CORPORATE TRENDS — Placer to increase copper output

Placer Dome the gold producer has resolved to become Placer Dome the gold-copper producer. The shift recognizes there is money to be made in future years from copper, a building block for world development.

Placer Dome International (PDI) shareholders were told last year that increased copper production will be a major priority and opportunity for the company. And with experience of more than 30 years of copper mining in British Columbia and the Philippines, PDI has a good track record in finding and producing the metal.

We already have some significant copper and copper-gold prospects in the pipeline: Mount Milligan and Kerr-Sulphurets in British Columbia, Leonor in Chile, Trough Tank in Australia, and Namosi in Fiji.

Studies show that copper consumption is likely to grow during the 1990s and demand will increase by 2% per year.

Much of PDI’s exploration for copper is being directed to the Pacific Rim where many copper deposits are associated with gold.

Copper deposits with gold in them are preferred, but pure copper deposits are also a target. Production of pure copper metal at the mine site, as practised at the Gibraltar mine with respect to about 10% of its production in British Columbia since 1986, avoids smelting costs, and is much easier to control environmentally.

The use of copper’s major product, wiring, is growing steadily. While worldwide production is expected to expand rapidly in the next 3-4 years as new mines come on stream, it is thought that this increased production will not outpace the growth in demand.

Doug Brown, PDI’s market research manager, says: “Rapid growth rates in metal consumption are typically found in the developing nations as the need for infrastructure, housing, and consumer goods is much higher on a per capita basis than in developed nations.

“Japan’s strong consumption growth in recent years is expected to plateau by the middle of the decade as more and more metal-consuming industries are relocated in Southeast Asia.

European demand for copper should accelerate in the latter half of the decade as political and economic factors retarding East European economic rebuilding are slowly resolved. North American demand is likely to continue to be level or perhaps to decline as more manufacturing is moved offshore.” Uses of copper are another pointer to market trends. Wire products comprise more than half of copper consumption. Wire demand is generally not sensitive to price and is growing rapidly as the use of electrical conveniences in the home, office and factory continues to multiply and spread throughout the world.

Fibre optic cables compete with copper in end-uses involving data transmission, monitoring functions, and signal processing. But fibre optic cables cannot be considered a substitute for copper in any application requiring energy transmission. But it will be 15-20 years before fibre begins to meaningfully compete in home and office uses such as light switching and temperature control.

Copper rod, tube and sheet products together account for about 40% of consumption. Rod products, chiefly valves, fittings and fasteners, are expected to show slow, steady consumption growth through the 1990s. Tube products for heating, cooling and plumbing applications are expected to remain flat over the next decade as substitution of plastics for copper in plumbing tube and aluminum in auto radiators offsets growth in other end-uses. Copper sheet, used for electronic circuitry and for architectural purposes, is expected to grow steadily.

“Gold assets create greater long-term value for the company and the shareholder within a diversified company, rather than as a separate entity,” writes Paul Carmel, Levesque Beaubien Geoffrion Inc. analyst, in a recent report.

“Related diversification effectively reduces the mining company’s exposure to any one commodity, all the while preserving the stock’s behavior as a cyclical play,” Carmel says.

PDI expects the final decade of the 20th century to be good, if not great, for copper, barring extremely poor economic conditions. That means gold, PDI’s engine since 1987, will likely be twinned by copper, to provide greater thrust into the future.

— From Prospect, a quarterly publication of Placer Dome.