Vancouver – Weak demand in the United States and Europe has prompted global mining house BHP Billiton (BHP-N) to extend copper production cutbacks by six months.
“With copper inventories of nearly 1.4 million tons of metal in LME/Comex/ Shanghai warehouses, we believe it is prudent for us to operate at less than our full capacity at this time,” says BHP’s president of base metals, Brad Mills.
The world’s largest diversified miner first responded to weak demand in November 2001 by announcing a 170,000-tonne reduction in copper output. The move was accomplished by scale-backs at the Escondida mine in Chile and the temporary closure of the sulphide operation at the Tintaya operation in Peru.
The major subsequently extended the cuts in December 2002, removing an additional 80,000 tonnes from Escondida through to the end of this calendar year.
The latest news will keep production at BHP Billiton’s operations some 390,000 tonnes below capacity, although capacity has been increased following the October completion of the Escondida expansion program.
The major plans to keep production at Escondida at 1.05 million tonnes per year, some 200,000 tonnes below capacity. But given the capacity expansion, even with the cutback the mine in 2003 will produce much more than the 760,000 tonnes slated for 2002.
Production rates at the Tintaya mine will be kept at 34,000 tonnes, some 90,000 tonnes below capacity.
At the company’s Pinto Valley and Robinson operations in the southwestern United States, operation will remain on standby through 2003. These operations represent 100 000 tonnes of idled copper capacity. Pinto Valley and Robinson did not produce any copper in concentrate in 2002, but the Pinto Valley operation is scheduled to produce 10 000 tonnes of copper cathode this year.
BHP owns 57.5% of Escondida, the world’s largest copper mine, which last year produced 794,131 tonnes of the red metal. The remainder is held by Rio Tinto (RTP-N) (30%), a Japanese consortium (10%) and the World Bank’s International Finance Corp. (5%).
The announcement propelled LME three-months copper to an intra-day high of US$1,685 a tonne, its highest since July 2 this year, before easing back to US$1,678 per tonne, up from $1,661 at day earlier.
Other big copper producers slashed production at about the same time as BHP in a further attempt to battle a surplus of the metal.
Phelps Dodge (PD-N) is producing at the rate of about 908,000 tonnes copper per year — just two-thirds of its annual capacity of 1.5 million tonnes
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