# Presentation: 034877

## Business Opportunities:Chilean Mining Industry

- Carlos F. Capurro
- Senior Commercial Advisor
- U.S. Commercial Service
- Santiago, Chile

**Image courtesy NASA GSFC, MITI, ERSDAC, JAROS, and U.S./Japan ASTER Science Team **

## Chile?

## Geography

**2,600 miles long**
**Just 100 miles wide (average)**
**Diverse climate and geography**
**Opposite seasons from the U.S.A.**
**Isolated by mountains, desert and sea**
**16 million population**
**Principal city and capital - Santiago**

## Brief History

** ****Spanish Colony 1541 – 1810**
** ****Socialists take power 1970**
**Military coup 1973**
** “****Chicago Boys”  take charge**
** ****Open economy begins to grow - 1974**
** ****Structural changes - 1981**

**Democratic elections in 1989**

## Chile Today

-  **President Michelle Bachelet took office               ****	****March 11, 2006 (2006-2010)**
** “****Concertacion” Coalition**
** ****Socialists**
** ****Party for Democracy**
** ****Christian Democrats**
**Broad Consensus – No Change **
** ****Open Economy – Free Market**
** ****Democratic Institutions**

## Why Chile?

## Sustained Economic Growth

## Unemployment Level 

- Source: Banco Central de Chile

## Price StabilityAnnual Inflation (%)

## Business - Why Chile?

- Steady economic growth
- Prudent fiscal policies
- Stable democratic government
- Solid business practices
- Rule of law

## U.S.-Chile Trade Agreement

- 95% + of bilateral trade in goods duty-free
- 75% + of U.S. farm goods duty-free by 2008
- Stronger protection of intellectual property rights (IPR)
- Open and fair government procurement
- Commitments on labor rights and environmental protection

- Visit our *U.S. Exporters Guide to the US – Chile FTA* at http://www.buyusa.gov/chile/en/ftaguide.html

- Effective January 2004

## U.S.-Chile Trade Merchandise/Goods (In US$ Billion)

## Construction	
Computer Hardware / Software & Services 
Electric Power Equipment 
Environmental Technologies & Services
Financial Services
Food Processing & Packaging Equipment

- Computer Hardware / Software & Services
- Electric Power Equipment
- Environmental Technologies & Services
- Financial Services
- Food Processing & Packaging Equipment

- Best Prospects for U.S. Exports

## Best Prospects (cont.)

- Medical Equipment & Healthcare
- Mining Equipment
- Plastics Machinery & Materials
- Security Equipment & Safety
- Telecommunications Equipment & Services
- Travel & Tourism

## Mining Industry Overview

- Market Overview
- U.S. Position
- Competitors
- Commercial Opportunities
- Other Resources

## Market Overview

- Mining explains 7.8% of Chile’s GDP and 66% of the nation’s overall exports in 2007.
- Chile is the world’s number one producer of:
- Copper 				*37.5%*
- Molybdenum 			*28.1%*
- Sodium & Potassium Nitrate 	*100%*
- Lithium 				*42%*
- Iodine 				*55%*

**Notes:**
The commodity price increase, that has affected copper among many others, has generated such a large in-flow of dollars that mining companies are struggling to get the goods they need at the pace they want.  

It’s becoming difficult to supply electric power.  Copper mining companies are building a Liquid Natural Gas regasification plant in the port of Mejillones, which should supply the entire mining district...New coal fired power plants are being built as well.

## Chile is also a large producer of: 

- Borates *(9.9%)*
- Silver *(7.3 %)*
- Gold *(1.8 %)*
- Rhenium
- And produces substantial amounts of gold and silver

- Market Overview

**Notes:**
This will give you an idea of the importance and the magnitude of the Chile market.

## 130 Mining companies (5.7 million tons)
18 companies produce 70%
275 supplying companies
APRIMIN: 50 companies – Selling US$ 3.5 billion (47% imp.) 
1,800 reps/distributors
2,500 products & services

- 18 companies produce 70%
- 275 supplying companies
- APRIMIN: 50 companies – Selling US$ 3.5 billion (47% imp.)
- 1,800 reps/distributors
- 2,500 products & services

- Market Size

- Market Overview

## Expects to average annual growth of 6% from 2008-2015

- Projected investments exceeding US $15 billion
- Foreign investment has been the key: 1974-2006 $21 billion or 33% of all foreign investment.

- Market Overview

## Foreign Direct Investment in Mining($21.1 billion 1974-2006)

- Source: Chilean Foreign Investment Committee

- Market Overview

**Notes:**
Canada has recently surpassed the U.S. as the main direct investor in the mining industry.  However, the U.S. keeps (and by far) the largest market share as the main supplier of goods and services for the Chilean mining industry.

## Chile: Mining Imports

- Source: COCHILCO, based upon Chilean Customs Data (Sept. 2007)

- Market Overview

- Billion

## Market Share by Main Supplying Countries

- Source: COCHILCO, based upon Chilean Customs Data (Sept. 2007)

- Market Overview

- U.S.-Chile FTA

**Notes:**
The U.S. – Chile FTA effect becomes crystal clear in this slide, particularly if compared with the evolution experienced by the other “main” suppliers.  Only the U.S. and the other suppliers show an increase that follows the pattern shown by copper prices. Therefore, the effect on U.S. exports to Chile is not due to the “copper price factor”, but because of the tremendous pull derived from the U.S.-Chile FTA.

