BHP Group (BHP.AX) is making significant investments in Chilean copper mines, anticipating a global copper deficit of 10 million metric tons by 2035. To combat this shortfall, the mining giant plans to allocate at least $11 billion towards enhancing operations at the Escondida mine, the world’s largest copper mine, along with other projects in the region.
In a recent announcement to investors, BHP outlined a budget of $10.7 billion to $14.7 billion over the next decade to increase copper extraction from Escondida and the smaller Spence mine, as well as to restart operations at the Cerro Colorado mine. Despite these efforts, BHP’s annual production is projected to decline by approximately 300,000 tons, reaching 1.6 million tons by the decade’s end, primarily due to a decline at Escondida, which is expected to peak in 2025.
This production challenge is echoed across the copper mining industry, as many companies grapple with aging infrastructure and the need to boost output. Demand for copper is surging, driven by its essential role in electric vehicle battery production and the construction of data centers.
BHP Americas President Brandon Craig noted, “We think the deficit is going to be around 10 million tons by 2035,” estimating that developing sufficient mines to meet this demand could cost around $250 billion. This figure represents nearly half of the current global copper production, which stood at 22.4 million tons last year.
To counter declining ore grades at Escondida, BHP plans to enhance processing facilities and implement leaching technologies to extract copper from sulphide ores, which are more challenging to mine than traditional oxide ores. The bulk of BHP’s capital expenditure is expected between fiscal years 2030 and 2031, focusing on four projects at Escondida and three at the Pampa Norte division, which includes Spence and Cerro Colorado. Initial production from these projects is anticipated between 2027 and 2028, with later projects extending to 2031 to 2032.
Earlier this year, BHP attempted to expand its copper portfolio through a $49 billion bid for Anglo American but was unsuccessful. Despite this setback, BHP has not ruled out making another offer in the future. Craig emphasized the company’s preference for organic growth, stating, “Our default is to take that resource and develop it.”
BHP is also advocating for faster permitting reforms with the Chilean government, although it currently expects to adhere to standard timelines, which often exceed legal expectations and create uncertainty.
While previously considering an underground expansion for Escondida, Craig indicated that current copper prices do not support this move for at least another decade. The price of copper on the London Metal Exchange has declined around 20% from its peak in May 2024, now hovering at approximately $8,995 per metric ton.
Additionally, BHP has shifted its strategy regarding Cerro Colorado, which was placed in temporary care and maintenance late last year due to water usage concerns. The company is now exploring a seawater leaching solution for the mine.