Platts reports that “Codelco is facing a sharp drop in copper grades at its aging mine operations in 2016 while the price of the red metal will likely remain stuck around $2.50/lb, CEO Nelson Pizarro said last week. “It does not look like it will be a year to be smiling. Next year is going to be very tough.” he said. The company, owned by the Chilean state, posted profits of $875 million for the first half of 2015, down 33% from a year ago, as the company faced a 14% drop in copper prices — to $2.64/lb — and sharply lower molybdenum prices.

Platts also reports that the result could have been significantly worse were it not for stringent cost-cutting programs, which aim to reduce costs by around $1 billion this year. Around half has come from the strength of the dollar, which has hit 12-year highs as copper prices slumped.

More efficient mining lifted copper production by 5.5% to 810,000 t in the six-month period, with higher production at El Teniente in particular offsetting lower ore grades at Chuquicamata.

Molybdenum byproduct sales rose 6.3% to 13,261 t on higher production.

Direct costs fell 11% to $1.40/lb. Without these efforts, profits would have fallen 80% to just $272 million.

Lower prices and lower ore grades will mean it will probably struggle to match these results next year, Pizarro said.

Chile’s Finance Minister Rodrigo Valdes said Thursday that the country will have to tap international finance markets to fund government spending if prices continue at current levels.

But beyond 2016, Codelco sees conditions improving in the copper market as it moves back into deficit after years of surplus. “We can see that this situation should turn around at some point in late 2016 or in the first half of 2017,” he said.