December 23, 2013 / 9:45 PM / in 4 years

UPDATE 2-Chile gives miner Codelco extra $1 bln in financing

* Fresh financing aimed at protecting credit rating

* State miner Codelco in midst of ambitious investment plan

* Codelco had been upset about previous financing

SANTIAGO, Dec 23 (Reuters) - The Chilean government said it is handing state-run miner Codelco an extra $1 billion in financing to protect the company’s coveted investment rating and allow it to carry out crucial spending plans.

The fresh funding is on top of $1 billion the government said in July it would provide Codelco, the world’s No. 1 copper producer.

“This (funding) is immediate,” Finance Minister Felipe Larrain said on Monday, flanked by Codelco Chairman Gerardo Jofre. “This way at the end of the year Codelco’s balance will show more capital.”

The news is a boost for Codelco, which is in the midst of an ambitious investment plan to salvage output at its aging mines, while struggling to rein in costs and withstand a drop in copper prices.

But with a 2013-17 investment plan of around $24 billion, an extra $1 billion is seen by some as falling short.

“Although this is a positive measure that will allow Codelco’s ratings to improve and with it its financial position, the issue of how it will finance its weighty investment portfolio remains outstanding,” said Juan Carlos Guajardo, the head of mining think tank CESCO.

That will be a task that the next government will have to confront, he said.

Conservative President Sebastian Pinera’s term ends in March, when former center-left president Michelle Bachelet will take office.

She has promised to fund Codelco, but hasn’t specified what type of mechanism she will favor.

The miner gives all its profits to the state and had been severely disappointed by the amount the government had returned to it earlier this year.

The government subsequently agreed to review the way it funds the company, which produces around 10 percent of the world’s copper.

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