Chile’s Severe Drought Puts Copper Production At Risk In Full Energy Transition

Water shortages are beginning to pose a serious threat to copper production in Chile ( along with threats of a strike ), a country that accounts for more than a quarter of the world’s supply. The demand for copper is expected to maintain an increasing pace in the coming years as the energy transition progresses, since renewable energies or electric cars are much more intensive in the use of copper.

In Chile this week, a BHP Group mine was ordered to stop pumping groundwater for three months, while Antofagasta (another miner) warned it will produce less than expected this year amid restrictions on water supplies. .

Challenges for mining
While it is true that BHP’s Cerro Colorado is a small end-of-life operation and the Antofagasta cut is not huge, the disruptions underscore the challenges of mining in one of the driest deserts in the world. Copper mines have been pumping water from underground aquifers for decades, often to the detriment of local communities.

The problem has risen to prominence recently as the desert expands south from a decade-long drought, potentially exacerbated by global warming. The industry has responded by intensifying efforts to start using seawater, but the process is slow and expensive. However, it is expected to account for almost half of your total water consumption by 2031.

Chile is now drafting a new constitution in the wake of mass protests against social injustices, with lawmakers pushing for reforms that shift toward a water system that has relied heavily on private business and market forces to assign rights and provide services.

In this context, an environmental court took the surprising measure of blocking, even temporarily, the use of water from the Lagunillas aquifer in Cerro Colorado as of October 1 after hearing a lawsuit that accuses the exploitation of environmental damage.

The company said that “it will evaluate the courses of action based on the instruments that the legal framework provides and will take operational actions to comply with the available measures.”

The smallest of BHP’s three copper mines in Chile has faced opposition from local communities over its use of groundwater. Last year, it announced plans to downsize operations, effectively anticipating scheduled decommissioning when its permits expire in 2023. At that time, the company said it would continue to explore options to extend mining beyond 2023 by using water from sea.

Antofagasta now expects to produce 710,000 tonnes to 740,000 tonnes of copper this year, down from its previous forecast of 730,000 tonnes to 760,000 tonnes. The Santiago-based company is building a desalination plant, but it won’t come online until the second half of 2022, putting another 50,000 tonnes of copper production at risk next year.

A severe drought
“This year has been the driest in 12 years in Chile,” Antofagasta said in a statement Thursday. “With the traditional rainy season running from June to September, it seems increasingly likely that low levels of precipitation will continue into at least the southern hemisphere winter next year.”

Added to all of the above is a demand for copper that could be boosted by the energy transition that is underway in much of the globe. Increased use of electric vehicles and the expansion of the capacity of renewable energy to reduce harmful emissions will translate into an acceleration in the growth of copper demand in the coming years.

CRU analyst Charlie Durant said earlier this year that total copper demand from the electric vehicle sector will rise to almost 1.5 million tons in 2025 and 3.3 million tons by 2030 from less than 500,000 tons this year .

“Electric vehicle demand for copper will account for 10% of total demand in 2030. The renewable energy sector could see copper demand rise from around 650,000 tonnes in 2020 to more than 1.3 million tonnes. tons in 2030, “says Durant.

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