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Gold/Mining/Energy : Copper - analysis -- Ignore unavailable to you. Want to Upgrade?

To: critical_mass who wrote (1200)	5/23/2005 10:04:37 PM
From: Stephen O	Read Replies (1) \| Respond to of 2131

This is BIG news re copper Electroandina Says Chilean Mines May Face Shortage May 23 (Bloomberg) -- Electroandina SA, the largest energy company in northern Chile, said that mining companies in Chile, the world's largest copper producer, may face energy shortages after Argentina cut supplies of natural gas. Companies that use natural gas to run turbines may need to ration electricity to miners in northern Chile as soon as next year as energy demand rises, said Lode Verdeyen, chief executive at Electroandina. Deeper cuts in natural gas exports also might trigger energy rationing for miners in the region, which include BHP Billiton Plc, the world's largest miner. ``The copper business is at huge risk,'' Verdeyen said in an interview. ``What we see coming on is a very bleak future.'' Electroandina, and units of AES Gener SA and Empresa Nacional de Electricidad SA, are among companies that invested in turbines fueled by Argentine natural gas to feed growing copper production in northern Chile. Argentina last year reduced its shipments of the fuel to Chile to ease a shortage at home. State-owned Codelco, which is a shareholder of Electroandina and the generator's biggest client, is studying how to prepare for possible energy shortfalls, such as through purchasing turbines, said Roberto Vial, a spokesman for Codelco in Calama in northern Chile. Codelco has three mines in northern Chile, including its largest. ``We're doing all that we can to have the necessary back up,'' Vial said May 20 by telephone. Mauro Valdes, spokesman in Santiago for Melbourne-based BHP Billiton, and Diego Hernandez, president of BHP Billiton's base metals division, weren't at their offices in Santiago on May 20 to respond to requests for comment by Bloomberg News, said BHP Billiton's public affairs office in Santiago. Today is a holiday in Chile. Prices for copper, Chile's top export, have surged 21 percent in 12 months as demand in China, the biggest user of copper, outpaces supplies. Chile accounts for about a third of global copper supplies from mines. Tough Sell Electroandina, which had losses last year after its energy costs surged, has asked clients to renegotiate contracts to increase energy prices and index prices to fuel costs, Verdeyen said May 17 at the company's offices in Santiago. Codelco's Vial confirmed that Codelco is negotiating fees with Electroandina. Other clients of the generators include BHP Billiton's Cerro Colorado mine, Verdeyen said. ``It's still difficult to convince customers that it's a huge problem,'' Verdeyen said. Argentina said it cut natural gas supplies to northern Chile last month by an average of 27 percent from levels prior to the reductions, which began last year, according to Chile's state-run National Energy Commission. A reduction by half would trigger energy shortfalls, Verdeyen said. Solutions Electroandina is worse off than energy companies in central Chile, which also have had supplies of natural gas cut, said Carlos Diez, an analyst at Fitch Ratings in Santiago. Electroandina's long-term contracts prevent it from benefiting from a decision by the Chilean government to increase energy prices to compensate for higher fuel costs. Electroandina ``probably signed contracts at low prices, thinking they'd have gas for 10 to 15 years,'' Diez said. Now ``they have to generate at high costs and sell cheap.'' Since Codelco is a shareholder, ``it's easier that they get to a long-term agreement to pay more, at some point,'' Diez said. Codelco and Paris-based Suez SA own Electroandina