current production levels, have Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 23 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment been given the consideration of new production rather than base production for the purposes of this report. Thus, following the launch of the thirty-one mining projects in the pipeline, production is expected to reach 2.63 million tonnes of fine copper, in addition to the 3.4 million from current sites. At present, most production is copper concentrate, which accounts for around 40% of annual production. However, its relative weight in production has declined by 7.9% over the last five years due to increased refined production, especially of electrowon cathodes, up 20.6%. Composición de Producción (Kton Cu) 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 7.000 6.000 5.000 4.000 3.000 2.000 1.000 - Cátodos Sx-Ew RAF y Electro Refinados Concentrados Figure 9: Breakdown of copper production Source: Anuario de Estadísticas del Cobre y Otros Minerales 1989-2008, COCHILCO, 2008. In addition, fire-refined (FR) copper anodes have witnessed a sharp decline in production over this period, from 150 thousand tonnes/year in 2004 to 99 thousand tonnes in 2008, which represents a fall of 34%. Likewise, electrorefined cathodes have also experienced a slight decline over the last five years (2.75%), with production being maintained at around 1 million tonnes. Despite there being seven foundries and three refineries in Chile, the proportion of mined copper converted into refined copper products (SX-EW cathodes, ER cathodes and FR) has declined since its peak of 62% in 2002 to 57% in 2008, reflecting an increase in concentrate not refined in this country. Briefly, we can note the following: Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 24 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment • • • • Production in 2008: 5.3 million tonnes of copper. Projected production up until 2019: 6 million tonnes. Main product: copper concentrate (60%). SX-EW cathodes account for around 35%. Some initiatives are now emerging to increase the capacity of Chile's refineries in order to cope with production increases in the leading mining companies. Codelco, for example, has made significant technological improvements at its Codelco Norte refinery, increasing its capacity by 200 thousand tonnes per year. It is also planning a generation project for a new smelter and refinery in the central area that will integrate the operations of the Andina, El Teniente and Ventanas division, which is currently under review given current prices. In the same vein, Anglo American is conducting pre-feasibility studies for a similar project to complement the work of its Chagres smelter, which will cut freight costs for concentrates and allow the production of sulphuric acid to be stepped up. Nonetheless, a sharp increase in concentrate production is expected over the next decade (23%), while cathodes obtained by solvent extraction and electrowinning will fall 2% from the levels reached in 2008. In this scenario, refining capacity through electrowinning, fire refining and electrorefining will stand at 56% for 2019, based on the assumption that all of the above initiatives will come into operation within the stated period. The biggest gap between production and refining capacity is projected for 2014 and 2015, deemed to be prior to the start of operations at the smelter and refinery to reinforce Chagres (Anglo American) and the Codelco refinery project in the central area. This situation is expected to remedy itself by the end of the decade. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 25 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Capacidad de Refinamiento de Cobre kTon de Cobre 2010 2012 2014 2016 2018 5.000 60,0% 59,0% 58,0% 57,0% 56,0% 55,0% 54,0% 53,0% 4.000 3.000 2.000 1.000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Concentrados Cátodos Sx-Ew Cap. RAF+Electroref. Porcentaje de Refinamiento Figure 10: Copper-refining capacity Source: COCHILCO figures and USM S.A. estimates. 4.5 Main copper demanders Copper is the third most used metal in the world after steel and aluminium. The main consumers of the metal are the industrialised countries and some emerging countries, the European Union, China, Japan and the United States being the leading demanders. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 26 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Principales Consumidores de Cobre Mexico 2% Otros 17% Brasil 2% Unión Europea 24% India 2% Taiwan 4% Rusia 4% Corea del Sur 5% China 21% Japón 7% Estados Unidos 12% Figure 11: Main consumers of copper Source: Prepared by USM S.A. based on information from COCHILCO, Cesco and various public sources. Current projections indicate a decline in global demand for 2009 as a result of the global economic crisis. The situation looks set to rebound in 2010, when demand will increase by 3.5% to reach 18.37 million tonnes. Despite this forecasted decline in aggregate demand for 2009, China is expected to resume its level of consumption and increase by 18.9% this year. During 2008, the mining companies operating in Chile together exported 5,405 kt of copper. Its main destinations were China (21%), Japan (12%), South Korea (7%), Italy (7%) and the US (7%). Current estimates indicate an annual growth in China's consumption of more than 8.8% over the next 5 years, representing a demand for 2.5 million tonnes of refined copper and 2.7 million tonnes in concentrate. A slowdown in consumption growth is expected between 2015-2020 with rates of around 5.5% per annum, reaching 10.7 million tonnes towards the end of the following decade. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 27 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Principales Destinos Exportaciones de Cobre Taiwan 4% Otros 20% España 3% Alemania 3% Francia 4% China 21% Italia 7% Holanda 6% Corea del Sur 7% Japón 12% Estados Unidos 7% Brasil 6% Figure 12: Main export destinations Source: Anuario de Estadísticas del Cobre y Otros Minerales, COCHILCO. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 28 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment 5 Identification of main supplies 5.1 Identification of main supplies To facilitate the analysis, these supplies have been grouped into three main categories: energy and fuel, mining goods and inputs, and services. In addition, the items are grouped into categories according to the nature of the supplies. Thus, there are six categories of goods and inputs and one of services, together covering 29 types of supply, the breakdown of which is attached in the table in Annex 4. Services account for the biggest consumption, with US$2.8 billion, representing 43% of total expenditure, followed by mining goods and inputs (34%) and energy and fuels (23%). Composición de suministros Bienes e insumos mineros 33% Energía y combustibles 25% Servicios 42% Figure 13: Breakdown of supplies by consumption Source: Prepared by USM S.A. based on figures from COCHILCO and other public sources. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 29 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment In the case of energy and fuel, increased production will clearly involve an increase in energy demand (Figure 14). Although this is very obvious, the crucial point is that the sources of energy supply in the Norte Grande mining area are based mainly on primary fossil fuels, resources that are not available in Chile. Moreover, considering the carbon footprint trend, the issue could become even more critical, which is why some companies have taken steps towards nonconventional renewable energy (NCRE) such as wind and solar power. The relevant figures on energy and fuel indicate that: • • • It represents 25% of mine expenditure. There will be an average annual increase from 2009-2019: approximately. Projected average energy and fuel expenditure: US $3.2 billion. Demanda de Energía Costo de Energía US$ Millones 3000 2500 2000 1500 1000 500 0 2000 Energía 2005 Combustible 2010 2015 Energía Proyectado 2020 Combustible Proyectado Figure 14: Main chemical reagents Source: COCHILCO figures and USM S.A. estimates. Upon analysis of the main mining goods and inputs, we see that the majority are chemical reagents (48%), followed by supplies and mining equipment, with 37% and 15%, respectively. An overview of the relative weight of some inputs relevant to operations is illustrated below while Figure 15 illustrates the future trend in the same. