Experts Recommend Improved Contracting to Optimize Chile's Mining Efficiency
Mining leaders in Chile emphasize the importance of refined contracting strategies to ensure projects stay on track and within budget.
During a recent seminar organized by Halpern & Pino, industry experts highlighted the critical need for improved contracting strategies in Chile's mining sector. As major projects loom on the horizon, attendees, including notable figures like Sofía Parra from Pinsent Masons, insisted that effective contracts would play a pivotal role in keeping future mining and energy endeavors on schedule and within budget.
The Current Landscape of Mining Projects
Chile's Corporación de Bienes de Capital (CBC) has outlined 75 mining projects valued at approximately USD 35.569 billion scheduled for between 2026 and 2030. This figure contributes to a broader total of 921 projects across various sectors, amounting to USD 95.149 billion.
A concerning trend emerged as McKinsey's study revealed that 83% of major mining and metals projects globally faced cost overruns or delays. With Chilean copper projects, specifically those from Codelco, often running into issues with budget and schedule, industry leaders are now pushing for reforms in contracting practices to mitigate future risks.
Understanding Contracting Challenges in Chile
The high-profile Radomiro Tomic project exemplifies some of the challenges faced in Chilean mining. Codelco’s legal disputes highlight that contractual agreements alone cannot guarantee success; for instance, physical progress at Radomiro Tomic was only 82.55% completed following a lengthy delay.
Furthermore, the cost structure of Chilean copper production, influenced by the grade of ore and energy prices, complicates project budgets. The lack of consistent contract structures across various projects often leaves foreign investors underestimating associated risks.
Strategies to Improve Project Management
At the Lobo Marte gold project, Maurício Aguilar from Kinross showcased an innovative approach through the use of an Integrated Project Management Team (IPMT). This model ensures that the owner and engineering firm work collaboratively from the outset to facilitate rapid decision-making and better control of resources.
As of October 2026, Kinross reported that the initial capital for Lobo Marte is estimated at USD 1.8 billion, with significant engineering progress expected. The environmental assessment review was initiated in Q2 2026, with construction anticipated to take place primarily between 2028 and 2029, leading to production in the early 2030s.
Contracting Models and Their Implications
Two common contracting models, EPC (Engineering, Procurement, and Construction) and EPCM (Engineering, Procurement, and Construction Management), have distinct implications for project risk and cost management. Under EPC, one contractor assumes responsibility for all tasks, while EPCM places more control in the hands of the owner, creating a different risk profile.
Experts like Parra stress that understanding these models and their associated risks upfront is vital. For instance, the complexity of contractual arrangements should align with the project's specific needs and potential uncertainties.
The Path Forward for Chilean Mining
As Chile progresses into 2027, there are critical indicators that industry professionals will be monitoring. The success of planned projects hinges greatly on effective early-stage planning and realistic budgeting. Early permitting can take several years, making it essential to act swiftly on planning.
- Tracking the upcoming Cochilco portfolio update is crucial to set a new baseline for project timelines.
- Watching for Lobo Marte's engineering milestone by mid-2027 will be an important signal for stakeholders.
- Kinross’s updated capital estimates will reveal shifts in project costs and budget reliability.
The recent seminar reiterated that effective contracting is about managing uncertainty rather than eliminating it. The focus must be on mature engineering and project definition to ensure that the burden of risk is shared appropriately.
This article serves strictly for informational purposes and is not financial advice. Interested investors should seek professional guidance and conduct thorough research before making any investment decisions.
