Copper: Chilean Investment Still Expanding

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Right now, copper spot prices are an anemic $1.65 per pound. Thats an amazing drop from above $4 back in June.

And yet, one Chilean copper mine is actually expanding.

The mine is called Dona Ines de Collahuasi. Its Chiles third largest copper mine and is located in an historical copper mining area. Back in 1880, a large, high-grade copper and silver vein was found. Its one of the worlds largest copper resources.

Right now, the mine produces roughly 440,000 tons of copper a year.

But the mine has just approved a $64 million project that will increase annual output by 30,000 tons. And thats just the first expansion.

At the end of the first quarter of 2009, a $750 million expansion plan will boost production to 650,000 tons a year. After that expansion is complete, the mine intends to increase production to a full one million tons of copper a year by 2014.

Thats an astounding move.

And one that will need some major financial backers, particularly if copper prices dont recover. Its a good thing some big companies own this mine.
Im talking about Anglo American (AAUK:Nasdaq) and Xstrata (XTA:London), each with a 44% stake. Theres also a Japans Mitsui (MITSY:Nasdaq), owning 12%.
The CEO of the mine, Jon Evans, told the newspaper Diario Financiero, The mid and long-term plans are the same, therefore our expansion plans are also the same. Which may pay off in the long run If it can survive depresses copper prices.

And copper prices have continues to fall, despite a huge cash injection by China to its economy. China is the largest user of many of the industrial metals, like iron ore, aluminum, zinc, and, of course, copper.

So with Chinas economy slowing (albeit to 7.5%), the country will use less of those materials.

Now, Chinas been part of the reason why copper prices had more than doubled since 2002. If Chinese demand continues to slow, that could mean a long time before we see copper prices begining to climb again.

Which would mean that Anglo American, Xstrata and Mitsui will have to wait for the returns on these major expansion.

But it would also mean that theyd be ahead of the game once things begin to turn around If they can afford it.

About the Author:
http://blog.taipanpublishinggroup.com/2008/11/17/copper-chilean-investment-still-expanding/



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