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Copper Supply Faces Water Problems in Chile

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Problems with water supply

Copper miners in Chile are facing problems with arranging the water required for copper mining. Chile has been facing a severe drought for the past seven years. As the mining of copper requires a high amount of water, the situation in Chile has been forcing big copper mining companies to curb production.

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How does this situation affect mining companies?

The mines in Chile yield nearly 6 million tons of copper annually. The world’s five largest copper mines are located in Chile, and this water scarcity situation could impact copper production significantly in the near future.

The Los Bronces mine, one of the largest copper reserves in Chile, is owned by Anglo American (AAUKY). According to Anglo American, the shortage of water for copper mining curbed 18,000 tons of its production in 2015.

The Morenci Copper Mine, the largest copper-producing mine in North America, is no exception to the water problems. This mine is owned by Freeport-McMoRan (FCX), and it is already facing water problems. The yearly output of this mine comes to around 600 million pounds.

How are mining companies handling this situation?

The scarcity of water for mining may slow the copper supply in this oversupplied market and has a chance to support copper’s falling price in a short-term scenario, but the situation could become a serious threat to copper mining companies once the market finds the demand-supply balance. One way to fight against the water scarcity problem in Chile is to depend on seawater by desalination methods.

According to the Chilean Copper Commission Cochilco, seawater consumption by copper miners in Chile will have risen by 14% in 2026, and the usage of fresh water is falling by 2% annually.

A $3.4 billion desalination plant is being built by BHP Billiton (BHP) and Rio Tinto (RIO) following their realization of the water scarcity situation in their jointly owned Escondida mine in Chile.

Copper has been in a downtrend for the most part of 2015. The SPDR S&P Metals & Mining ETF (XME) has fallen 48% since the beginning of 2015.

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