Data fraud, fatal accidents, mounting debts... Codelco, one of the world's largest copper miners, faces a historic choice.

Artificial intelligence, energy transition, and defense demand are driving global copper demand into a new upward cycle, but one of the world's largest copper miners is mired in its worst internal crisis in decades.

According to Bloomberg, Chile's state-owned Codelco is currently saddled with about $25 billion in debt, copper output has fallen to a 28-year low, and the company has been hit by governance crises including fatal mining accidents and falsified production data. The Chilean state-owned miner is facing a strategic overhaul that will determine its future competitiveness.

New chairman Bernardo Fontaine is pushing reforms aimed at restoring profitability, reducing debt, and improving corporate governance. However, under Chile's political environment, there remains significant resistance to balancing state-owned asset positioning, labor interests, and capital efficiency.

Meanwhile, expectations of a tightening global copper supply are growing. BloombergNEF projects that the global copper supply gap could reach 7 million metric tons by 2035, a record high. S&P Global estimates that AI, data centers, and the defense sector will generate an additional 4 million metric tons of copper demand by 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 Data Fraud Scandal Severely Damage Codelco's Credibility

Over the past year, Codelco has faced a series of operational and governance crises.

In July 2025, a collapse at the company's core El Teniente mine killed six workers, making it one of Chile's worst mining accidents in decades and leading to the suspension of some expansion projects. Subsequent internal audits revealed that when a rockburst incident occurred earlier at the mine, related technical reports contained "inconsistencies and omissions," and three senior executives were dismissed. Regulators are now investigating whether reporting failures in 2023 affected subsequent safety management.

At the same time, the accuracy of the company's production data has been questioned. Internal reviews showed that Codelco had overstated its 2025 copper output by about 27k metric tons, approximately 2% of annual production. Because the data affected performance evaluations, the falsification even triggered bonus payments. Chile's Minister of Economy and Mining, Daniel Mas, openly stated that the company had fallen into a state of "loss of control," raising concerns among bond investors and partners.

High Debt, High Costs: The "Copper King" Loses Competitiveness

Codelco's current difficulties are not a short-term event but the result of accumulated long-term structural issues.

The company's debt has reached $25 billion, a high level among global mining companies. Former chairman Maximo Pacheco said that the increase in debt was partly due to compensatory investments after years of underinvestment, along with pressure to remit profits to the government and repay historical debt.

On the operational side, Codelco's cost pressures continue to rise. Due to declining ore grades, the company's production costs are now over 50% higher than the average of the world's top three copper miners. As mines extend deeper underground, mining difficulty and capital investment further increase.

In terms of production, Codelco currently produces about 1.3 million metric tons of copper annually, roughly 30% below the target set two decades ago, and has consistently missed its annual targets since 2020. In June, Chile's Copper Commission noted that the company has long-standing weaknesses in production planning and execution, and questioned the abnormal production growth at the end of the year.

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

Divergent Reform Paths: Pursuing Scale or Restoring Profitability?

Amid the crisis, the future development path of Codelco has become a focal point of debate in Chile's political and mining circles.

Fontaine's stance is relatively clear: Profitability before scale. On June 24, he told Chile's Chamber of Deputies that the company is reassessing its asset portfolio, including delaying some investments, selling assets, and seeking partners, emphasizing: "We don't need to be big; we need to be profitable."

Chilean copper research institute Cesco suggested that the company could divest some undeveloped assets, raise funds through capital markets, and consider adopting a holding company structure to increase business autonomy, creating space for introducing external partners.

Plusmining founder Juan Carlos Guajardo believes that Codelco should abandon the goal of restoring pre-pandemic production of 1.7 million metric tons per year and replan around the current level of about 1.3 million metric tons or even lower. He said that the excessive pursuit of production targets in the past is itself one of the causes of the current crisis.

However, reforms still face political constraints. Although there is general recognition within Chile's parliament that Codelco needs change, most oppose privatization. Some right-wing lawmakers have proposed a "capitalization" plan, which would improve operations through joint investment and private capital injection rather than selling company control.

Copper Supercycle Arrives: A Critical Window for Codelco

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

BloombergNEF projects that the global copper supply gap will reach 7 million metric tons by 2035. Unlike past copper price fluctuations driven by economic cycles, the current supply-demand imbalance mainly stems from long-term demand growth driven by AI, electrification, and the energy transition, as well as supply bottlenecks caused by declining old mines and insufficient new projects.

S&P Global data shows that AI, data centers, and the defense sector will generate about 4 million metric tons of new copper demand by 2040, a significant increase from current levels. Goldman Sachs analyst Samantha Dart and others also note that geopolitical risks, electrification investments, and AI infrastructure expansion will further boost copper consumption.

But supply-side pressures are equally evident. BloombergNEF's model shows that with aging mines, Chile's copper output could fall from the current roughly 5.4 million metric tons to about 4.2 million metric tons by 2050. I-Pulse, founded by mining entrepreneur Robert Friedland, has recently partnered with Codelco to explore new mining technologies. He said: "Without copper, there is no AI, no air conditioning, no electric vehicles, and no modern economy."

For Codelco, a historic demand opportunity and its own governance crisis are arriving simultaneously. Whether it can complete reforms and restore efficiency will determine whether this century-old copper giant can play a central role in the next copper supercycle.

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