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 30 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment o Reagents and chemicals o Sulphuric acid: accounts for 70% of hydrometallurgy reagents with around US$500 million. o o Grinding balls o o 48% of flotation inputs with US$220 million. Plate steel o o Lime: accounts for 40% of flotation reagents. 25% of flotation inputs with US$120 million. Explosives o Will increase from US$250 million in 2008 to US$500 million in 2019, along the lines of the trend that will emerge following start- o Tyres o up of the projects described above. An increase of US$125 million is estimated over 2008-2019, consistent with the growth in the fleet of trucks, as shown below. Principales Insumos de Producción Principlaes Insumos Producción 700 Reactivos 600 MM US$ 500 Bolas de Molienda 400 300 Aceros de Revestimiento 200 Explosivos 100 Neumáticos 0 2004 2006 2008 2010 2012 2014 2016 2018 Figure 15: Main chemical reagents Source: COCHILCO figures and USM S.A. estimates. Among the chemical reagents, the biggest consumption is for sulphuric acid (H2SO4), which represents 69% of total demand in this category, followed by sodium hydrosulphide (NaSH) with 10%. All other reagents, analysed individually, have relatively lower shares not exceeding 5%, as shown in the figure below. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 31 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment These include cobalt sulphate, foaming agents, flocculating agents, diluents and extractants, among others. Reactivos químicos Espumante 4% Floculante 3% Cal 3% Diluyente 2% Sulfato cobalto 5% Colectores 4% Extractantes 0% NASH 10% Ácido sulfúrico 69% Figure 16: Main chemical reagents Source: Prepared by USM S.A. based on figures from COCHILCO and other public sources. Major mining inputs include the share of milling balls, which, with US$220 million, represent 48% of operating costs in mining, followed by tyres, with a 30% share, as illustrated in Figure 17. In mining equipment, trucks account for 78% of consumption, followed by drilling machines (13%) and loaders (9%), the breakdown of which is also provided below. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 32 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Insumos Mineros Aceros Revestimient o 24% Neumáticos 30% Bolas de Molienda 46% Figure 17: Main mining inputs Source: Prepared by USM S.A. based on figures from COCHILCO and other public sources. Equipos Mineros Perforadoras Rajo 13% Cargadores Frontales 7% Palas Rajo Abierto 2% Camiones Mineros 78% Figure 18: Main mining equipment Source: Prepared by USM S.A. based on figures from COCHILCO and other public sources. With regard to the future trend in the main mining equipment, there follows an overview both of trucks (whose existing fleet of 800 will increase by 600 units, representing an investment of over US$2 billion) and of shovel loaders and loading equipment, which will represent an annual investment of US$100 million) with an average annual increase of 7 shovel loaders, 15 loading machines and 9 drilling machines. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 33 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment 6 Demand for strategic supplies After gathering background information from public sources, interviews and the experience of the consultant team, a set of goods and services was identified which, due to their amount, volume, criticality for the operation and degree of specialisation, were deemed crucial to the national mining industry. 6.1 Matrix of strategic supply analysis To categorise the various inputs, goods and services identified initially, a qualitative analysis matrix was prepared. This consists of four quadrants and allows supplies to be grouped into services, strategic items, consumer items and items of maintenance, repair and operations (MRO). Features of services: • Mainly labour services. • • • Handled as per specifications. Specific contracts used. Typically with a set duration. Examples: contracts for miners, engineering and maintenance. Features of consumer items: • • • Undifferentiated products. Choice is determined mainly by price. Generally handled through tendering tools. Examples: Safety, office items, travel. Features of MRO items: • • • Inputs aimed at maintaining operations. They are intensive. Purchasing and payment are automated. Examples: valves, pumps, bearings. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 34 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Features of strategic items: • • • • • Require detailed negotiations. Few suppliers. Require much more detailed cost analyses. Associated with strategic supply projects. Tend to generate strategic partnerships with suppliers. Under this matrix approach, the various supplies are grouped as follows: Servicios • • • • Ítems estratégicos Mantención y Generales Transporte Ingeniería Construcción • • • • • Ítems consumo • • • Aseo Viajes Artículos de oficina Energía Combustibles Insumos de producción Equipos mineros Reactivos químicos Ítems MRO • • • Bombas Válvulas Automatización y control Figure 19: Categorisation of strategic supplies Source: Prepared by USM S.A. 6.2 Strategic supplies Based on the above, a summary now follows of the main supplies deemed strategic for mining. A summary of the features of each supply is provided. a) Electricity In the 1990s, mining companies overhauled their policy of self-sufficiency in electricity, progressively turning towards external procurement of the input in order to cover the total demand of their installed systems. To this end, they established important contractual agreements, ensuring the continuity of supply over a number of periods. This was largely possible due to the incorporation of natural gas into the energy matrix halfway through the past decade, which led to the development of new plants with relatively low costs. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 35 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment In turn, these decreased costs led to the performance of many projects that had not been sufficiently attractive in earlier scenarios, which resulted in a significant increase in the demand for electricity. Between 1995 and 2008, electricity consumption increased by almost 8.4% annually, above production, which increased at a rate of 7.2%. This is due not only to the increasing number of companies demanding supply but also to other relevant factors, including the aging of deposits, increases in mine size and a substantial increase in refined copper production, since cathode production (whether by electrowinning or electrorefining) is a more energy-intensive process. 6.000 5.000 4.000 3.000 2.000 1.000 - 20.000 10.000 GWh 15.000 5.000 - 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 Kton de Cobre Fino Consumo de Energía Eléctrica Producción de Cobre Energía Eléctrica Figure 20: Electricity consumption Source: COCHILCO figures and USM S.A. estimates. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 36 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Similarly, projected annual electricity consumption averages around 18,900 GWh per year, which translates into a total of US$1.767 billion. For 2019, estimated consumption stands at 25,540 GWh, representing a 77% increase on the level observed in 2008. Due to the trans-Andean natural gas supply being cut off, generation companies found it necessary to diversify their fuel supply in order to maintain the levels of service demanded by the mining companies. Thus, natural gas fell from representing 60% of generating fuel in 2004 to 11.9% in 2008, while diesel was given a strong push, increasing from values of close to 1% to 27% over the same period. This had a major impact on costs, which increased by 213% from US$36/MWh in 2006 to US$113/MWh in 2008 in the SING grid, where 70% of the country's copper is mined. Combustible Diesel Petróleo Combustible Carbón Bituminoso Gas Natural Carbón + Petcoke Total 2004 1% 0,20% 37,60% 61,20% 100% 2008 27,20% 2,30% 41,50% 11,90% 17,30% 100% Table 4: Breakdown of generation fuel Source: Consumo de Energía y Emisiones de Gases de Efecto Invernadero de la minería del Cobre de Chile, COCHILCO. To estimate the cost of electricity, the average cost between 2004 and 2006 has been taken as the unit cost per GWh. This corresponds to the period in which the gas cuts from Argentina began, with an annual adjustment similar to the periods before the crisis. This holds both for the new coal-fired generation projects in the Electroandina, Codelco and BHP Billiton portfolios and for the construction of the liquefied natural gas plants of Quinteros and Mejillones, which would cut costs from the current level to values closer to those prior to the gas crisis. