Chilean miner Antofagasta (LON:ANTO) expects annual copper production in 2022 to be below last year's levels as operations continue to be affected by the country's longest drought in decades.
The company, which already saw 2021 copper production down 1.7% to 721,500 tons, expects to produce between 660,000 and 690,000 tons of copper this year due to a combination of lower grades at some facilities and lack of water.
Antofagasta's flagship mine, Los Pelambres, was one of the company's operations hardest hit by the lack of precipitation.
Only in the central region of Chile, where the mine is located and home to most of both the country's population and the main copper mines, rainfall has decreased by more than 30% over the past 20 years.
The drought affects not only miners, but also farmers and winemakers, prompting the authorities to reform the national water code.
CEO Ivan Arriagada noted that the company is ready to commission a desalination plant in the second half of the year, which will provide a long-term solution to the problem of water shortages in Los Pelambres.
Arriagada also drew attention to the numerous favorable long-term trends in the copper market.
"The demand picture for copper is still high as copper is needed for economic activity and environmental investment initiatives such as electric vehicles, infrastructure and renewable energy," he said.
Antofagasta is in the process of expanding its Los Pelambres concentrator, with completion scheduled for early 2023.
The company, which is majority owned by the Chilean Luksic family, one of the richest in the country, said it was reviewing project costs primarily due to the impact of COVID-19. The company already expects capital expenditures to rise to $1.7-1.9 billion this year.
Net cash costs were estimated at $1.55/lb copper this year, compared to $1.20/lb in 2021, reflecting lower production and higher production costs, especially for sulfuric acid.