Mining With Stability
State-owned mining giant Codelco remains central to Chile’s strategy to strengthen its role in the global energy transition. After years of pressure from declining ore grades, ageing assets, and environmental scrutiny, the world’s largest copper producer is pursuing a broad transformation: moving more production underground, increasing renewable energy use, and expanding into lithium. Just as importantly, Chile is signalling that reform and operational recovery, not rapid privatisation, remain the preferred path for its most strategic mining asset.
The first pillar is operational modernisation. The Diamante project at El Teniente marks an important step in extending the life of one of the world’s largest underground copper mines. By moving deeper underground and introducing more automated electric equipment, Codelco aims to improve efficiency while reducing some of the land and emissions impacts associated with traditional open-pit mining. Although early 2026 production has been uneven as structural projects ramp up, the long-term objective is to stabilise output near 1.34 million tonnes annually, an important source of supply for global electrification demand.
The second pillar is lithium. In February, Codelco secured the Special Lithium Operation Contract (CEOL) for the Maricunga Salt Flat, formally expanding into battery materials. Partnerships with major international firms, including Rio Tinto, are expected to bring capital, technology, and operational expertise. Chile’s broader objective is to develop lithium production using more water-efficient methods while maintaining stronger state oversight. For investors, that may help improve confidence in project delivery and policy continuity.
The third pillar is social and environmental legitimacy. Chile’s policymakers increasingly recognise that long-term mining growth depends on broader public support. Revenues from the sector are being linked more closely to technical education, workforce development, and pension resilience. Codelco’s “Digital Copper” programmes are designed to train workers for roles in automation, remote operations, and data-led mining systems, particularly in regional communities.
That broader institutional backdrop remains supportive. Chile continues to lead Latin America in the 2026 Social Progress Index, ranking 36th globally and comfortably ahead of regional peers. For investors, that reflects comparatively strong governance, social development, and policy capacity, factors that can matter as much as geology in long-duration resource investments.
Environmental performance is also becoming more important. Codelco has continued retiring older smelting capacity, increasing desalinated water use in some operations, and expanding renewable electricity procurement. The company has also introduced new monitoring technologies to strengthen biodiversity and land-use oversight around mining assets.
The broader policy message is equally notable. Rather than treating Codelco as a short-term privatisation candidate, Chile appears focused on rebuilding it as a commercially stronger state champion capable of anchoring copper supply, leading lithium partnerships, and supporting higher ESG standards across the sector.
Chile remains above all a resource story, but one becoming more sophisticated. The EPIC Fixed Income strategy has been a longer-term holder of Codelco debt, which we continue to view as undervalued relative to its strategic importance and sovereign linkage, while offering attractive risk-adjusted returns. If the turnaround gains traction, Chile could increasingly combine world-class mineral reserves with stronger governance, improved sustainability, and more reliable long-term supply chains.
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