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 37 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Demanda deEnergía Energía Eléctrica Costo de Eléctrica US$ Millones 3000 2500 2000 1500 1000 500 0 2000 2005 2010 2015 Energía Energía Proyectado 2020 Figure 21: Cost of electricity Source: COCHILCO figures and USM S.A. estimates. b) Fuel The energy consumed as fuel in processes associated with copper mine production witnessed a 36% increase between 2004 and 2008, despite production falling by 2% over this period. This represents a 38% increase in the unit rates of fuel consumption over the past 5 years. If we observe the timeline between 1995 and 2008, the situation is the diametric opposite, since a progressive decline in unit consumption rates was witnessed between 1995 and 2004, when they fell by 29%. Therefore, the trend for 19952008 is towards a 3% reduction in the values recorded in the mid-1990s. This change of direction is due to a range of factors, including decreased mineral grade, increased haulage distances, change in the portfolio of marketable products and technological changes that have intensified the use of fuel energy. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 38 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment 7000 6000 5000 4000 3000 2000 1000 0 60000 40000 20000 Tera Joule 80000 Producción 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 0 2004 Kton de Cobre fino Consumo de Combustible Combustible Figure 22: Annual fuel consumption Source: COCHILCO figures and USM S.A. estimates. The main fuel used in the mining industry is diesel oil, with 79.6%, followed by ENAP 6 (Fuel Oil 6), with 16.7% and, with a much lower percentage, natural gas. Combustibles Utilizados en la Minería Gas Natural 2% Otros 2% ENAP 6 17% Petróleo Diesel 79% Figure 23: Fuels used in mining Source: Consumo de Energía y Emisiones de Gases de Efecto Invernadero de la minería del Cobre de Chile, COCHILCO. For its part, the cost of fuel has witnessed a dramatic rise in recent years, in line with the international events of the commodities market. This situation drove the price of oil to record levels in July 2008, representing a 37% increase for the industry between 2007 and 2008. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 39 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Thus, in 2008, the cost of energy in the mining industry climbed to over US$2 billion, up almost 15% on the previous year. To estimate fuel costs for the coming years, long-term annual variations (20 years) were used as a price projection, since this maintains the trend and eliminates any occasional distortions. Hence, average annual fuel consumption is estimated at 66,000 [terajoules], representing an expenditure of US$1.562 billion per year over the next decade, although a peak of 70,228 [terajoules] is observed in 2013 due to increased levels of production for this year. Demanda de Energía Energía Costo de US$ Millones 3000 2500 2000 1500 1000 500 0 2000 Energía 2005 Combustible 2010 2015 Energía Proyectado 2020 Combustible Proyectado Figure 24: Projected energy costs Source: COCHILCO figures and USM S.A. estimates. As a general observation on electricity and fuel, note that demand will increase as the various projects described begin operation. Nonetheless, although supply can be guaranteed, we need to bear in mind that the fuels used are fossil fuels and that the electricity comes mainly from power plants that use these fuels. So, as explained above, criticality will come into play when the carbon footprint begins to gain momentum. From this point on, the pro-activeness of the mining companies in the shift towards NCRE will become relevant in marking the difference between copper with a "heavy carbon footprint" and one that is "carbon Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 40 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment neutral" or "low carbon". Given the volumes of energy consumed, this will be no mean feat. It is therefore necessary to attract investment with alternative energies to ensure the competitiveness of Chilean copper. c) Mining goods and inputs To determine the level of consumption of the main Mining Goods and Inputs, we use a methodology based on projected production and mineral grade and on recovery rate. These will be used to project the amount of ore to be treated in the concentration processes (via flotation) and hydrometallurgical processes, and hence, to determine the requirements of the latter. A gradual increase is envisaged in the amount of ore to undergo hydrometallurgical processing over the next 10 years, which looks set to stand somewhere around 400 million tonnes by 2019, approximately 24% above the value of 2010. For flotation concentration, the situation is intensified further, since it is projected that by 2019 the amount of ore to be processed will exceed 1 billion tonnes. This would be due to the impoverishment of the ore grade and the increase in projected production. As a result, a gap is opened that must be covered by a significant increase in current production capacity. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 41 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Mineral a Remover 1600 1400 1200 1000 800 600 400 200 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2016 2017 2018 2019 Mineral a Remover Flotación Mineral a Remover Hidrometalurgia Figure 25: Mineral to be processed Source: USM S.A. estimates based on COCHILCO data and Brook Hunt database. d) Reagents for hydrometallurgy The estimated amount of mineral to be processed for 2010 is 324 million tonnes, which is projected to increase to 403 million tonnes in 2019. This significant increase will have an impact on the requirements for inputs and chemical reagents for the treatment of these new levels of ore. This calculation uses the values in the Guía de Ingeniería y operaciones Mineras de Chile (Guide to Engineering and Mining Operations in Chile), published by Portal Minero, as unit consumption values. Ácido Sulfúrico [g/ton] Aditivo Guarfloc [g/ton] Extractantes [g/ton] Sulfato de Cobalto [g/ton] Diluyente [l/ton] Cons. US$/ton Unitario 3,1 60 0,2 5780 0,175 3000 1,02 8100 10,7 670 Table 5: Unit hydrometallurgy reagent consumption Source: Guía de Ingeniería en Operaciones Mineras, Portal Minero. The biggest expense is for sulphuric acid, which annually accounts for over US$300 million. The demand for sulphuric acid increased by 20% between 2004 Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 42 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment and 2009, so companies had to turn to outsourcing, mainly through the Interacid Trading company. The latter is planning to set up an acid production plant in Norte Grande that would bridge the gap between demand and local production over the coming years. Proyección Reactivos Hidrometalurgia (Millones de US$) 2004 2009 2014 2019 500,0 400,0 300,0 200,0 100,0 - 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 70,0 60,0 50,0 40,0 30,0 20,0 10,0 - Aditivo Guarfloc Extractantes Diluyente Ácido Sulfurico Sulfato de Cobalto Figure 26: Projection of hydrometallurgy reagents Source: COCHILCO figures and USM S.A. estimates. Demand for this input is expected to continue to rise over 2010-2019, with an annual expenditure of US$370 million and a peak estimated value of US$410 million, which would occur in 2012. The second biggest expenditure in this period will be for extractants, with an average cost of US$28.2 million per annum, followed by diluents, with the sum of US$14.2 million, copper sulphate with US$11.7 and lastly, the additive Guarfloc, with an average cost of US$1.2 million per year. