Data falsification, fatal accidents, mounting debts... One of the world's largest copper producers, Codelco, faces a historic decision.

Artificial intelligence, energy transition, and defense needs are driving global copper demand into a new wave of growth, but one of the world’s largest copper miners is caught in its most severe internal crisis in decades.

According to Bloomberg, Chile’s state-owned copper company Codelco currently has about $25 billion in debt, copper production has fallen to its lowest level in 28 years, and it has faced successive fatal mining accidents and governance crises such as falsifying production data. This state-owned Chilean mining enterprise is facing a strategic restructuring that will determine its future competitiveness.

The new chairman, Bernardo Fontaine, is driving reforms aimed at restoring profitability, reducing debt, and improving corporate governance. However, given Chile’s political environment, balancing the positioning of state assets, labor interests, and capital efficiency presents significant obstacles.

Meanwhile, expectations of a global copper supply shortage are rising. BloombergNEF forecasts that by 2035, the global copper supply gap could reach 7 million tons, the largest in history. S&P Global estimates that AI, data centers, and the defense industry will add about 4 million tons of copper demand before 2040. Codelco’s predicament not only affects Chile’s finances, but may also impact whether the global copper supply chain can seize the demand window of the AI era.

Mining accidents and fraud scandals severely damage Codelco’s reputation

Over the past year, Codelco has repeatedly fallen into operational and governance crises.

In July 2025, the company’s core asset, El Teniente mine, suffered a collapse, killing six workers, one of the most serious mining accidents in Chile in decades, and stalling some expansion projects. Subsequent internal audits found inconsistencies and concealment in technical reports following earlier rock burst incidents, resulting in the dismissal of three senior managers. Regulators are currently investigating whether the breach of duty in the 2023 report affected subsequent safety management.

Meanwhile, the authenticity of the company’s production data has also been questioned. Internal reviews revealed that Codelco falsely reported about 27,000 tons of copper output in 2025, accounting for roughly 2% of annual production. Because this data affected performance evaluations, the false reporting even triggered bonus payouts. Chile’s Minister of Economy and Mining, Daniel Mas, bluntly stated the company is in an "out of control" situation, raising concerns among bond investors and partners.

High debt, high costs, declining competitiveness of the former “Copper King”

Codelco’s current predicament is not a short-term event, but the result of long-term structural problems.

The company’s debt has reached $25 billion, among the highest in global mining. Former chairman Maximo Pacheco said that some of the debt increase stems from compensatory investments following years of underinvestment, along with the burden of handing over profits to the government and repaying historical debts.

Operationally, Codelco continues to face cost pressures. With declining ore grade, its production costs are now over 50% higher than the average of the world’s top three copper miners. As mining extends further underground, extraction difficulty and capital investment continue to rise.

In terms of output, Codelco currently produces about 1.3 million tons of copper annually, roughly 30% below the target set two decades ago and has failed to meet annual targets consistently since 2020. The Chilean Copper Commission noted in June this year that the company has long-standing weaknesses in production planning and execution, and raised doubts over abnormally high year-end output.

Meanwhile, Chile’s share in the global copper market has fallen from over one-third at the turn of the century to less than a quarter, with Codelco a key driver of this trend.

Diverging reform directions: pursue scale or restore profitability?

In the face of crisis, Codelco’s future development is a focus of debate among Chilean politicians and miners.

Fontaine’s position is clear: Profitability takes precedence over scale. On June 24 in Chile’s House of Representatives, he stated the company is reassessing its asset portfolio, including delaying some investments, selling assets, and seeking partners. He emphasized: “We don’t need to be bigger, we need to be profitable.”

Chilean copper industry research institute Cesco suggested the company can divest some undeveloped assets, raise funds via capital markets, and consider adopting a holding company structure to enhance business autonomy and create space for external partnerships.

Plusmining consulting founder Juan Carlos Guajardo believes Codelco should abandon the goal of restoring pre-pandemic annual output of 1.7 million tons, and re-plan around the current level of about 1.3 million tons or even lower. He stated, the excessive pursuit of output targets in the past is itself one of the causes of the current crisis.

However, reforms still face political constraints. While there is broad recognition in Chile’s parliament that Codelco needs change, most disagree with privatization. Some right-wing legislators have proposed a “capitalization” plan—improving operations via joint investment and introducing private capital, rather than selling control of the company.

Copper supercycle arrives; Codelco faces a critical window

Codelco’s crisis coincides with a structural growth phase in global copper demand.

BloombergNEF forecasts that by 2035, the global copper supply gap will reach 7 million tons. Unlike in the past, when copper price fluctuations were driven by economic cycles, this round of supply-demand contradiction is mainly due to long-term demand growth brought by AI, electrification, and energy transition, as well as supply bottlenecks caused by aging mines and a shortage of new projects.

S&P Global data show that AI, data centers, and defense will add about 4 million tons of copper demand before 2040—a major increase over current levels. Goldman Sachs analyst Samantha Dart and others point out that geopolitical risks, electrification investment, and expansion of AI infrastructure will further drive copper consumption.

But supply-side pressure is also evident. BloombergNEF models show that as mines age, Chile’s copper production may fall from about 5.4 million tons today to about 4.2 million tons in 2050. Mining entrepreneur Robert Friedland’s I-Pulse recently partnered with Codelco to explore new mining technologies. He commented: “Without copper, there’s no AI, air conditioning, electric vehicles, nor a modern economy.”

For Codelco, the once-in-a-century demand opportunity and self-inflicted governance crisis are happening simultaneously. Whether it can complete reforms and restore efficiency will determine if this century-old copper giant can regain its central role in the next copper supercycle.

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