Vancouver — Copper miners continue to adjust to low global prices, with Grupo Mexico considering further production cuts and Corporacion Nacional del Cobre de Chile (Codelco) opting out of the contest to buy
The world’s largest copper producer says Exxon rejected its latest offer for the subsidiary, which owns two Chilean mines and a smelter.
“Exxon Mobil has informed us that our last offer for the acquisition of 100% of the rights of Minera Disputada Las Condes and Inmobiliaria CMD Limitada still do not fulfill its expectations,” Codelco says in a press release. “Taking this into account, Codelco has decided not to persist in acquiring these assets and withdraws from the process.”
The Chilean company would not disclose the amount of its offer, but sources close to The Northern Miner estimate it was in the range of US$1 billion.
Other mining firms vying for Disputada de Las Condes are London-listed Antofagasta, South Africa’s
Exxon put Disputada on the selling block late last year. Subsequently, several firms signed confidentiality agreements to evaluate the assets.
Disputada produced 254,000 tonnes copper last year from the Los Bronces and El Soldado copper mines in central Chile. Nearby, the firm also runs the Chagres smelter.
Late last year, an oversupply of copper on the world market prompted Codelco to cut, by 4%, production for 2002. The company plans to trim 11,480 tonnes of production from its highest-cost operation, the El Salvador mine, in the northern part of the country, as well as slash 47,750 tonnes at its largest mine, Chuquicamata. Smaller cutbacks of 25,400 and 23,370 tonnes are slated for the El Teniente and Andina mines, respectively. The only operation not affected by the cutbacks is Radomiro Tomic.
The move reduces the company’s copper production forecast to 1.5 million tonnes in 2002, compared with 1.6 million tonnes in 2001.
Meanwhile, Grupo Mexico, the world’s third-largest copper producer, says it was unable to make new cuts. In late 2001, the Mexico City-based giant slashed output in the U.S. and Mexico to the tune of 151,000 tonnes copper.
The company states: “Grupo Mexico would seriously consider continuing to cut back production as an orthodox reply to the significant increase in the world inventories. [However,] we are convinced that reasonable inventories will protect future markets and will create an additional protection against the uncertainty of the economic factors we are facing.”
Last year’s production cuts came as copper prices hovered near historic lows, hurting Grupo Mexico’s balance sheet.
For the year ended Dec. 31, 2001, a 16.2% reduction in costs and expenses failed to offset a 15% drop in copper prices as Grupo Mexico suffered an 18.3% drop in sales to US$2.84 billion. In the fourth quarter, sales plunged 28.5% when compared with the year-ago period, amounting to US$599 million. During the period, the company posted a loss of US$254 million, compared with a loss of US$104 million recorded in 2000.
Copper sales dropped 76,844 tonnes, or 6.7%, to 1.06 million tonnes from the 1.14 million tonnes tallied in 2000. Similar results were seen in zinc and silver sales, down 7.7% and 32.4%, respectively, to 193,907 tonnes and 1.14 million kg.
The prospect of further cutbacks by Grupo Mexico comes on the heals of a series of production cuts designed to prop up prices for the metal amid weak global demand. A year ago,
Antofagasta also felt the brunt of low copper prices as its pretax profit was nearly sliced in half to US$113.5 million in 2001. Earnings per share fell to US31, from US70 in the year-earlier period.
Copper production at the group’s three projects, El Tesoro, Michilla and Los Pelambres, grew by 26% to 445,000 tonnes in 2001. Antofagasta expects production to hit 460,000 tonnes in 2002.
“Costs are among the lowest in the sector, and cash flow remains strong,” says Jean-Paul Luksic, Antofagasta’s chief executive of the mining division. “The group is well-placed to benefit from an upturn in copper prices.”
Antofagasta’s average cash costs came in at US$860 per tonne in the last year, down slightly from 2000. The company realized an average copper price of US$1,580 in 2001.
The company’s 61%-owned El Tesoro mine has been completed on schedule and under budget at US$282 million, and is now running above design capacity. The operation is expected to churn out 85,000 tonnes copper cathode in 2002 at US$860 per tonne.
The benchmark London Metal Exchange 3-month copper price recently traded at US$1,609 a tonne, up from the 15-year low of US$1,336 per tonne recorded in November 2001.
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