LMEWEEK-Antofagasta CEO warns Chile could miss out on mining dollars

* Expects cash cost to be stable or lower in 2015

* Encuentro Oxides to get board approval by year end

* Sees copper prices roughly flat next year

By Silvia Antonioli

LONDON, Oct 22 (Reuters) - Copper miner Antofagasta (LSE: ANTO.L - news) warned on Wednesday that Chile could miss out on future mining investment unless it does more to support the industry, simplify regulations and streamline an increasingly cumbersome permitting process.

Chile produces about a third of global copper supply. The red metal is the country's top export by far and is vital for its economic development.

But copper miners, already grappling with weaker prices, are struggling to contain production costs at aging Chilean mines. They are also faced with scarce water and power, and tax changes threaten to further inflate costs.

"Authorities and the country need to realize that there is a limited amount to invest in the copper mining industry, and probably there are more projects than money," Antofagasta Chief Executive Diego Hernandez said.

An industry veteran, Hernandez joined Antofagasta (Other OTC: ANFGF - news) in 2012, after two years at the helm of Chile's state copper giant Codelco.

"If a project that you can develop now is delayed a couple of years, it does not mean that in a couple of years you will go ahead," he said in interview with Reuters. "The opportunity will not necessarily be there."

Like the rest of the Chilean industry, London-listed Antofagasta is facing rising labour and energy costs. Its cash costs were up more than 6 percent in the first half this year.

But Hernandez said the company has been able to counter the increase more recently, also thanks to a weaker Chilean peso, in which it pays about 60 percent of its costs.

Its sales, on the other hand, are in US dollars.

"We have been able to revert the trend of cash cost going up. It's now flat and for next year certainly will be better," Hernandez said.

To reach this target Antofagasta has taken measures such as merging its Esperanza and El Tesoro mine and is now centralising the procurement for all its mines, hoping to get better deals for spare parts and services.

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Antofagasta, controlled by Chile's Luksic family, currently produces about 700,000 tonnes of copper a year. It is hoping to counter falling copper grades and boost output with projects such as Antucoya and Encuentro Oxide, the expansion of its large Pelambres mine and the construction of a second concentrator at its Centinela operation.

If everything goes to plan, the company will reach output of 900,000 tonnes by 2018 and about 1 million tonnes by 2020.

While Antucoya is at an advanced stage and due to be commissioned next year, Encuentro Oxide is expected to be approved by the board by the year end.

To go ahead with the Pelambres expansion and the Centinela concentrator, Antofagasta will start the process to get environmental permits next year.

The whole process generally takes 12 months or more.

"Ten years ago there weren't so many stakeholders in the room," Hernandez said. "Now (NYSE: DNOW - news) we deal with a lot of different entities... considering this, I think that the government needs to take a more proactive role."

While Chilean miners battle the complex permitting system, high energy prices and salary inflation that has outpaced productivity gains, neighbour Peru -- albeit a much smaller producer currently -- has been gaining ground.

Peru expects its copper production to rise by 9 percent this year to around 1.5 million tonnes.

"In Peru the advantage that they have power at a good cost. And they have a government that is supportive and is trying to foster mining investment in the country," Hernandez said.

"But they also have many communities issues, and those are difficult to solve."

Asked about the outlook for copper, Hernandez said he expected prices to be roughly unchanged next year, with global consumption growth flat at around 3-4 percent a year.

Copper has lost about a third of its value from a 2011 peak on the back of rising supply and cooler demand growth.

The market will be oversupplied by roughly 100,000 tonnes this year and by about 400,000 next year, Hernandez said, before flipping into deficit from 2017 as fewer new projects are being developed. (Reporting by Silvia Antonioli; Editing by Clara Ferreira Marques)