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C O P P E R O U T LO O K All Ships Headed to China Prices will hold steady while grades decline and China will remain the most important customer—those were the key conclusions for the 12th World Copper Conference By Oscar Martinez, Latin American Editor Chilean Minister of Mining Hernán de Solminihac opened the 12th World Copper Conference organized by CRU in Santiago de Chile, during April. He explained the forecast extending to 2024 indicates that China will consume more than 50% of the world's copper production. "We also see the copper mining and processing business becoming more competitive with decreasing ore grades," de Solminihac said. With that in mind, Chile has created an agency to encourage foreign investment, and it is developing new proinvestment initiatives and policies, along with a national strategy aimed to face current and future energy challenges. Chile owns Codelco, which is the largest copper miner in the world. Codelco has seen its costs increase by 57% in 2012 and expects costs to continue to rise another 36% in 2013. Codelco CEO Thomas Keller believes copper, as a commodity, has been experiencing quite stable behavior in price terms when compared with other commodities. According to Keller, between 2000 and 2013, relative copper prices increased more than other main nonferrous base metals and energy commodities. "The investment projected for this year has been revised due to various factors such as an increase in the capital expenses of different mining projects," Keller said. "The reasons for this Source: USGS 2012 World copper reserves, 2011. 68 E&MJ; • JULY 2013 capex increase are based on deeper deposits with lower grades and increasing ore hardness, remote locations and lack of infrastructure, increasing environmental demands, and difficulties with communities." Keller also explained that Codelco is currently facing a number of challenges, such as the decreasing availability of skilled labor in an economy at full employment and the need for new breakthrough technology in their mining and processing operations. However, the company keeps growing and developing new mining projects such as the Ministro Hales mine, Radomiro Tomic Phase II, the New Mine Level at El Teniente, Chuquicamata Underground and the expansion of its Andina mine. Higher capex is not just a Chilean problem. Most copper miners are dealing with a similar situation. This trend of higher capex indexes was addressed by JeanSebastian Jacques, chief executive-copper for Rio Tinto, who also said that his company is focusing on large, long-life prospects, citing the Oyu Tolgoi mine in Mongolia as an example. Rio Tinto believes the growth in emerging markets will create an additional 11 million metric tons per year (mt/y) of demand by 2014. Diego Hernandez, CEO of Antofagasta Minerals (and former Codelco CEO), explained the company's growing strategy, indicating that their priority mining project at this time is in the area of the Centinela district, located in northern Chile. At the same time, Antofagasta is working on a pre-feasibility study for an expansion at its Los Pelambres property. According to Hernandez, Chile has a big opportunity to benefit from continued strong demand for copper, and it will continue to be the biggest copper producer, at least during the next 10 to 20 years. "We—Chile— have the potential of still being the No. 1 copper producer for a long time," he said. The Global Market Situation Copper stocks have been rising, while prices have fallen and the growth in world mine production picked up strongly in 2012. "Copper prices have been very stable over the last few years, a range between $7,300/mt to $8,600/mt," said Vanessa Davidson, analyst, CRU. "Recently, the prices have reached the low part of that range. CRU strongly believes that copper demand has started to improve, and that the increase in mine production in 2012 is not just a reflection of output from new projects." However, CRU also feels there are still considerable challenges to bringing new supply to the market, and this, along with current upward capex revisions, would be responsible for continued new project delays. According to Davidson, CRU still sees Chile as a competitive country for the short and intermediate terms, but the situation might change in the long run (after 2030). Echoing those sentiments, Michael Harris, general manager of economics and markets for Rio Tinto, believes China still has plenty of room to run. "Further urbanization will encourage copper demand," Harris said. "In fact, the country has set a goal of 65% urbanization rate by 2050. The long-term demand outlook remains attractive amid increasing constraints on supply." Making a differentiation between China and India, Harris explained that industrial activity has played a major role in China's growth, while India is more focused on services. Although India is also considered a www.e-mj.com