Codelco and Enami, Chile’s two state copper companies, are discussing the possibility of combining their respective efforts to expand smelting capacity into a single project, according to people with knowledge of the matter.

A new working group is looking into collaboration between a project to overhaul a shuttered Enami smelter and a separate proposal to build a new plant being organized by Codelco, said the people, who asked not to be identified given the talks are private and at an early stage. Cooperation may be limited to ensuring they align with national processing needs or may extend to an amalgamation in which one project replaces the other, they said.

Strengthening smelting capacity in the biggest copper-mining nation is a priority for President Gabriel Boric’s leftist government. A new-generation smelter would be cleaner than existing plants, and reduce waste involved in exporting concentrates that contain only about 30% metal. More than half of Chile’s copper is shipped in the semi-processed form, with the last smelter built three decades ago.

Building copper smelters makes little business sense right now given the abundance of Chinese capacity and a series of mine disruptions, which has seen processing fees sink to historical lows. But there are sustainability and geopolitical factors at play as nations look to boost their presence in battery supply chains in response to China’s dominance.

Talks between Enami and Codelco began after the former agreed to sell its stake in the Quebrada Blanca mine to the latter in September. In the wake of that deal, the firms agreed to collaborate in smelting and refining, including evaluating “potential synergies and cooperation mechanisms,” Enami said in response to questions. Codelco didn’t immediately comment. Chile’s mining ministry referred questions back to the companies.

For now, the two smelting projects remain separate.

Enami halted its money-losing Hernan Videla Lira plant in February. It’s awaiting approvals for the upgrade project as authorities figure out financing. Companies “from both the East and the West” had shown interest in getting involved, Mining Minister Aurora Williams said in April.

Codelco, meanwhile, also received expressions of interest for a greenfield smelting project, the people said. The current thinking is that Codelco would be an offtaker in what would be a privately run initiative.

Last year, Codelco signed an accord with Europe’s top smelter Aurubis to look into potential areas of collaboration in Chile. Codelco closed one of its smelters in 2023 for environmental reasons, while a proposed toughening of emission rules poses a threat to another of its plants.