SANTIAGO (Reuters) - Chile's Codelco, the world's largest copper producer, will meet its financial obligations despite headwinds from a series of operational problems and from high levels of debt and investments, JPMorgan (NYSE:JPM) said on Tuesday.
Codelco's copper production fell in 2022 to its lowest level in 25 years, exacerbated in part by delays to key projects for extending the lives of its mines.
The company cut its production estimate for this year to between 1.31 billion and 1.35 billion metric tons of the red metal.
"We believe Codelco will be able to meet all of its financial obligations despite the elevated capex budget and operational issues it has faced that has led to reduced production and increased unit costs," JPMorgan analyst Ian Snyder said in a note.
JPMorgan estimates that Chile's government will likely provide support to Codelco, which gives all its profits to the state, through direct capital injections or by a continued reduction in upstream dividends so that the company can make investments, if necessary.
"That said, we do expect credit metrics to continue to deteriorate as the company will likely issue additional debt to help fund a portion of the capex budget," the note added.
In August, Chile's Center for Copper and Mining Studies (CESCO) said in a report that Codelco was at risk of insolvency due to rising costs and a growing debt pile stemming from projects that missed output targets.
Earlier this month, Codelco's Chairman Maximo Pacheco told lawmakers that the company was "financially solid" and described CESCO's forecast as "nonsense."