Chilean Copper Producers, Wary of Low Prices, Avoid New Mines
Santiago, April 12 (Bloomberg) -- Chilean copper producers,
the world's biggest, have put investment in new mines on hold as a
global slowdown threatens demand and prices.
In contrast to the previous five years -- when Chile doubled
annual copper output to 4.6 million metric tons -- copper
producers say no new mines are planned this year.
``At these prices, investments in new projects aren't very
attractive,'' said Diego Hernandez, who runs Collahuasi, a 2-year-
old mine that produced 436,000 metric tons of copper in 2000, or
3.3 percent of world output.
Hernandez also said he is waiting until year-end to make sure
prices warrant a $600 million planned expansion. Exploring for new
deposits, he added, isn't even on the drawing board at Collahuasi,
which cost $1.8 billion to build.
Since 1974, about $14.8 billion in private investment has
gone into mining in Chile, much of it into new copper mines. Now,
in contrast, state-run Codelco, Escondida, and others say they are
expanding existing mines and processing facilities, mainly to keep
up with the falling percentages of copper in the rock they're
digging out of Chile's desert north.
Traders say mining companies are holding back for good
reason, after seeing prices fall 19 percent -- to about 76 cents
per pound -- from a three-year high. Prices slumped on concern an
economic slowdown in the U.S. and elsewhere will crimp demand for
copper used to make everything from cars to computers.
``It is a very risky time to be looking into expanding mine
production simply because you can't be sure now where prices will
be when new production is available,'' said Rick Hirsch, president
of Stamford, Connecticut-based copper trading firm Sogemin Metals
Inc.
Price Cuts
Collahuasi, for example, cut its forecast for average copper
prices to 84 cents per pound. In September, when prices were
soaring and Collahuasi was writing its investment budget for 2001,
it expected prices to average 89 cents per pound.
That led the company to opt to wait until year-end, when
executives will have a better take on forecasts for demand and
prices for copper, before deciding on whether to expand its
processing plants.
``The whole recovery in the cycle was put back six months,''
Hernandez said. ``The decision on the expansion is tied to market
expectations.''
Collahuasi is considering boosting the daily capacity of its
processing plant to 110,000 metric tons of rock per day by 2004,
from a current 60,000 tons.
If not, annual copper output would fall to 240,000 metric
tons by 2004, as the amount of copper in ore, or its grade, falls.
With the expansion, output would be slip to 396,000 tons by 2004.
Collahuasi is owned by a group led by Japan's Mitsui & Co.,
Falconbridge Ltd. and Anglo American Plc.
The Escondida mine, the world's biggest, is also focusing on
expanding current facilities to head off a drop in ore grade.
The mine, controlled by BHP Ltd. and the Rio Tinto Group, has
a $1.47 billion proposal to develop another copper deposit called
Escondida Norte, but isn't moving ahead with it yet.
Codelco
And Codelco, the Chilean state-run company that produces more
copper than any other in the world, is also focusing investment on
boosting output at Andina, El Teniente, and other existing mines.
It also plans to expand its newest mine, Radomiro Tomic.
There are no firm plans to opening new mines, however, executives
have said.
--Michael Smith in Santiago (562) 638-4732, or
mssmith@bloomberg.net, with reporting by Claudia Carpenter in New
York or through the New York newsroom/jrk |
