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Mining and energy go hand in hand

Article - September 7, 2011
Mining is Chile’s most important economic activity, requiring enormous amounts of energy
Chile produces over a third of the world’s copper and rhenium, and ranks third in molybdenum, fifth in silver and 15th in gold. In terms of non-metallic mining, Chile also leads the world in natural nitrates, lithium carbonate and iodine.

Founded in 1968, SQM is Chile’s top non-metallic mining company. In iodine production, it is Chile’s largest company and third worldwide. It also controls one-third of the global market for chemical lithium, and over one-quarter of the mineral lithium market.

With US$2 billion in sales expected for 2011, SQM has plenty of room to move and invest. This year it’s injecting US$500 million in its SQM Salar plant, which annually produces 300,000 tons of potassium chloride and 10,000 tons of lithium. By 2014, the company expects to have raised these figures to 2.5 million tons and 50,000-60,000 tons respectively.

Fertilizers – or “specialty plant nutrition” – are SQM’s forte. Beginning in 1988, SQM moved away from sodium nitrate production as global demand dropped, and instead began developing potassium nitrate, or saltpeter. “Today, we produce half of the world’s saltpeter,” says Patricio Contesse, general manager of SQM. “We’ve built a new and highly modern factory that produces 300,000 tons. This makes us the biggest producer and the only one with installed capacity for potassium nitrate on a global level.”

SQM, Chile’s fourth biggest company in terms of market value, boasts its own trading house, which not only sells to the final user, but also serves to keep a finger on the pulse of the market. Luckily for SQM this is increasing non-stop as industry around the world grows and a mushrooming global population demands more fertilizers for greater food production.
Feeding Chile’s mining industry is no easy task, as the country is far from rich in fossil fuels and hydroelectric plants are concentrated in the south – far, far away from the northern mines. “We have an enormous desert in the north, and as soon as technology allows for a better use of solar energy, Chile will have a huge comparative advantage,” explains Bernardo Matte Larrain, president of Colbun (see article above).

Current power generation sits at 15,000MW yet this is expected to double over the next decade in step with growing demand. While Chile remains dependent on imports of energy resources (especially natural gas and coal), it is working to raise the capacity of renewables and alternative sources. “The key is to have a sufficiently diversified energy grid,” comments Cristian Arnolds, general manager of Chilquinta.

With origins dating back to 1889, Chilquinta is the electricity distributor for Valparaiso and the V Region. According to Mr. Arnolds, Chilquinta’s supply indicators are excellent, much higher than those mandated by local regulation. The company’s goals are therefore to continue offering a steady and reliable supply to the zone’s growing population, which it will do through investments in infrastructure. The other objective Chilquinta has adopted is to seek out growth opportunities beyond its traditional line of business and enter energy generation.

Up until 1986, Chilquinta (known previously by various other names) was a state-owned company. After passing through a series of owners, in April this year, California-based Sempra Energy completed its buyout of the Chilean company, which it partially owned since 1999.

“Sempra’s presence has helped us to see new ideas, to improve our business. They also own other operations in Latin America, so we’ve been able to swap notes with Peru’s Luz del Sur and Brazil’s Electro,” says Mr. Arnolds.

Although the February 2010 earthquake’s epicenter was in Concepcion, destruction was widespread for hundreds of miles up and down the coast. However, within a few hours, Chile’s electric energy supply was restored, and once the interconnected system was reestablished, Chilquinta managed to restore supply to 80% of its clients.