The Latin Quarter: 15th September 2021

The Latin Quarter

15th September 2021

The good news and the bad news for copper investors in Latin America is the same this week: a series of looming or actual strikes have been averted in the world's biggest producer, Chile. Obviously this is positive due to the fact that that supply has now been shored up and major mines in the region can resume or continue production at normal levels, but such is the impact of Chile on copper markets that these resolutions have driven the global price of the metal down over the past week, as the market relaxes from the potential shortage.

First of all were the labour tensions at two Codelco mines, operated by Chile's state-owned copper company. At the relatively small Andina mine, a work stoppage had been in effect for over three weeks before the company managed to negotiate an agreement that got staff back to work, but production has now resumed with a deal hammered out. There was also the threat of a strike at Codelco's Salvador mine, where the previous best offer from the company was labelled "unacceptable" by the union. A new proposal was due to go to a vote on Monday, with results forthcoming.

Codelco has struggled with labour relations at two of its mines

Then there was the Caserones mine, which is owned and operated by a subsidiary of JX Nippon Mining & Metals. A strike there started on the 10th of August, with the company finally announcing its end on the 6th of September. That strike mostly involved mining operators, who approved collective agreement negotiated with the company before returning to work. The subsidiary, SCM Minera Lumina Copper Chile, says it's now in the process of restoring operations at the Caserones.

BHP's smaller Cerro Colorado mine

Next was BHP's small Cerro Colorado mine, where the company managed to avert a strike when workers voted on Saturday to accept a new 36-month agreement after five days of mandatory government-led mediation, after rejecting a different collective contract deal last month. This is something of a relief for BHP, given the uncertain future faced by Cerro Colorado as it awaits the decision of the Antofagasta First Environment Court, due yesterday, about whether a 90-day prohibition on pumping water from the local aquifer will be enforced in October. In July, the court ruled that BHP must completely restart its environmental plan, following complaints from local indiginous groups, and the same court imposed the ban on the 19th of August. This follows a period of aquifer depletion and drought in the Chilean desert which has forced many companies to go looking for alternative water sources such as desalination plants.

Desalination plant at Escondida

Most of these labour disputes occured at relatively small mines, but the big hitters have not been exempt from the threat of work stoppages. BHP's Escondida, which is single-handedly responsible for about 5% of the world's copper output, was facing strike action after protracted negotiations, but last month the company managed to totter to a deal that was accepted by the union, allowing production to continue as normal. That agreement included record-breaking benefits that will certainly be used as leverage by workers at other mines.

BHP managed to avert a strike at Escondida, so work continues

At Codelco's biggest asset, the El Teniente mine, agreements set to expire at the end of October will be hashed out during a period of negotiation starting today after most unions at the site rejected an early offer by the company last month.

Fortunately for Chilean copper production, the El Teniente agreement is now the only major unresolved labour dispute at the copper mines in the country. Such is the impact of Chile on world copper supply, that these labour tensions seem to have directly propped up the price of copper over the last few months. With the resolution of most of these issues, the copper price for December delivery dropped 1.8% between Friday and Monday this week to $9,622 per tonne. The Escondida deal alone caused an overnight 0.4% price drop in August, although prices are up again slightly since then. While these fluctuations may not be the best news for anyone who was hanging on to copper in the hopes that its meteoric rise this year would continue unabated, clearly the best thing for the copper market overall is consistent, uninterrupted supply from the world's largest producer.

Around the Traps

Forgive me for veering from the LatAm theme of this newsletter, but I think you'll agree that this is something you want to hear about. Spotlight has a special show today focussing on the announcement of of Rupert Resources's (TSXV:RUP) maiden resource update from the Ikkari gold project in Finland, with Tom and James from the company. The Spotlight team visited the project recently and were very impressed by the drilling from discovery to 4 Moz. in just 18 months. The show is on at 19:00 Vienna, 18:00 London, 13:00 Toronto, and 10:00 Vancouver, and you can register here and read Rupert's news release here. Check out the video below for a sneak preview!

Huge news for Mammoth Resources (TSVX:MTH) this week as they announce the commencement of diamond drilling at their Tenoriba gold-silver project in Mexico. They'll be testing up to five targets ranging from a few hundred metres to over a kilometre in strike, which identified after a comprehensive campaign of sampling, mapping, previous drilling, geophysics and 3D modelling.

Solgold (LSE&TSX:SOLG) has some very exciting drill results from the Tandayama-Ameríca deposit at its Cascabel copper-gold project in Ecuador. The company says that the geological character of the drill core indicates that it's sitting on a well-preserved porphyry system, and that the full extent of the deposit has not yet been tested.

Solgold staff working on sustainability measures in Ecuador

That's all the LatAm news for this month, I'll be in touch on Friday with Spotlight's weekly Roundup!

- Jane Lockwood