The Mining Industry in Chile and its Solar Bet

The Chilean energy landscape has changed. In 2014 governmental policies allowed the competitive entrance of clean energy to the Chilean market with solar energy at its center. This creates an opportunity for Antofagasta Minerals, a private copper mining group, to utilize clean energy to lower its carbon emissions and lower costs generated by electrical energy.

The mining industry uses an incredibly large amount of energy for its operations, thus increasing CO2 emissions, which leads to climate change. Antofagasta Minerals is the main private mining group in Chile and it is within the tenth largest copper mining groups at a global level [1]. Changes in government policy in Chile for clean energy has created an opportunity that is hard for the company’s operations to ignore.

Chile is a country that is poor in respect to fossil fuels but rich in natural resources such as wind and solar energy. One of the main items in the Ministry of Energy’s agenda is that by the year 2050 70% of energy supplies will come from clean energy[2]. In 2014 the Chilean energy scenario changed giving way to a clean energy auction that allowed several companies to place bids and enter the Chilean energy market at record low prices[3]. The auction allowed competitive advantages for solar energy suppliers by licensing them to bid by time blocks and also long-term projects[4]. This newly found competition allowed for energy prices to come down[5]. As mentioned in Al Gore’s “An Inconvenient Sequel” the investment in solar energy in the country has been exponential thanks to the government’s ability to change the rules of the game for clean energy. The government has also promised to reduce carbon emissions by 30% by the year 2035 [6].

Industry standards are also moving to more sustainable grounds, encouraging Antofagasta Minerals make changes to be more sustainable in order to remain competitive. Rene Aguilar Saez, Antofagasta’s VP of Corporate Affairs and Sustainability, mentioned how changes in the way the mines operate with respects to sustainability is a matter of survival. The company discloses its carbon emission to the Carbon Disclosure Project (CPD), which holds company’s self-reporting data and their environmental impact[7]. This particular measurement gives information to investors on how the company is doing and what are the potential risks of investment. If this measurement is low in any way, it can jeopardize the company’s competitiveness at a national and global level.

In 2015 the mining industry in Chile accounted for 33% of the energy consumption of the country[8]. In order to effectively reduce the carbon emissions of the country, the mining industry has to make significant changes. For Antofagasta Minerals, 72% of carbon emissions are associated with electric energy [9] therefore management has agreed to diversify its sources of energy and incorporate renewables. For the management team, one of the most important factors to accomplish this in the short term is the efficient use of energy without reducing the production of copper.

It is in this sense that the country has enabled Antofagasta to get energy from clean suppliers at a reasonable price given that fuel and electricity make up 15% of the company’s costs [10]. The company managed to increase its clean energy supplies efficiently from 5% in 2015 to 17% in 2017[11]. Its long-term goals are to implement initiatives that foster efficient energy usage and to invest in innovation and the most modern technologies for its operations so that it is aligned with the sustainability required by Chile and the industry.

In my opinion, given the opportunity the country has in terms of clean energy suppliers, the company needs to focus on establishing good relationships with them. As stated above, mining is a high user of energy and in order to keep emissions down, changing its supply chain to renewables will become an important factor. I would also encourage management to think about developing their own solar fields and how profitable would that be for the company.

Overall there are many opportunities that push Antofagasta Minerals into a more sustainable environment. Should they make radical changes in their operations? Would these changes allow them to stay competitive? Another issue worth reflection is that copper is considered a commodity and therefore trades as a commodity in the stock market. Would it be different if the industries decommoditize copper in order to properly track how this metal is being acquired? Will this be enough to change the markets perspective to choose what type of copper they purchase for production?

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[1] Antofagasta Minerals, Sustainability Report 2016, p.4, , accessed November 2017.

[2] Antofagasta Minerals, Sustainability Report, p.54, , accessed November 2017.

[3] Reuters, “Chile power auction attract 24 bids: official”, , accessed November 2017.

[4] Ministerio de Energia de Chile, Historica Licitacion de Suministro Elecrico,, accessed November 2017

[5] Ibid., accessed November 2017

[6] Antofagasta Minerals, Sustainability Report, p.54, , accessed November 2017.

[7] CDP,, accessed November 2017.

[8] ClimateScope,, accessed November 2017.

[9] Antofagasta Minerals, Sustainability Report, p.55, , accessed November 2017.

[10] Ibid., p.59

[11] Ibid., p.55


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Student comments on The Mining Industry in Chile and its Solar Bet

  1. Interesting read! I wonder how this also plays out given the situations seen in recent decades regarding the energy markets and trade between South American countries. For example, Argentina started out being a net exporter of energy to, among other countries, Chile. Over the years, macroeconomic instability and restrictive trade policy decisions put a heavy strain on this supply, and so Chile had to find other ways to get the energy they needed. To me, it sounds that internalizing energy production or, at least, ensuring it remains as local as possible, is a means of ensuring adequate supply and political control of this key ingredient of the industrial matrix. The push for renewables, then, may also bring more independence to countries.

    1. Regarding the decommoditization, I honestly don’t see how it could happen. Is there such a thing as certified copper? How important is the mining company’s name and reputation at the moment of the sale of minerals in an open market?

  2. Great read!

    I am really attracted by the idea than the company can actually make an opportunity out of the increasing regulation. However, for the time being, I find unlikely the idea that copper consumers will assume a higher purchase cost to support for cleaner energy.

    Given the existing renewable potential , I can envision a scenario where Antofagasta Minerals will support the development of solar developments in northern Chile to supply (partially) their energy demand. This could be executed in the form of financial stake in this hypothetical project, or through long-term offtake agreements (both of which will facilitate project finance).

    However, I would still like to reflect on the fact that this might be economically prohibitive. Despite the record-low renewable energy costs, access to cheap LPG could be a lower-cost energy for power generation. Similarly, a boost in Argentina’s shale gas production could generate excess gas which could be imported by Chile (with existing infrastructure in place), thus generating energy with a lower total cost. Ultimately, the outcome will depend on the extent to which renewable power generation projects in Chile can remain “record low” when exposed to potentially cheap fossil fuel sources.

  3. Just a thought: Are these new regulations and changing industry standards enough to push Antofagasta Minerals towards using clean energy? While I see that the external as well as internal incentives exist, it worries me that the company has no timeline. These regulatory goals are scheduled for 2050 and 2035, meaning that these governments probably won’t transfer some of the clean energy responsibility down to corporations for many years to come. I worry that the rate of initiatives Antogasta Minerals has implemented to date will decrease throughout the next decades, until the government decides to hold them liable in preparation for its clear energy goals.

  4. Great article. I like how Antofagasta Minerals (AM) is using a highly upstream approach in changing its sourcing mix to allow for a “cleaner” copper product. Given potentially large economic costs as Tomas touched on in making this a full renewable mix, my question is whether there is room for “bridge” financing on part of the government in the form of a subsidy, which can roll off once renewable costs fall below a certain level. This would mean that the country’s minerals business will remain competitive and remain clean. There is some degree of market failure here that a government’s subsidy may be able to address. Namely, there is an externality, whose costs for complete renewable mix, 1) may be hard (if not, likely impossible) to pass on to consumers given the highly commoditized nature of copper and 2) may completely erode margin for AM, making it unfeasible for the producer to assume the whole cost of the externality. In this way, there may be a role for public-private partnership in ensuring both private and societal objectives are met.

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