Codelco Q1 2026: Record Profit, Falling Production, and a Production Audit That Changes the Story

July 14, 2026

Codelco nearly quadrupled its pre-tax profit in the first quarter of 2026, reporting USD 825 million against USD 213 million in the same period a year prior. Copper at USD 5.60 per pound papers over a lot. What it does not fix is a quarter in which own copper production fell 8% to 272,000 tonnes, El Teniente was down 26%, Chuquicamata was down 18%, and an internal audit revealed approximately 27,000 tonnes of overstated 2025 output that resulted in executive dismissals, referral to public prosecutors, and an incoming government-ordered external review. Codelco Q1 2026 results tell two stories simultaneously: a company extracting exceptional margins from an elevated price environment, and a world-leading copper producer whose operational trajectory is deteriorating regardless of what the income statement shows.

The copper scarcity thesis does not need a demand shock. Codelco is doing enough on its own. The world’s largest copper producer by volume recorded production that, after the audit adjustment, may represent its lowest annual output since 1998. That is not a cyclical dip. It is a structural signal about the state of the mines at the core of global copper supply.

The Production Numbers Behind the Headline Profit

Own copper production of 272,000 tonnes in Q1 2026 represents an 8% decline from the same period in 2025. El Teniente, South America’s largest underground copper mine, was down 26%. Operations at the mine remain limited following the fatal collapse in 2025 that killed six workers. Codelco’s CEO told Reuters that output at El Teniente would likely hover around 301,000 tonnes per year for the next five years, a longer recovery timeline than the three years previously communicated.

Chuquicamata was down 18%, attributed to lower ore availability at the plant. The world’s largest open-pit copper mine by excavated volume is dealing with declining ore grades, longer haul distances, and the transition from open-pit to block-cave underground operations that has been years in execution. Ministro Hales, Gabriela Mistral, and Andina also recorded weak output.

Codelco did not revise its 2026 annual guidance of 1.33 to 1.36 million tonnes. The Q1 run rate annualises to approximately 1.09 million tonnes, well below that range. Delivering on guidance would require a significant improvement in production across operations in the remaining three quarters, from a base where the two largest mines are operating under documented operational constraints.

The Audit: What the 27,000-Tonne Gap Actually Means

The production audit is the dimension that transforms Codelco’s Q1 results from a strong-price story into a governance story. An internal review found that approximately 26,875 tonnes of copper were improperly recorded in 2025 production figures. Of that total, 20,000 tonnes came from Chuquicamata and 6,875 tonnes from Ministro Hales. The material had been recognised as finished production but had not met Codelco’s criteria for finished product and should have been recorded as work-in-process inventory.

The adjustment means Codelco’s 2025 annual copper production, after restatement, fell to its lowest level since approximately 1998, a 27-year low. Seven current executives and one former executive were found responsible for the improper reporting. Codelco referred the matter to public prosecutors to determine whether criminal conduct occurred. More than 6,000 workers may be required to repay production bonuses paid on the basis of the overstated figures, estimated at more than USD 14 million.

The significance is not the 27,000 tonnes. In a global market of 25 million tonnes, that volume is immaterial. The significance is what the audit reveals about the institutional environment at Codelco during a period when the company has been claiming a production recovery narrative. The improper reporting helped the company meet its December monthly target, which had been far above the January-to-November average. It was a red flag that analysts had already questioned publicly before the audit was initiated.

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What Copper at $5.60 per Pound Is Concealing

Copper at USD 5.60 per pound generates exceptional EBITDA margins for any operator with production. It also makes it easy to report strong financial results while operational deterioration continues beneath the surface. The Q1 2026 result is a case study in how price can obscure structural performance.

Codelco’s cost structure has been rising for years as ore grades decline at its flagship assets. El Teniente has been mined for over a century. Chuquicamata since 1915. The highest-grade ore was extracted generations ago. What remains requires deeper workings, more acid, more energy, and more capital per unit of copper output than the operations these mines once were. At USD 2.00 per pound copper, these cost trajectories would be visible in every quarterly result. At USD 5.60, they are masked by price.

The contrarian framing is that Codelco’s production weakness is itself a component of the copper price support. The world’s largest copper producer is declining in output while reporting record profits. That dynamic, repeated across a sufficient number of large operations, is precisely how a structural supply deficit builds: not through a single catastrophic event, but through the accumulated effect of grade decline, mine age, operational complexity, and capital requirements at the assets that have historically anchored global supply.

Governance, Recovery Timeline, and What Comes Next

The incoming Chilean government has ordered an external review of Codelco following the production audit. The review adds a layer of governance uncertainty to an operational situation already under pressure. El Teniente’s five-year depressed output forecast, combined with Chuquicamata’s declining ore availability, means the production recovery thesis that Codelco has been communicating to markets will need significant revision.

Codelco’s four-year production strategy, to be presented to the government in coming months, includes an ambitious plan to integrate the Chuquicamata, Radomiro Tomic, and Ministro Hales mines in northern Chile, targeting USD 2 billion in combined savings and additional revenue. Whether that plan can offset the structural headwinds at El Teniente and Chuquicamata is the central question for Codelco’s medium-term output trajectory.

For copper market participants, the Codelco story matters because it is not unique. Grade decline, mine age, and rising capital intensity are challenges shared by BHP’s Escondida, Anglo American’s Los Bronces, and a number of other tier-one assets that form the backbone of global copper supply. Codelco is the most visible case of a dynamic that is playing out across the system. The price has the capacity to make it invisible. The audits do not.

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Kamoa Capital is not licensed and does not know your circumstances. Nothing here is financial, legal or tax advice – seek professional advice and read any PDS before acting. We aim for accuracy but make no guarantees and accept no liability. Views are opinions only and may include forward-looking statements that may not occur.