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 43 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment e) Flotation reagents The unit consumption of the main chemical reagents used in the flotation process is indicated in the following table: Floculante [g/ton] Espumantes [g/ton] Colectores [g/ton] Cal [g/ton] Consumo US$/ ton Unitario 20 2500 30 2200 35 2000 1500 100 Table 6: Flotation unit consumption Source: Guía de Ingeniería en Operaciones Mineras, Portal Minero. The biggest expense in the flotation concentration process is lime, which represents 45% of the cost of reagents, with a projected average spending of US$ Millones US$61.6 million over the next 10 years and a peak of US$66.1 million in 2016. Reactivos Flotación 160 140 120 100 80 60 40 20 0 Floculante Espumantes Colectores Cal Figure 27: Projected expenditure on reagents for flotation Source: COCHILCO figures and USM S.A. estimates. The second biggest expenditure after lime is collectors, with an average annual total of US$28.7 million, followed by foaming agents with US$27.1 million and lastly flocculating agents, with an average of US$18.5 million per year. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 44 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment f) Grinding balls and steel plate As with reagents, it is possible to determine the levels of future consumption based on average yields per tonne of copper produced. Bolas de Molienda Aceros de Revestimiento Consumo US$/ ton Unitario 775 0,000073 150 0,0002 Table 7: Unit consumption of steel balls and steel plate Source: Guía de Ingeniería en Operaciones Mineras, Portal Minero. The largest sum corresponds to grinding balls, with an average cost of US$232 million a year, representing 47% of total input costs for flotation. Consumo de Aceros US$ Millones 300,0 250,0 200,0 150,0 100,0 50,0 - Bolas de Molienda Aceros de Revestimiento Figure 28: Projected steel consumption Source: COCHILCO figures and USM S.A. estimates. For its part, steel plate totals an annual average of US$123 million over the period and accounts for 25% of total inputs for concentration by flotation. g) Material to be removed To project demand for mining equipment, tyres and explosives, it is essential to estimate the material to be removed both in opencast mines and in underground Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 45 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment operations. To do this, we use the average sterile/mineral ratio for each year, which, combined with the projected production, allow us to quantify the levels of material removed. Material a Remover 6.000 Millones de Toneladas 5.000 4.000 3.000 2.000 1.000 - Material Estéril Mineral a Remover Figure 29: Projected material to be removed Source: COCHILCO figures and USM S.A. estimates. h) Mining equipment To estimate mining equipment, we used data considered to be representative of the industry. Hence, data recorded at Codelco Norte on equipment performance and operation factors were used. 6.2.a.1 Mining trucks To determine the haulage requirements of material from opencast mines, the average yields, availability and costs associated with 330 tc trucks were used, as this is one of the latest models in Chile. Rendimiento Disponibilidad Uso Disponible Rendimiento Costo de Inversión Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 86% 80% 8700 t/día US$ 3,5 millones 46 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Table 8: Truck performance Source: Guía de Ingeniería en Operaciones Mineras, Portal Minero. An increase of 596 units is projected in the number of haulage trucks between 2010 and 2019 since, in order to cover the increased requirements, the fleet would need to increase from the 963 trucks in 2010 to the 1,559 units in 2019. This would require an investment of approximately US$2.086 billion. Parque de Camiones 1.800 1.600 Unidades 1.400 1.200 1.000 800 600 400 200 - Figure 30: Projected mining-truck fleet Source: COCHILCO figures and USM S.A. estimates. 6.2.a.2 Loading equipment and opencast drilling machines As above, the increase in material to be removed leads to growth in the demand for drilling and loading equipment, thus generating an increase in the current fleet. Upon analysis of the average performance of this equipment, we obtain the following data. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 47 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Rendimiento Palas Disponibilidad 88% Utilización 95% Factor Operacional 77% Rendimiento Medio Nominal 6921 t/hr. Efec. Costo de Inversión US$ 17 millones Table 9: Shovel loader performance Source: Guía de Ingeniería en Operaciones Mineras, Portal Minero. The increased demand in this mining equipment is expected to occur by the middle of the next decade due to execution of major mining projects in this period, including Phase V of Escondida and Expansion Phase II of Andina. Demanda de Equipos Mineros 80 70 60 50 40 30 20 10 0 200420052006200720082009201020112012201320142016201720182019 Perforadoras Cargadores Frontales Palas de Carguío Figure 31: Projected demand for mining equipment Source: COCHILCO figures and USM S.A. estimates. Thus, on average, 31 mining machines will be required each year from 2010 to 2019. Of these, 9 will be drilling machines for opencast mines, 15 will be front loaders and 7 will be shovel loaders. This represents an annual investment of around US$58 million in front loaders and US$31 million in shovel loaders. b) Tyres By estimating the trend in the haulage truck fleet used in Chile, with an average cost per vehicle of US$20,000, it is possible to estimate the demand and sums incurred by companies for this heading. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 48 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment 300 14000 250 12000 10000 200 8000 150 6000 100 4000 50 Unidades US$ Millones Neumáticos 2000 Costo de Neumáticos 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 0 2004 0 N° Neumáticos Figure 32: Projected demand for tyres Source: COCHILCO figures and USM S.A. estimates. Hence, a 10% increase can be observed in the number of units over the past 5 years and an annual consumption of 10,407 tyres is expected over the next decade, requiring a total of US$208 million. c) Explosives The average unit consumption of explosives at an average cost of US$650 per tonne of input has been used as a load factor for this projection. Thus, an annual consumption of 648,526 tonnes of explosives is projected, which would require an investment of around US$422 million per year. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 49 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Explosivos 800.000 600.000 400.000 200.000 Toneladas 1.000.000 - 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 US$ Millones 600 500 400 300 200 100 - Costo Explosivos Explosivos Figure 33: Projected consumption of explosives Source: COCHILCO figures and USM S.A. estimates. 6.3 Regional market By way of example and in order to exhibit greater potential of attraction to possible suppliers wishing to set up operations in Chile, the size of the market is described for two strategic inputs, taking into account some of the countries of the Southern Cone. The specific consumption of these inputs per tonne of copper produced in each country was used as the benchmark to estimate market size. Suministro Neumático (MMUS$) Bolas Molienda (MMUS$) Chile 282,00 211,68 Perú 63,80 47,93 País Argentina 95,81 71,89 Brasil 53,23 39,93 Table 10: Projected supply market Source: Prepared by USM S.A. based on various public sources. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 50 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment 7 Critical supplies for mining Drawing on the value chain illustrated in Annex 5, Figure 34 below shows a matrix with various supplies considered to be critical, based on the results of the interviews and analysis of the information gathered by the team. They have been considered critical because a reduction in supply or lack of the latter has a significant impact on mine operation. Figure 34: Critical supplies for mining Source: Authors. For each of the inputs, aspects were identified that make them critical to operation of the mine. In each case, a selection of initiatives is put forward to mitigate the scenario of criticality analysed. In the case of the transportation of ore and intermediate materials, the critical supplies are thermal energy (associated with fuel) used for truck movement, tyres, operational services and maintenance services, as illustrated in Figure 35. