Double Handshake

Chuquicamata, or Chuqui for short, in northern Chile is one of the largest open-pit copper mines in the world. It has been in operation since 1910 – first run by American mining concerns and then nationalized in 1970. It is now operated by Codelco, a government-owned entity. Twenty-four hours a day, 20,000 workers and over 100 giant German Liebher and Japanese Komatsu trucks haul rocks out of the 1-km-deep pit to be processed nearby. Explosions at the bottom happen everyday at 5pm sharp.

When writing about Chuqui, it’s tempting to just reel off statistics: the main pit is 5-km long and 3-km wide; trucks cost US$4 million each (tires alone cost US$30,000 each and last one year); 600,000 tons of rocks are transported daily. The one stat that stood out to me, though, was 22% – the percentage of the mine’s output that heads to China, the mine’s biggest buyer. I visited Chuqui last week and asked our guide about China and the global recession.

“Oh, we’re having a very difficult time!” she told me cheerfully. “But you don’t understand how much money we had been making before the recession, when we were selling cathodes for US$1000.” (current copper prices are approximately US$600 per cathode).

China was largely responsible for Chuqui’s flush years. Now, she said, Chinese demand for copper had fallen a bit, but not nearly as much as demand in other countries. This corroborates news from Peru in recent months of Chinese mining companies announcing expansion plans as other foreign interests shutter mines and smelters.

From the viewing platform above the mine, the enormous trucks hauling 400 tons per load looked like toys in a sandbox. Puffs of dust rose up as rocks were moved. Trucks emitted black diesel smoke as they climbed the packed-dirt inclines. From my vantage point, the lines cut into the side of the pit looked like dusty rice terraces.

Image: sxc.hu

Another headache for Chinese mining giant Chinalco and its US$2.2 billion copper mining project in Toromocho, Peru surfaced last week. In January, you may recall, the company was struggling to find common ground with local residents over resettlement packages. Last week, chief executive of Minera Chinalco – the Peruvian arm of Chinalco – Gerald Wolfe told El Comercio that the opening of its Toromocho mine is at risk of delay or worse because of inadequate facilities at Callao Port, the country’s main exit point.

Wolfe described conditions at Callao Port as unchanged from 30 years ago and called for at least US$70 million worth of upgrades before 2012, when the Toromocho mine is to be up and running. Toromocho, to be Peru’s largest copper mine, will boost Chinalco’s annual tonnage in Peru by 35% to about one million tons.

Wolfe and a consortium of other mining interests are asking for a new terminal at Callao Port dedicated solely for metals. Renovations for Callao Port have been in the works for years – and must have been talking point when the Toromocho deal was brokered in 2007 – but Wolfe said the government has not provided any details or answered any questions concerning the upgrade to date. Peru’s minister of transportation and communication said there are four studies underway to assess how to modernize Callao Port, but no deadlines have been set.

With so much of Peru’s economic growth pinned to its attractiveness as a metals source for China and other nations, I’m sure Callao Port will eventually get the facelift it needs. It’s just a question of when. At present, though, no one seems very confident that the needed work will be completed by the beginning of 2012.

Image: David Baggins