Economy "Codelco
National adrift: From how to prepare its privatization
Why down so much revenue from the sale of Codelco Mr management Hernandez? We know, and we've written before, Mr. Hernández is an expert at losing money in futures markets for copper. By Julian Alcayaga262
Lecturas17 April, 2011 00:04 Comment
We had already said on several occasions, Mr. Diego Hernandez and other former executives of transnational mining companies, Codelco reached to the goal always pursued: privatization . But as for that to happen requires a constitutional amendment and a quorum not be met at present, is used then to a "school management" or "scapegoat" in an opinion that goes in that direction.
This is to create such financial and economic difficulties in the Corporation, to reach the "conclusion" to save and there is no other way to its privatization in whole or in parts, as is being done with the sale of Edelnor, the Inca site Gold and pave the way for the sale of Windows, El Salvador and Potrerillos.
This statement is being verified more quickly than I thought myself. Indeed, in presenting his first year of operations at Codelco, in a press conference on 25 March, Mr. Hernandez presented his tenure as a great success due to the profits of the Corporation increased U.S. $ 2,020 million in 2010, 16.6% compared to 2009. But a close look at the numbers can say it is a curious way of presenting things.
First, Mr. Hernández forgot to compare the average copper price in 2010 was of 3.42 dollars per pound, an increase of 46.2% compared to $ 2.34 per pound 2009. If we project the 2009 production at a price of 2010, Codelco's sales revenues in 2010 should exceed 15 billion dollars, or about 800 million dollars more than those actually obtained. / Income ratio of copper production in 2010, is by far the worst year from 2004 to date.
Second, in 2010 there was a cost increase of 1,231 million dollars, or 20.6% more than the year 2009, and also the highest since 2004.
Consequently, between decreased sales and increased costs, the financial year 2010 was worse than 2009 in at least 2 billion dollars, and that that 2009 was already one of the worst results of Codelco past 5 years.
compare how bad were the results of Codelco in 2010 relative to 2006 for example. That year, the average copper price was $ 3.05 a pound, ie 12.1% less than the 2010. But 2006, Codelco's sales amounted to 15.825 million dollars, ie 1,657 million dollars more than the 2010 with similar production.
If the parameters of 2006 projected production and price of 2010, revenues from sales had exceeded 17 billion dollars. But Codelco's revenues in 2010 reached only U.S. $ 14,068 million, U.S. $ 3 billion below what it should achieve.
There is nothing that can justify the considerable drop in income of Codelco in 2010 than in 2006, because out of copper, in 2010 the price of gold and silver are almost double than in 2006, and only the price of molybdenum is lower. If this drop in revenue will add U.S. $ 1,176 million cost increase compared to 2006, we cast the results of 2010 are worse than those of 2006 by about more than 4 billion dollars. So where is the professionalism of the Board and the new authorities of Codelco? Comparing
price and output, sales revenue of Codelco in 2010, are by far the worst in the last 7 years. Why lowered both Codelco's sales revenues to the management of Mr. Hernandez? We know, and we've written before, Mr. Hernández is an expert at losing money in the markets the future of copper, which is a speculative market where copper is traded not physical.
Blancos Mining in 1995 (now Anglo American Norte), then led by Mr Diego Hernandez lost 25% of its operating revenues in the copper futures markets. "Interestingly," Mr. Hernandez was awarded by the parent company Anglo American. Why? Because it was a related company which received the Blancos lost profits which, in addition, paid no income tax in Chile because he lost all his earnings in that year. Pure Magic: losing to earn more.
The same magic seems to be happening at Codelco, since that is not explained that the price of copper observed in 2010, Codelco has had a very considerable drop in income from sales in relation to 2009, and particularly in relation to the years 2006 and 2007.
This unexplained drop in sales, which is well over 3 billion dollars in respect of the years 2006 and 2007, can only be explained by losses in copper futures markets, since such losses are counted as decline "non-accounting" of sales revenues, allowing disguise and hide and not appear in the accounts. All we need to know who or which company "won" or who were favored with these Codelco's losses in copper futures markets.
However, if these losses, or technically decline in sales revenue, did not occur in the speculative markets of derivatives, then lost in the sale of physical copper. Codelco ie should have sold several boats loaded with copper rods at prices well below market. Again the question arises: who were the favored to these sales at a lower price? One can only hope that those favored companies are not subsidiaries of "friends" as BHP Billiton, Anglo American and Xstrata, the other majority shareholder of Collahuasi. Obviously
primarily interested in investigating this situation, should be the new, highly professional and qualified directory Codelco, which involved Mr. Fernando Porcile, former senior executive at several multinational mining and knows perfectly the mining business. But no one hears father, the board appears not to have noticed this huge drop in income of the company he leads. Drivers
absent
The second interested in drawing conclusions on this issue should be the sanctioning body is Cochilco Codelco, but the agency has never audited in the past and will now more than ever. For its part, the Comptroller can monitor through Cochilco, and even what can be done automatically even without complaint or request from of any person or institution.
But these enormous losses mean less tax revenue of at least 1,500 million dollars, so that the IRS should be highly interested in investigating this situation. Finally, how are you losses are much higher than $ 170 million it lost in 1994 Juan Pablo Davila, a fortiori the House of Representatives should appoint a Commission of Inquiry, also independently come to carve our courts.
When he was appointed Mr Diego Hernandez as Executive President of Codelco, both government officials and the company's board, welcomed the election by his undoubted technical ability and experience at a senior executive of multinational mining, and both were appointed as Vice President of Administration and Finance Mr. Thomas Keller, former CEO of Minera Collahuasi.
Consequently, this huge drop in revenues of Codelco, can not be due to inexperience or technical failure of these executives, by contrast, have much experience in the mining of copper. Why then is his first year at Codelco management is a failure, though in principle come to increase the competitiveness of the company?
The answer is none other than the one I always maintained, came to be generating conditions for privatizing Codelco, and the results of 2010 are there to prove it.
The methodology is clear successes are making up numbers. After some time, "it notes" that in reality the situation is really bad and it takes "extreme" measures, of course, not imply that the state budget, so "worried" or "focused" on the urgent needs people, being distracted in saving a company. There is no other solution than selling.
Alcayaga Julian O. Economist
www.defensadelcobre.cl
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