ARIZONA DAILY STAR
Tucson, Arizona | Published: 10.25.2008
advertisement
While tumbling copper prices have caused some of the world's largest producers to retrench, startup copper mining projects such as the Rosemont mine southeast of Tucson are moving ahead with optimism.
"We are proceeding forward with no change in our development plans," said Gil Clausen, president and CEO of Augusta Resource Corp., which is developing the Rosemont project.
He said tight credit hasn't spooked investors.
"We are well cashed up," said Clausen, who expects announce new major investors soon.
After reaching a peak price of $4.26 a pound on May 5, copper fell to around $1.65 this week.
This summer, Citigroup Inc. had raised its copper price forecast for 2009 by 43 percent, saying the metal would average $5 a pound next year as supply constraints boost prices.
But this week, copper declined 23 percent, the steepest plunge since 1988.
"This move is just unprecedented," said John Gross, publisher of the Copper Journal in Cranston, R.I. "There's been an acute focus on negative news and it's resulting in panic selling."
Lower price still profitable
Clausen said Rosemont's projected annual production of 220 million pounds of copper, 4.5 million pounds of molybdenum and 2.7 million pounds of silver were presented to investors with a scenario of copper at $1.50 a pound.
"At that level we have a robust economic plan," he said.
The 1.2-square-mile open pit would be built in the Santa Rita Mountains. Vancouver, B.C.-based Augusta expects the $782.4 million project to begin producing copper in 2011 for 18 years.
John Perry, president and CEO of Tucson-based Nord Resources Corp., expects to begin new mining next year at the reopened Johnson Camp mine in Cochise County. The company is currently producing copper from previously mined ore.
He, too, said the dip in copper prices isn't interfering with his plans.
"Things are coming along as planned," he said. "We're not letting this get in our way."
In fact, when the big producers pull back, it could help keep business steady for the smaller operations, Perry said. He predicts copper prices will remain low for a couple of quarters and then pick up.
Perry and Clausen noted that both presidential candidates are talking about infrastructure plans in their campaigns and the growth in Asia is only stalled, not stopped.
China slows, price lags
Copper had quintupled in the six years through 2007 as demand surged in China, which consumes about one-fifth of the world's mined copper. China's economy expanded at a 9 percent annual rate in the third quarter, the slowest pace since the second quarter of 2003.
As a result, some copper companies are taking a second look at expansions and acquisitions.
Earlier this month, India-based Sterlite Industries Ltd., withdrew its $2.6 billion offer to buy Tucson copper producer Asarco LLC's operating assets and bring the company out of bankruptcy.
Sterlite cited the ongoing credit crisis and falling copper prices as the reason for abandoning the offer. How and when Asarco will emerge from bankruptcy is expected to be hashed out during a mediation hearing in Brownsville, Texas, starting Thursday.
Phoenix-based Freeport-McMoRan Copper & Gold Inc., the second-largest copper producer, last week said it will defer spending after third-quarter profit dropped 33 percent. The company said deferred investments will include spending at El Abra, a Chilean mine it owns with Codelco.
The world's largest copper producer, Chile-based Codelco said a "supercycle" for the commodity has ended, and it is taking "all necessary measures" to address the impact.
"Due to the crisis, there has been this abrupt drop in prices that requires us to react," Executive President Jose Pablo Arellano said this week. He declined to say what steps the company may take.
But Aluminum Corp. of China, that nation's biggest copper producer, said development of the Toromocho copper mine in Peru won't be slowed by falling prices.
"We're not concerned by current prices as we won't be producing copper for another three years," Gerald Wolfe, Peru manager for the Beijing-based company, said this week. "There is significant Chinese demand for copper and the company is confident this will continue."
Construction on the $2.2 billion project is slated to start next year.