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 51 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Energía térmica (combustible) o Dependencia energética o Distancia de los centros de consumo desde los centros de distribución o No intercambiabilidad de combustible o Antigüedad de yacimiento: incremento de consumo por aumento de material base y desplazamiento Neumáticos o Pocos productores o Puntos de fabricación y distribución alejados de centros de consumo o Impacto directo en el core del negocio o Disponibilidad (durabilidad) o Antigüedad del yacimiento: incremento del desplazamiento Mitigación o Cambio tecnológico (utilización de cintas transportadoras) o Estación de transferencia Servicios de operación o Intensivo en mano de obra (4 - 5 operadores) Mitigación o Manejo remoto / robótica aplicada Servicios de mantenimiento o Impacto en la disponibilidad o Incremento de la flota: mayor costo directo de mantenimiento o o o o o o Mitigación Mejoramiento de caminos Monitoreo de presión de aire Nuevo tipo de neumático (sin aire) Mitigación Servicio de mantenimiento especializado Repuestos in situ Manejo stock crítico de repuestos Figure 35: Criticality in the haulage of ore and intermediate material Source: Authors. In crushing and grinding mining processes, the most critical inputs are related to grinding balls, maintenance services and water supply. Bolas o Impacto directo en el core del negocio o Disponibilidad (por durabilidad de bolas) o Aumento de lucro cesante por cambio de bolas (equipo) Mitigación o Aumento de durabilidad del material o Cambio de paradigma (llevar el proceso de chancado al material) Servicio de mantenimiento o Impacto en la disponibilidad Mitigación o Servicio de mantenimiento especializado o Repuestos in situ o Manejo stock crítico de repuestos Agua o Baja disponibilidad del recurso o Impacto ambiental por generación, manejo y disposición de riles Mitigación o Reutilización de agua de procesos o Reutilización de aguas sanitarias Figure 36: Critical supplies in crushing and grinding Source: Authors. In flotation, the most important supplies are electricity and operational services, since both are directly linked to the core business of the mining industry. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 52 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Energía eléctrica o Impacto directo en el core del negocio Mitigación o Modificación de la matriz de energéticos primarios Servicios operacionales o Impacto directo en el core del negocio Mitigación o Automatización Figure 37: Critical supplies in the flotation process Source: Authors. Another relevant aspect is that associated with human resources. The main reasons relate to the lack of interest among young professionals in working at sites. Another important aspect is safety, to which the mining industry allocates many resources each year in order to try and prevent or at least reduce the frequency of events, especially those relating to personal safety. Servicio de campamento o Hotelería crítico para las personas o Disponibilidad de agua sanitaria, energía eléctrica o Higiene (desagües y residuos “domiciliario” o Desarme de faenas Mitigación o Campamentos mecanos (prearmados) Selección y capacitación o Menor disposición de profesionales jóvenes a trabajar en faena y en turnos o Formación universitaria: principalmente teórica y sin carreras orientadas al negocio minero Mitigación o Automatización o Control remoto del proceso/robótica o Formación especializada y focalizada en el negocio (formación dual) o Transferencia tecnológica Agua o Baja disponibilidad del recurso o Crítico para la subsistencia (agua potable) o Aguas sanitarias (salud e higiene) Mitigación o Tratamiento de aguas residuales o Reutilización de aguas sanitarias o Separación de aguas fecales Figure 38: Critical aspects of personnel at sites Source: Authors. In the case of prospecting and operation, one relevant fact is that related to the supply of chemical reagents and explosives in particular, as there are only two suppliers in the domestic market, a scenario that does not help with the competitiveness of mining. The entry of a new player on the market will be no mean feat given the level of penetration of the existing suppliers and the conditions of distribution of the market. Another point that will impede the entry of new suppliers is that the mining industry is seeking solutions, not isolated products or inputs. In the case of the supply of explosives, what is being supplied on the market are services at the mine itself. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 53 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Servicios operacionales o Servicio especializado Mitigación o Formación especializada y focalizada en el negocio (formación dual) o Transferencia tecnológica Químicos reactivos y explosivos o Bajo poder de negociación de mineras Mitigación o Atracción de nuevos proveedores Figure 39: Critical aspects in prospecting and operation Source: Authors. The team's research revealed that some supplies are not being served locally, as shown in the figure below. Suministros Estratégicos Bienes y Servicios de Apoyo • Robótica aplicada • Innovaciones en equipos mineros • Innovaciones en insumos • Gestión de aguas • Monitoreo de taludes • Servicios logística de entrada • • • • Tribología Explosivos Bolas de molienda Reactivos químicos (extractante, colectores, sulfato de cobalto, NaSH) • Energía • • • • • • • • • Neumáticos Combustibles Lubricantes Reactivos químicos (flotación) • Sistemas de automatización y control • Sondajes mineros • Monitoreo ambiental • • • • Equipos mineros Correas transportadoras Aceros revestimiento Geotextiles • • • • • • Servicios de alimentación Telecomunicaciones Estanques Aseo industrial Zunchos Bombas Válvulas Construcción Ingeniería Transporte de personas Mantenimiento Figure 40: Number of suppliers with a local presence Source: Authors. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 54 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment 8 Potentially successful cases There are some cases that could be successful and whose experience could be adapted to other strategic mining supplies in Chile. Note that the initiatives being driven by CORFO are on the right track towards attracting new players to supply the mining industry, by gathering them at a single event with the key producers on the local market and explaining the near future. Three notable stories of success now follow: a) Treatment of grinding bars In Chile, steel bars are only sold without heat treatment, supplied exclusively by CAP in ex-works deliveries. In the international market, there is a limited supply of such bars. These processes applied to the metals are designed to improve their mechanical properties, most notably hardness, strength and toughness. The materials that are heat-treated are basically steel and grey cast iron composed of iron and carbon. The mechanical properties of steels reside in the chemical composition of the alloy and the type of heat treatment applied to them. The heat treatment used is cementing, which increases the surface hardness of the bar associated with an increased concentration of carbon in the peripheral area of the bar. Subsequently, through quenching and tempering, a high surface hardness is obtained, together with resistance to wear and a tough core. This opportunity for success is illustrated in the material shown in the figure below: Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 55 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment ¾” (18mm) 52 Rockwell C 39 Rockwell C 27±4 Rockwell C 27±4 Rockwell C Figure 41: Representation of the effect of treatment on the material Source: Authors. b) Phosphorus pentasulphide This is a chemical compound (P4S10) that is yellow in colour. It is an important compound in the agrochemical and mining industries. It is manufactured as flakes and used in several areas: • • • Intermediary in insecticide production. Mineral flotation agent. Lube oil additive. In the case of Codelco, for example, the only supplier of phosphorus pentasulphide is Fosfoquim S.A. This circumstance has resulted in a strategic relationship of supply logistics (customer-supplier relationship) that includes the development of technology for risk prevention and productive efficiency. Together, they have developed waste plants and special containers for the safe handling of P4S10. Other companies have been identified as potential suppliers: National suppliers • Merck S.A (www.merck.cl/es/company/merck_in_chile_sa/merck_sa.html). • Perez & Jacard (www.portland.cl/). Foreign companies: • Tekchem (Mexico) (www.tekchem.com.mx). Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 56 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment • Thermphos/Sudamfos S.A (Argentina) (www.thermphos.com.cn/tianfu/en/index.asp). • Chemtrade Logistic (Canada) (www.chemtradelogistics.com). c) Industrial cleaning The mining companies currently use a Roto Power with brush and shovel. Abroad, technical mechanisms are used for dust collection, including the aspiration of dust in underground mines, aspiration of particulate material spills, cleaning of material build-up underneath operating equipment, cleaning of dust and debris from smelting and refining. The suppliers with industrial cleaning technology present in the US market include: • Clean Earth Environmental Group (www.edainc.net/PastSuccess/ceeg/ceeg.aspx). • MET–PRO CORPORATION (www.met-pro.com/). • MPW (www.mpwservices.com/). Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 57 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment 9 Strategies for attraction To generate optimal and attractive conditions for foreign investment in Chile, it is important to identify aspects that, from the point of view of investors, make the country a market with security guarantees. Thus, the following SWOT analysis will help to identify elements that need to be overcome (weaknesses) and that need to be exploited (strengths). A summary is provided below. Fortalezas • Chile, con el mayor índice de potencial político (PPI)* de Latinoamérica. • Baja incertidumbre sobre la administración y aplicación de las regulaciones vigentes. • Políticas basadas en las “mejores prácticas”, dando apertura económica. • Régimen de aprobación ambiental transparente, da paso a la inversión. • Red de apoyo a la inversión. • Estabilidad política Debilidades • Potenciales problemas de lenguaje • Bajos niveles de inversión en innovación y desarrollo • Presencia de “carteles” • Debilidad de ley de protección a la propiedad intelectual • Inestabilidad en países vecinos Oportunidades • Aumento de producción por alto precio del cobre • Chile, país con mayores reservas de cobre • Crecimiento de negocios en países de la región • Búsqueda de soluciones, no de productos Amenazas • Alza en los precios de los commodities por la recuperación de la economía. • Bajo crecimiento económico • Rigidez del mercado laboral • Guerra de precios • Impacto por cambio de mando Figure 42: SWOT analysis to attract investment Source: Based on Survey of Mining Companies 2008/2009 (Fraser Institute Annual) and other public sources. The view of Chile as reflected in the PPI index that measures the effects of government policies is important. This should allow the attraction of investors supplying strategic inputs, given that, from Chile, it is possible to approach the growing mining market developing in Peru and the initiatives of other countries like Colombia, which seeks to become a major player in global mining. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 58 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment One general aim should be that of generating sustainable optimal conditions to encourage investment by foreign companies in Chile and to promote both the regions and the mining cluster. Based on the above, the specific aims are as follows. The monitoring indicators and proposed targets are indicated in Figure 44. 1. Promote Chile as a platform for the generation of mining business throughout the Southern Cone. The various potential foreign suppliers should be shown the benefits of investing in the country, such as its political, economic and social stability. 2. Bridge existing technology gaps through technology entrepreneurship and investment by businesses that supply new technologies applied to mining. 3. Develop public, private and mixed tools and incentives to generate the ideal conditions for the entry of foreign investment to the country. 4. Define lines of action to encourage progressive improvements in the national panorama. CORFO and its various agencies are considered responsible for driving implementation of the strategy. However, it must be a countrywide strategy in which all of the public instruments work together to seek the effective attraction of suppliers. To this end, besides the review of international initiatives, road shows, promotional fairs and visits to suppliers, among other events, the actions currently promoted by CORFO should be continued. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 59 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Figure 43: Aims, targets and monitoring indicators Source: Authors. In the light of the above, nine basic aspects must be guaranteed to facilitate foreign investment in Chile: a. Guarantee a sufficient volume of current and projected business o Promote regional interest while maintaining Chile as the productive and operational platform. o Encourage the creation of specialised clusters that can be developed in the regional market with a local base. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 60 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment o Send out clear signals regarding the relevant size of the specific market. b. Guarantee access to stable and mature financial markets o o o Guarantee a stable financial market. Encourage access to credit at preferential rates (IDB, CORFO, etc). Well-regulated financial system with high and reliable operating standards. c. Minimise investor risk through economic, political and social stability o Promote clarity in the labour market and in wages. o o o o Send out signals of a clear regulatory framework. Facilitate the flow of relevant economic information to investors. Limit currency risk (controlled exchange rate, hedging instruments). Reduce social tensions in productive areas. d. Guarantee stability in the short, medium and, most importantly, long term o Send out signals of seriousness, integrity and institutional agility in economic, financial and legal affairs. o o o Set up regional agreements to ensure stability. Promote investor confidence in the country. Show signs of seriousness, stability and open government. e. Offer clear conditions of national competitiveness o Develop an "Investor's Manual" with practical information for companies wishing to set up operations in Chile. o Provide guarantees of competitiveness and benefits for foreign investment. o o Provide clear signs of free-market reform. Generate a plan to privatise inefficient state enterprises. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 61 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment f. Improve or at least maintain the conditions that exist in the country of origin o Generate an adequate level of technical education and language learning. o Implement globally accepted accounting practices with control measures accepted by other duly developed markets. o Remove barriers to international trade in business, taxation, etc. g. Generate guarantees for operation and access to the local mining market (state and private) o Host road shows and thematic fairs that link mining companies to international strategic competitiveness. o suppliers, focusing on areas of low Guarantee competitiveness, with limited costs similar to those available abroad. o o Incentivise remittances sent to parent companies. Build adequate infrastructure for the implementation and expansion of productive activities (roads, ports, energy, etc). o Promote the incorporation of new suppliers in state enterprises so as to introduce them gradually to the market. h. Create clear, competitive national advantages o Develop public instruments to attract investment (subsidies, benefits, etc). o tax Develop institutional partnerships (universities, technology centres, CORFO, etc). o o o i. Create tax holidays - extension of free trade zones. Promote innovation through subsidies or other mechanisms. Encourage the association of producers using available synergies. Consolidate the country's policy on international investment agreements o Increase FTAs and agreements to promote and protect investments. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 62 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment o Seek out companies interested in the international projection of their products. o Encourage inter-government agreements on technology exchange and the mutual development of markets. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 63 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment 10 Concluding remarks The figures relating to projects in the industry show no signs of a crisis. The reasons for this are varied and range from the need to remain in business and not disappear to taking increasingly stronger and profitable positions in a country that is still a major player when it comes to copper production. CORFO's opportunities for attracting new players are clear. Supplies such as applied robotics, innovations in mining equipment and supplies do not have a local presence. The same applies to the management of water, a scarce resource, particularly in the north of the country. The same can also be said of slope monitoring. Other supplies have suppliers in the local market but their offers cannot guarantee the competitiveness of mining. The need is obvious. The types of supply are obvious. A series of suppliers have now been identified. Some have already been contacted both by companies and by CORFO. Hence, CORFO needs to approach the mining companies with a view to building a permanent project together, using all of its lines and promotional instruments, just as it has done with Innova, for example. Mining companies are eager to have more suppliers competing in a context of economic and political stability such as that witnessed in Chile. CORFO must also interact with its counterparts in neighbouring countries in order to identify and group common needs to offer attractive market sizes to investors. It must lead this movement to ensure that those interested in reaching the South- American market set up operations in Chile and from there, supply the mining market of the region. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 64 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Bibliography • • Antofagasta PLC. “Annual Report 2008”, Antofagasta PLC, 2009. CESCO, “Desarrollo de la Industria Minera en América Latina”, Centro de Estudios del Cobre, Chile, 2009. • COCHILCO. “Anuario de Estadísticas del Cobre y Otros Metales 19992008”, Comisión Chilena del Cobre, Chile, 2009. • COCHILCO. “China: Desarrollo Económico y Consumo de Cobre”, Comisión Chilena del Cobre, Chile, 2009. • COCHILCO. “Coeficientes Unitarios de Consumo de Energía de la Minería del Cobre 2001-2007”, Comisión Chilena del Cobre, Chile, 2008. • COCHILCO. “Consumo de Energía y Emisión de Invernadero”, Comisión Chilena del Cobre, Chile, 2009. • Gases de Efecto COCHILCO. “Demanda de Energía Eléctrica y Seguridad de Abastecimiento en la Minería del Cobre”, Comisión Chilena del Cobre, Chile, 2008. • COCHILCO. “El Mercado del Ácido Sulfúrico y su Proyección al 2015”, Comisión Chilena del Cobre, Chile, 2009. • COCHILCO. “Inversión en la Minería del Cobre y del Oro Proyección Período 2009-2013”, Comisión Chilena del Cobre, Chile, 2009. • COCHILCO. “Oportunidades de Negocio para Proveedores de Bienes, Insumos y Servicios Mineros en Chile”, Comisión Chilena del Cobre, Chile, 2008. • CODELCO, “Memoria Corporativa 2008”, Corporación Nacional del Cobre, Chile, 2009. • • • • • COLLAHUASI. “Memoria Anual 2007”, Collahuasi, Chile, 2008 Consejo Minero. “Informe Económico 2007”. Chile, 2007. EDITEC. “Catastro de Proyectos Mineros”, EDITEC, Chile, 2009. Minera Escondida. “Memoria Anual 2007”, Minera Escondida, 2008. Portal Minero S.A., “Guía de Ingeniería en Operaciones Mineras”, Portal Minero Ediciones, Chile 2007. • Valenzuela, A., Arias, M., “Oportunidades de Negocio en la Minería del Cobre. Potencial Demanda de Bienes e Insumos Mineros”. Comisión Chilena del Cobre, Chile 2005. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 65 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Websites. Sources of information • • • http://www.portalminero.com/proyectos/muestra_all_proyecto.php http://www.abastemin.cl http://www.aminera.cl/contenido/companias-mineras-y-proveedorespor-una-relacion-consolidada.html • • • • • • • • • • • • • • • • • • • • http://www.finning.cl http://www.aprimin.cl http://www.iimch.cl http://www.portalminero.cl http://www.cesco.cl http://www.cochilco.cl http://www.editec.cl http://www.sonami.cl http://www.collahuasi.cl http://www.escondida.cl http://www.codelco.cl http://www.enami.cl http://www.anglochile.cl http://www.bcentral.cl http://www.barrick.cl http://www.exponor.cl http://www.cbc.cl http://www.aia.cl http://www.estrategia.cl http://www.minmineria.cl Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 66 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Annexes Annex 1. Websites. Suppliers • • • www.mobiusinstitute.com www.swannglobal.com www.amcconsultants.com.au • www.salveresources.com • www.h2oceanpower.com • www.asa-australia.com • www.engen.com.au • www.crescent-pps.com • www.apssystemms.com.au • www.mpe.com.au • www.bigtyre.com.au • www.itpower.co.uk • www.itpon.com.au • www.klinge.com.au • www.croctyres.com.au • www.acfr.usyd.eder.au • • • • • www.acumine.com.au www.sunemporium.com www.broons.com www.mmdsizers.com www.controlsystems.com.au (already in Chile) • www.jda.com.au • www.trensfieldservices.com (with Inser) • • • www.adaptfms.com www.maunsell.com www.smec.com.au • www.enviroflow.com.au • • www.isipl.com www.groundwatertech.com • www.clemente.com.au Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 67 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment • • • www.grd.com.au (already in Chile) www.groundprobe.com www.owencustomproducts.com.au • www.a-i-t.com.au • www.birrena.com.au • • • • • • www.sageautomation.com www.biocentral-labs.com www.globedvill.com.au www.argontechnology.com.au www.walenex.com www.metropower.com.au • www.scananalyse.com.au Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 68 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Annex 2. State of mining investment projects Año Operación 2009 2010 2011 2012 2013 2014 2015 2017 2018 - Operador Centenario Copper Pucobre Codelco Codelco Codelco Codelco Antofagasta Minerals Antofagasta Minerals Antofagasta Minerals Collahuasi Teck Vale a través de CMLA Anglo American Sinocoop, Tongling Group Cerro Dominador Xstrata Pan Pacific Copper Antofagasta Minerals Freeport-McMoran - Codelco Codelco Codelco Teck Xstrata BHP Andes Copper Quadra Mining Codelco Codelco Codelco Sinocoop, Tongling Group Sinocoop, Tongling Group Faena Franke Expansión Doña Agi Pilar Norte (Teniente) Expansión Gaby Fase II Expansión Fase I (Andina) Radomiro Tomic (Sulfuros) Esperanza Antucoya Ampliación Fase II (Los Pelambres) Ampliación Fase I Andacollo Hipógeno Tres Valles Expansión Los Bronces Minera Catania Verde (Fase I) Diego de Almagro Lomas Bayas II Caserones Los Pelambres (Ampliación) El Abra Sulfolix Mina Ministro Hales San Antonio Óxidos (Salvador) Relincho El Morro Escondida Fase V Vizcachitas Sierra Gorda Expansión Fase II (Andina) Nuevo Nivel Mina (Teniente) Chuqui Subterránea Minera Catania Verde (Fase II) Minera Catania Verde (Fase III) Inversión (MM US$) 172 6,8 120 202 220 382 1900 200 925 750 336 102 1744 25 120 200 1700 3200 450 900 230 1000 2500 3250 1000 1660 4800 1600 1900 30 300 Estado Confirmada Confirmada Confirmada Confirmada Confirmada Confirmada Confirmada Postergada Confirmada Confirmada Confirmada Confirmada Postergada Confirmada Confirmada Confirmada Confirmada Confirmada Postergada Confirmada Confirmada Confirmada Confirmada Postergada Confirmada Confirmada Confirmada Confirmada Confirmada Confirmada En evaluación Table 11: Breakdown of mining projects Source: Prepared by USM S.A. based on information from Cesco, COCHILCO and various public sources. