Interest from copper buyers in diversifying supply chains could help Chile's state-run Enami secure funding for a $1.7-billion smelter project, the entity's head told Reuters, even as over-capacity in China squeezes metal producers.

Plans for an upgrade of Enami's 70-year-old Hernan Videla Lira smelter have long raised questions about whether the project can be profitable and attract funding.

With China's highly efficient smelters competing for limited concentrate, treatment charges - the fees paid by miners to convert concentrate into metal - have fallen below zero and forced some overseas smelters out of business.

But EnamiI's head, Ivan Mlynarz, said profitability is not the only consideration for potential backers.

"In the logic and dynamics of today's geopolitics and how we secure supply chains worldwide, it's a very attractive alternative," Mlynarz said in an interview last week ahead of LME Week, an annual gathering of the global metals industry in London that began on Monday. "Various companies are looking at it from that perspective."

China holds half the world's copper smelting capacity, part of its broader grip on critical minerals that has drawn tough trade measures from U.S. President Donald Trump.

Chile accounts for just 6% of global smelting capacity.

Enami shuttered the near-obsolete Hernan Videla Lira smelter last year and sees getting it back online as key to helping Chile's small and medium producers access global markets.

Enami has said it aims to start initial construction by the end of 2025 and operations in another five years, with annual production of 240 000 metric tons of copper cathodes.

Mlynarz said 17 companies - including miners, commodities traders and banks - have expressed interest in funding the smelter in exchange for refined copper supply.

The low carbon footprint of a smelter close to mines is also attractive, Mlynarz added.

"If one company offers unbeatable financing, we'll go with one. If the quotas they want are smaller, then it'll have to be a combination of two, three or four," Mlynarz said.

The first round of financing offers is due at the end of October, ENAMI said last month.

ENAMI has had years of tight finances, with debt at one point at $700-million.

Codelco, which closed its Ventanas smelter in 2023, is courting investors for a separate smelter project.

Mlynarz said the companies are not discussing a joint plan, and ENAMI's project offers a faster path.

"The same people may be sitting with Codelco and with us, but the concentrates and timelines are very different," Mlynarz said.