## Competing Mining Suppliers Market Share by Country(2007)

- Source: Chilean Customs Data

## Copper Prices January 1998 – 2008($ cents/lb)

- Source: Chilean Copper Commission – COCHILCO (**www.cochilco.cl**)

**Feb 22, 2008 ********$ 378 cents /lb**

**Notes:**
This translates in to some $35 billion for the Latin American Region (2008-2015), where Peru, Brazil, Argentina and Mexico, in addition to Chile, will be the recipients of this large inflow of investment.
Mining companies are accelerating the pace of their new projects in order to take advantage of this high-priced cycle.  Last Friday, Feb. 22, the LME closed with a copper price of 378 cents/lb, a 318% above the price from Jan. 1998 and 24% since a year ago.

## New Copper Mining Projects(2008-2015)

- Source: COCHILCO: Based on companies press releases and own data compilation

## How this translates intoreal business?

- 2005: $ 2.9 billion _Operational Expenses_

## Cranes
Screening machines 
Environmental system solutions (water treatment, air pollution/dust abatement, mine closures) 
Underground mining technology services 
Wear-resistant materials

- Screening machines
- Environmental system solutions (water treatment, air pollution/dust abatement, mine closures)
- Underground mining technology services
- Wear-resistant materials

- Source: Revista Minería Chilena, Ministry of Mining, El Mercurio, Diario Financiero

- Off-road trucks (240-440 tons)
- Scoop shovels
- Giant tires
- Crushers
- Grinders
- Cabbed truck chassis    (+ 50 tons)
- Part for rock cutters
- Excavators

- Capital Goods Demand

- How to translate all this intoreal business?

**Notes:**
Off-road-trucks: $2.5 million each.  Currently operating some 700 units and by the beginning of next decade there will be over 1,000 units. A potential market of 3⁄4 billion dollars for new units.
Scoop Shovels: An total estimate of 70 units will be operating by 2011. 
Tires: Currently there are some 700 off-road trucks with a payload capacity exceeding 190 metric tons and 300 more units will be added.  Total imports will exceed $ 140 million (currently @ $20,000 each tire)

## How to translate all this intoreal business?

- How to translate all this intoreal business?

- 2005: $ 1.7 billion _Imports_

**Notes:**
Services: Range in the order of 25% of Total Operational Expenses (60% Maintenance, 28% Construction and 12% Engineering & Consulting Services).  May get closer to $1 billion, but the US faces tough competition from Canada, Australia, South Africa, Finland and Sweden. 
Energy:  Has become the most pressing resource along with water.  New investments exceeding $2 billion
Parts & Pieces
Consumables (Mine & Plant): $380 million (based upon US share): 
Wear protection parts: HDPE & HDPP linings (wear protection for mineral-ducts); strengthened steel truck box lining for off-road vehicles, etc.
Pumps & Valves
Dust control elements
Conveyor belts
Geotextiles
Filters
Bearings
Reagents

## How this translates intoreal business?

- Source: COCHILCO, Dec. 2007

- 2007: 5.7 million tons of copper

| Yearly Demand | US$ Million/Year |
| --- | --- |
| 65 off road load trucks | $247 |
| 19 giant front loaders | $74 |
| Drilling and underground transportation equipment | $22 |
| 24,800 tons Explosives | $16 |
| 24 LHD | $11 |
| 500 Tires | $10 |

**2011: 6.5 million tons of copper**

## How to translate all this intoreal business?

- Quadrem 		  www.quadrem.com
- CODELCO 		  www.codelco.com
- Chile Compras 	  www.chilecompras.cl
- SICEP			  www.sicep.cl

- How to translate all this intoreal business?

**Notes:**
QUADREM:  About 70% of Codelco and Escondida’s purchases were made through Quadrem from registered suppliers.  Six largest Chilean mining companies operate almost exclusively through this site.  Makes some $350-400 millions in sales to Chilean members.  There are over 3,000 registered suppliers.

CODELCO: About 15-2-% of Codelco’s purchases are made through this system.  Several hundred qualified suppliers are registered with this site 

CHILE COMPRAS: The entire Gov. of Chile acquires goods & services through this site.  Buyers include the Ministry of Public Works, Min. of Housing, and other that purchase goods & services equal or similar to those acquired by the mining industry.  

SICEP: This a very unique system since it is not a B2B place.  It is rather a catalog of homologated suppliers that are previously qualified to satisfy mining companies requirements. Currently, the 12 largest mining companies from the Antofagasta mining district acquire their goods & services through this site.  Currently there are over 1,200 suppliers, Chilean and foreign, servicing the mining industry in Chile. 

## A Must

**EXPONOR**

**EXPONOR**
- Antofagasta, June, 2009
- www.exponor.cl

**EXPOMIN**

**EXPOMIN**
- Santiago, May 2008
- www.expomin.cl

**Notes:**
Exponor had 23 US exhibitors in 2005.  In the 2007 version there were 98 US exhibitors with secured space.
Expomin, the second world’s largest mining show, after MineExpo, had 198 US exhibitors spread over 45,000 sq.ft, taking 50% of the entire show.  For 2008, we will have 230 US exhibitors or a 16.2% increase.

## Need Help?Count on Us!

**U.S. Commercial Service**
- Carlos F. Capurro
- carlos.capurro@mail.doc.gov
- Tel: 011-56-2-330-3307
- Fax: 011-56-2-330-3172
- Andres Bello 2800, Las Condes, Santiago
- Chile

**Notes:**
We are your ears and eyes in the mining market in Chile and elsewhere.

## Looking forward to see you soonin Chile

- Many thanks for you kind attention