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 69 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Annex 3. Methodology for estimating amounts for supplies Proyecciones de Producción Estimación Energía y Combustibles Proyección Sx-Ew No Tratamiento por Flotación? Si Proyección de Concentrados Proyección de Ley y % de Recuperación Proyección de Ley y % de Recuperación Mineral a Procesar Mineral a Procesasr Estimación Reactivos Mineral Total a Procesar Estimación Reactivos y Bolas de Molienda Proyecciones Relación EstérilMineral Material a Remover Estimación Equipos Mineros y Explosivos Fin Figure 44: Methodology for estimating demand Source: Prepared by USM S.A. Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl ∙ Fax (56) 2 3610425 70 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Producto Concentrados Base Producción Base Cátodos Sx-Ew Base Total Producción Base Concentrados Nuevos Producción Nueva Cátodos Sx-Ew Nuevos Total Producción Nueva Concentrados Producción Proyectada Cátodos Sx-Ew Total Producción Proyectada 2004 3.776 1.636 5.413 1.636 5.413 2005 3.736 1.585 5.321 1.585 5.321 2006 3.669 1.692 5.361 1.692 5.361 2007 3.725 1.832 5.557 1.832 5.557 2008 3.357 1.974 5.330 2009 3.309 1.940 5.249 1.974 5.330 35 35 3.309 1.975 5.284 2010 3.389 1.979 5.368 201 154 355 3.590 2.133 5.723 2011 3.267 1.811 5.078 415 196 611 3.682 2.007 5.689 2012 3.155 1.786 4.941 552 423 975 3.707 2.209 5.916 2013 3.178 1.663 4.841 1.114 500 1.614 4.292 2.163 6.455 2014 2.876 1.456 4.332 1.359 505 1.864 4.235 1.961 6.196 2015 2.736 1.401 4.137 1.619 505 2.124 4.355 1.906 6.261 2016 2.727 1.317 4.044 1.677 521 2.198 4.404 1.838 6.241 2017 2.624 1.216 3.840 1.741 525 2.266 4.365 1.741 6.105 2018 2.524 1.119 3.643 1.757 865 2.622 4.281 1.983 6.264 2019 2.420 1.018 3.438 1.722 914 2.635 4.142 1.932 6.073 Table 12: Projected production Source: Prepared by USM S.A. based on information from Cesco, COCHILCO and various public sources. Concentración Lixiviación Promedio Chile 2004 2005 2006 2007 2008 2009 1,21 1,17 1,19 1,18 1,13 1,10 0,89 0,84 0,83 0,91 0,85 0,81 1,09 1,05 1,06 1,06 1,00 0,99 2010 1,01 0,75 0,91 2011 0,96 2012 0,94 2013 0,90 2014 0,87 2015 0,88 2016 0,79 0,72 0,70 0,67 0,65 0,60 0,62 0,85 0,82 0,79 0,79 0,74 0,88 Table 13: Copper grade in mining operations in the country Source: Prepared by USM S.A. based on information from Cesco, COCHILCO and various public sources. 2017 0,78 0,64 0,74 2018 2019 0,76 0,75 0,67 0,68 0,73 0,73 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Table 14: Mineral and material to be removed Source: Prepared by USM S.A. based on information from Cesco, COCHILCO and various public sources. 72 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Consumo Energ. Elec. Costo Energía Electrica Consumo Combustibles Costo Combustibles 2004 16.178 726 41592 627 2005 16.281 730 40164 605 2006 16.422 737 41998 633 2007 15.429 692 47998 723 2008 14.435 648 58600 883 2009 13.110 588 60624 914 2010 11.784 529 62.649 944 2011 13.034 585 62.145 937 2012 14.451 648 64.498 972 2013 17.002 763 70.222 1.058 2014 18.209 817 67.262 1.014 2016 21.445 962 67.473 1.017 2017 22.766 1.021 65.863 993 2018 24.845 1.115 67.437 1.016 2019 25.545 1.146 65.243 983 Table 15: Energy consumption Hidrometalurgia Flotación Source: Prepared by USM S.A. based on information from Cesco, COCHILCO and various public sources. Reactivos Floculante Espumantes Colectores Cal Ácido Sulfurico Aditivo Guarfloc Extractantes Sulfato de Cobalto Diluyente 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 19 19 18 19 17 17 18 18 19 21 21 22 22 22 21 21 25 25 24 25 22 22 24 24 24 28 28 29 29 29 28 27 26 26 26 26 23 23 25 26 26 30 30 30 31 31 30 29 57 56 55 56 50 50 54 55 56 64 64 65 66 65 64 62 304,4 294,7 314,7 340,8 367,1 367,4 396,7 373,2 410,9 402,2 364,7 354,4 341,8 323,8 368,9 359,3 1,0 1,0 1,0 1,1 1,2 1,2 1,3 1,2 1,3 1,3 1,2 1,1 1,1 1,0 1,2 1,2 23,2 22,5 24,0 26,0 28,0 28,0 30,2 28,4 31,3 30,7 27,8 27,0 26,1 24,7 28,1 27,4 9,6 11,7 9,3 11,4 10,0 12,1 10,8 13,1 11,6 14,1 11,6 14,2 12,6 15,3 11,8 14,4 Table 16: Reagent consumption 13,0 15,8 12,7 15,5 11,6 14,1 11,2 13,7 10,8 13,2 10,3 12,5 Source: Based on data from COCHILCO, Guía de Ingeniería en Operaciones Mineras (Portal Minero) and USM S.A. estimates. 11,7 14,2 11,4 13,8 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Bolas de Molienda Aceros de Revestimiento 2004 213,6 113,29 2005 211,4 112,08 2006 207,6 110,07 2007 210,7 111,75 2008 189,9 100,70 2009 187,2 99,27 2010 203,1 107,69 2011 208,3 110,46 2012 209,7 111,21 2013 242,8 128,77 2014 239,6 127,06 2015 246,4 130,65 2016 249,1 132,11 2017 246,9 130,94 2018 242,2 128,44 2019 234,3 124,25 Table 17: Steel consumption Source: Based on data from COCHILCO, Guía de Ingeniería en Operaciones Mineras (Portal Minero) and USM S.A. estimates. 74 Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Table 18 Demand for mining equipment Source: Based on data from COCHILCO, Guía de Ingeniería en Operaciones Mineras (Portal Minero) and USM S.A. estimates. Table 19: Tyre and explosive consumption Source: Based on data from COCHILCO, Guía de Ingeniería en Operaciones Mineras (Portal Minero) and USM S.A. estimates. Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Annex 4. Relevant mining supplies Energía y Comb. Clases Categorías Energía Combustibles y Lubricantes Insumos Bienes e Insumos Mineros Equipos Mineros Equipos de Apoyo Servicios Reactivos Químicos Servicios Items Energía Proveedores Detectados Preliminarmente Energía de SING y SIC Combustibles y Lubricantes Shell, Copec, YPF Neumáticos Bolas de Molienda Aceros Revestimiento Camiones Mineros Palas Rajo Abierto Cargadores Frontales Perforadoras Rajo Bombas Válvulas Automatización y Control Floculante Espumante Colectores NaSH Ácido Sulfúrico Extractantes Sulfato de Cobalto Diluyente Cal Mantención y generales Suministro Explosivos Transporte Alimentos Ingeniería Construcción Michelin, Goodyear, Bridgestone, otros Molycop, Proacer CAP, Aceros Chile Finning Chile, Komatsu Bucyrus, Man Takraf Bucyrus, Komatsu, Finning, Janssen Bucyrus,WLS Drilling Products Vulco, KSB, Larox Fastpack S.A., KSB Chile Honeywell Chile Importados de USA e Irlanda Prod. Nacional e Importación (Interacid Trading) Oxiquim, Harting, Cognis, Cytec Inacal, Soprocal FFE Minerals Chile, Power Train Tech., MABET Enaex, Orica Transporte Tamarugal, Tur Bus, FFCC de AFTA. Compass Catering, Sodexho Fluor Daniels, CADE IDEPE, Aker Kvaerner, Guíñez Ing. Extranjeros y Nacionales (Techint, Parina, Salfa Montajes, etc.) Figure 45: Main supplies identified preliminarily Source: Prepared by USM S.A. based on figures from COCHILCO and other public sources. • Servicios ingeniería Exploracióón Exploraci Geolóógica Geol Santiago ∙ Chile Teléfono (56) 2 3610426 www.usmsa.cl • Aceros para perforación • Agua • Explosivos • Equipos de perforación y carga • Repuestos y • mantenimiento Extraccióón Extracci Mina Mina • Camiones • Neumáticos • Mantención de caminos • Repuestos • Mantenimiento camiones Transporte Avda Providencia 2331 ∙ Oficina 802 ∙ Providencia ∙ Fax (56) 2 3610425 Agua Ácido sulfúrico Geotextiles Tuberías Curado •Bolas de molienda •Aceros de revestimiento •Agua •Cal •Cintas transportadora Molienda • • • • Lubricantes Lubricantes Combustibles Combustibles •Reactivos extractantes •Reactivos tipo ácido orgánico •Reactivos ligantes •Reactivos sulfatantes •Diluyentes •Modificadores •Correas transportadoras •Agua •Ácido sulfúrico •Aspersores y •mangueras Secado y Fusióón Fusi •Filtros •Cintas transportadora •Reactivos espumantes •Reactivos colectores •Reactivos depresantes •Modificadores de pH •Agua • • • • •Cal •Oxígeno •Agua Curado •Ácido sulfúrico •Zunchos Electro refinacióón refinaci Agua Ácido sulfúrico Geotextiles Tuberías Conversióón y Conversi refinacióón Piro refinaci Planta Planta Flotación Flotación Extraccióón por Extracci solventes Lixiviacióón Lixiviaci Flotacióón Flotaci Construcción Construcción yy Proyectos Proyectos Servicios Servicios de de Apoyo Apoyo II + +D D Mayor incidencia en el uso Menor o nula incidencia en el uso Planta Planta Extracción Extracción por por Solventes Solventes Energía Eléctrica Eléctrica Energía • Chancadores • Cintas transportadoras Chancado Planta Planta Mapa de Procesos Consultancy for the Identification of Strategic Supplies for Leading Mining Companies in order to Direct the Promotion and Attraction of Investment Annex 5. Value chain in the mining industry Figure 46: Value chain of the mining industry Source: Authors. 77