RE: Chile
Updated: New York, Oct 08 18:25London, Oct 08 23:25Tokyo, Oct 09 07:25
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Chile Says $17 Billion Planned for Copper, Gold Mines (Update3)
By Chanyaporn Chanjaroen and Juan Pablo Spinetto
Oct. 8 (Bloomberg) -- Chile's Karen Poniachik, mining minister in the world's biggest copper producer, said about $17 billion will be spent on new projects to bolster output as prices for the metal head for a sixth consecutive annual gain.
The projects cover the next five to seven years and are mostly in copper and gold, she said in an interview in London. Chile's copper output will rise to 6.4 million metric tons in 2011, from 5.6 million tons now, she said. Codelco, based in Santiago and the world's biggest copper miner, should supply more metal this year after overcoming problems at mines, she said.
Chile's budget surplus will expand to a record 8.1 percent of gross domestic production this year, buoyed by sales of copper, it's top export, the budget office said Oct. 3. State- owned Codelco is the world's biggest copper producer. BHP Billiton Ltd. also operates in the country.
The investment in new mines is needed to replace existing ones whose reserves are running out, Poniachik said. The older mines are ``quite a serious issue,'' the minister said. She was in London, along with more than 3,000 other mining executives, consumers and investors, for London Metal Exchange week.
Copper traded at a record $8,800 a ton in May 2006, and has risen almost 26 percent this year, partly because miners can't keep up with demand from China, the world's largest user. Disruptions at mines and smelters from Asia to South America have also buoyed prices.
Codelco Production
Chilean output dropped 5.4 percent in August from a month earlier to 429,238 tons, the lowest since February, because cold weather froze pipes carrying water used to process the metal at one of Codelco's mines. The problem is ``temporary,'' and this year's production will be higher than last year, Poniachik said.
Barclays forecasts copper for immediate delivery on the LME at an average of $7,320 a ton this year and $7,800 next year. The contract averaged $6,740 in 2006. While production will increase 4.3 percent in 2008, demand will rise by the same amount, according to the bank.
Copper for delivery in three months fell $270, or 3.3 percent, to $7,940 a ton as of 3:06 p.m. in London.
Stephen Briggs, a metals analyst at Societe Generale in London, this month said 2007 would be the fifth consecutive year in which copper demand outpaces supply.
``Lower mine production is certainly one of the factors that's going to keep prices high,'' said Michael Cuggino, who oversees $1.2 billion as president of the Permanent Portfolio Funds in San Francisco. The Permanent Portfolio, in its eighth consecutive year of growth, owns shares of miners including BHP Billiton and Freeport-McMoRan Copper & Gold Inc.
`Not For Sale'
Codelco will remain a state company and there is no plan to sell shares, Poniachik said. Chilean President Michelle Bachelet said in January that her government turned down an offer from a group of unidentified investors.
``Codelco is not for sale,'' Poniachik said. The company will focus on expanding its own assets, rather than buying other companies, she said.
Prices will probably average more than the $3.20 a pound estimated by Cochilco, the Chilean Copper Commission, Poniachik said. Copper traded in New York has averaged about $3.23 a pound this year.
``People are having a harder time getting this stuff out of the ground,'' said Stuart Flerlage, who helps manage more than $600 million at NuWave Investment Corp. in New York. ``It takes a significant amount of time to increase mine production, and they haven't been able to do it. This is absolutely going to mean higher prices.''
To contact the reporters on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net ; Juan Pablo Spinetto in London at at jspinetto@bloomberg.net .
Last Updated: October 8, 2007 10:21 EDT |
