Copper miners eye higher prices (September 18, 2003)

Vancouver — After years of cutting back production because of low prices, the World’s largest copper miners are cautiously optimistic that the market for the red metal will improve in 2004.

The world’s biggest copper company, Chilean state-owned miner Corporacin Nacional del Cobre de Chile (Codelco), expects copper prices to hit at least US$0.80 per lb. next year, while the World’s number two producer, Phelps Dodge (PD-N) sees copper topping US$0.85 per lb.

“General indications are that it should be in the US$0.80-85 range for 2004, depending, of course, on the economic conditions,” says Phelps Dodge’s Chief Executive Officer, Steven Whisler. “Consumption in China is very strong, in the Far East it is generally strong, and there are signs that Japan is coming out of a 10-year slump.”

Codelco’s President, Juan Villarzu generally concurs with his counterparts projections.

“Maybe we are a bit more optimistic. If the U.S. economy consolidates, if China and Southeast Asia maintain the rhythm they have shown to date, I think that in 2004 we should be above US$0.80 and we should end this year near US$0.85.”

Codelco expects 2004 output of 1.8 million tonnes of copper, up about 10.4% from this year projected out put of 1.629 million tonnes. The major produced 1.52 million tonnes in 2002.

Phelps Dodge and Codelco, account for 20-25% of the world’s copper output.

Southern Peru Copper (PCU-N), Peru’s leading copper producer joined the optimistic bandwagon by expecting the price of the red metal to end 2003 at US$0.79 per lb. and rise to US$0.85 next year. Southern is owned by Mexico City-based Grupo Mexico, the World’s third largest copper miner.

“I agree that we should be around US$0.85 for next year, and this year should end, if things stay as they are, around US$0.79, which is US$0.04 more than last year,” says Southern Peru’s President, Oscar Gonzalez.

Over the past two years, low copper prices have prompted the top five global producers to curtail production.

Codelco has cut 106,300 tonnes of copper output from four of its five operations, with the biggest cut, 50,000 tonnes, occurring at Chuquicamata.

Meanwhile, BHP Billiton (BHP-N) 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.

BHP owns 57.5% of Escondida, the World’s largest copper mine. The remainder is held by Rio Tinto (RTP-N) (30%), a Japanese consortium (10%) and the World Bank’s International Finance Corp. (5%).

The spot price for copper last hit US$0.85 per lb. back in Feb. 2001 and the Dec. Comex copper contract recently traded at US$0.82 per lb.