"The output produced in the first six months of 2012 is slightly below what was defined by the company in its budget," state-run Codelco said in a statement.

Production fell due to "a drop in ore grades, harder rock and deeper deposits," the company said, especially at its Chuquicamata, Salvador and Radomiro Tomic mines. But declines were limited by higher output at the Gaby, El Teniente and Andina deposits, Codelco said.

Still, during a press conference to discuss results, CEO Thomas Keller said "expected production for this year hasn't been modified with respect to what we had budgeted."

Codelco CODEL.UL has said it expects to produce 1.708 million tonnes of copper this year. It is implementing an ambitious investment plan to boost copper output to more than 2 million tonnes annually.

But the miner has struggled as ore grades deteriorate at its massive but tired mines. Average grades were 0.806 percent of metal in the ore in 2011, which have tumbled to 0.720 percent this year, it said.

"I see it difficult, not impossible, but very difficult (for Codelco to reach its 2012 production aim)," said Gustavo Lagos, mining professor at the Universidad Catolica in Santiago.

The miner said profits before tax and extraordinary items fell 39 percent during the January-June period from a year earlier to $2.391 billion, partially due to lower prices for Chile's top export copper, lower output, dwindling ore grades and higher costs.

Cash costs in the period reached $1.477 per pound, up 27 percent compared with the same period of 2011. Codelco said the increase was partially due to fuel, energy and other costs. "Energy (costs) have hit us badly during this period," said Jorge Robles, the firm's interim CFO.

World No.1 copper producer Chile is struggling with power problems, triggered by a devastating 8.8 magnitude earthquake in early 2010, years of under-investment and significant setbacks in key energy projects. Major shortages are not seen in the short-term, but miners are bracing for a hike in already steep power prices.

Codelco's emblematic Chuquicamata mine produced 25.2 percent less copper than in 2011, while Codelco's small Gaby mine produced 27 percent more.

"Production would have to top 150,000 tonnes per month on average to reach 1.7 million tonnes (this year)," said Jose Pedro Fuenzalida, a senior analyst with LarrainVial in Santiago, who also said Codelco's aim seemed difficult to reach. "It hasn't been over 140,000 tonnes per month this entire year."