Base Metals

Copper future rallied on mounting concerns that demand will outpace global supplies by as much as 600,000 tonnes in 2011.

By Leia Michele Toovey-Exclusive to Copper Investing News

Copper futures rallied on mounting concerns that demand will out-pace global supplies by as much as 600,000 tonnes in 2011.  In New York, Copper futures for March delivery rose 1.5 cents, or 0.3 percent, to $4.427 at 10:44 a.m. on the Comex.  Over on the London Metal Exchange, copper for delivery in three months rose $60, or 0.6 percent, to $9,690 a tonne ($4.40 a pound).

Copper has jumped 30 percent in past 12 months. The red metal reached a record of $4.498 a pound on Jan. 3.  The price may average $5.10 this year, up 49 percent from 2010, Bank of America Merrill Lynch analysts said today in a report. “Copper has the strongest fundamentals among the base metals. The concentrates and scrap markets remain tight, and mine supply will likely constrain refined output in the coming years. We forecast a deficit for 2011,” said Merrill Lynch analysts.

According to JP Morgan Securities, the copper deficit will be between 500,000 and 600,000 tonnes in 2011. Macquarie said in a research report on Dec. 27 that the shortfall would be 550,000 tons. The International Copper Study Group has predicted a shortage of 435,000 tons. Today, Morgan Stanley today raised its copper and gold forecasts through 2015. The bank wrote in a research report that copper is likely to average $4.45 a pound in 2011, up 24 percent from an earlier estimate.

Several of Chile’s largest private mining companies have opted for the country’s new copper royalty structure, Mining Minister Laurence Golborne said Wednesday. The government moved to increase the royalty copper miners were paying to in part finance reconstruction efforts following the 8.8-magnitude quake that ravaged the country in early 2010. Under the new structure, which is voluntary, copper producers could pay a royalty of up to 14%, based on their sales and world copper prices.  So far, BHP Billiton (NYSE:BHP), Antofagasta PLC (LON:ANTO), Anglo American PLC (LON:AAL), Xstrata PLC (LON:XTA)and Freeport-McMoRan Copper and Gold (NYSE:FCX) have opted for the new structure.  Not all of these companies’ mines will partake in the new tax structure. In the case of Anglo American, some of its mines might not opt for the new tax structure as they have a shorter life span, the company’s chief executive in Chile Miguel Angel Duran told reporters the new tax structure will increase the average income tax currently paid by two to four percentage points, depending on international copper prices. With these companies opting for the new structure, about 80 percent of private copper output will now pay higher taxes, Golborne said. With the previous structure, the large-scale copper mining companies that opted for the voluntary royalty that went into effect in 2005 paid a tax of 4 percent on their copper sales.

Company News

Chile’s Collahuasi mine has found a second alternative export route that will help the copper miner normalize deliveries and lift a near four-week force majeure. Collahuasi will ship 10,000 tonnes of copper concentrate via the northern Arica port after weeks of talks following a Dec. 18 ship loader accident at the mine’s key sea terminal that forced it to declare force majeure on sales. The mine is already commercializing around 70 percent of its copper output through the Antofagasta port and increasing processing at the Altonorte smelter, run by part-owner Xstrata . A mine spokeswoman said force majeure continues. Collahuasi produces about 3.3 percent of the world’s mined copper.

A major shareholder has stalled financing of Moly Mines (ASX:MOL, TSE:MOL) flagship Spinifex Ridge project. Moly Mines’ 55 percent shareholder, China’s Hanlong Mining Investment, had advised the facility would not be ready when expected, leading the non-Hanlong directors of Moly Mines to seek legal advice. The market will be updated on the financing facility before January 31. The molybdenum hopeful also flagged in a statement yesterday that its Spinifex Ridge project had been negatively affected by the strong appreciation in the Australian dollar against the US dollar.After the news broke, shares in the Perth-based company fell 21.7 percent to close at $1.10, after the company said it would not have access to a $US466 million funding facility by the end of the month, as had been expected. “The ability of the company to complete the Spinifex Ridge molybdenum-copper project financing process will likely be dependent on an improvement in both the foreign exchange outlook and molybdenum prices above current levels,” company secretary Andrew Worland said in a statement. “The appreciation in the Australian dollar has resulted in a projected decrease in future project revenues measured in Australian dollars at December 31, by up to 25 percent,” Mr. Worland said. The metal products from the future mine molybdenum, copper and silver, are priced in US dollars, while the forecast operating costs are denominated in Australian dollars.


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