Describe the dynamics of the Chilean copper market in 2019 and the effect it has had on EPCM contracts in the country?

When I joined Stantec in January 2019, I was incredibly bullish about the year. We expected to double our workforce in Chile within 12 months and we expected the copper price to rise to $3.50 per pound. At that level, the mines are producing huge quantities of cash and projects are easily approved. Unfortunately by June, I was pessimistic about the market, mainly due to the US-China trade war. The fundamentals of copper are fantastic, because we have come to a point where there are not enough projects to cater to an increase in demand. I expected demand to exceed supply by mid 2019, however, that has not materialized yet.

Towards the middle of the year, a lot of projects started drying up, and we had to restructure Stantec in order to adapt to the new reality. We are fine, but the level of competition between the engineering companies has been fierce as the market and the number of projects declined. People don’t like shedding staff, so instead of laying off workers, companies lowered their hourly rates resulting in lower margins. 

How can water management practices in Chile be improved?

Water management in the Chilean mining sector is perhaps the most important factor for success. It has become a make or break issue, where if you don’t secure the water for your project, the mine may have to close down or may never be built in the first place. Underground water in the Atacama does not get replenished, so everything taken out of the ground is not coming back. This is why Escondida spent billions of dollars on one of the biggest desalination plants in the world.

Desalination is expensive to build and operate, because you have to push water up to five vertical kilometres at a rate of thousands of liters per second. All the mines that can afford it are going to build desalination plants and that is very important. However, equally important is the reuse of water at the mines. Stantec is working with a number of mining companies on large projects to assess how to best reuse water.  Clients can limit the amount of desalinated water they need to pump up to the mine if they can re-use already processed water effectively.

How do you view Chile as a mining jurisdiction in light of civil unrest that has shaken the country?

Chile is incredibly stable and has a very large and sophisticated mining industry, with hundreds of billions of dollars invested, employing hundreds of thousands of people, both directly and indirectly. The industry pays incredibly good salaries. My hope is that the current social unrest will result in a better and more socially aware Chile and that it is a wake up call for everyone in politics. Perhaps the economic model that was implemented to take Chile out of abject poverty and turn it into a growing economy, which worked very well, is outdated. They need to redesign the economic model now that Chile is a developed country and a member of the OECD. People have gotten to the stage where they simply cannot pay more for basic services. Chile has the best water treatment plants, electricity plants, and projects for renewable energy, wonderful highways and a nice metro, but that all has a cost, and the model says the people must pay for it. At the same time, salaries over the last 20 years have not risen at the same rate costs have. When the minimum wage is less that US$500 a month it is impossible to live whilst paying for first world infrastructure. So people start getting into debt at exorbitant interest rates that they will never be able to pay back.

If they change the system correctly, Chile will come out of this stronger. There is not a single worker at any mine in Chile that doesn’t earn double or maybe even triple the minimum wage. The mines are good payers and they give big bonuses at the end of the year. Mining is a great industry that people love, and it supports millions of people in Chile. It is the backbone of the Chilean economy. If anything happened in the mining sector all Chileans would suffer the consequences.