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Copper concentrate supply faces shortfall

Keywords: Tags  Freeport-McMoRan Copper & Gold, Javier Targhetta, copper concentrates, Cesco Week, Center for Copper and Mining Studies, Barbara O'Donovan

SANTIAGO, Chile — Global copper concentrate supply could be facing a 2012 shortfall of up to 300,000 tonnes against smelting capacity, according to Freeport-McMoRan Copper & Gold Inc. senior vice president of sales and marketing Javier Targhetta.

"I think (concentrate supply) will be rather tight, swinging from tight to balance from the next few years," he told AMM in an interview Tuesday in Santiago during Cesco Week events hosted by the country’s Center for Copper and Mining Studies.

The concentrate market is expected to remain tight for several years as new projects are delayed and ore grades drop at existing mines, he said.

"As much as companies are developing projects and fostering organic growth, I think that there are limitations in catching up," Targhetta said.

As concentrate supply grows increasingly tight, a number of miners have moved to negotiate copper concentrate treatment and refining charges (TC/RCs) more frequently, but Targhetta said Freeport plans to continue to negotiate its TC/RCs on a yearly basis.

"That approach might be happening by different companies, but this year with the companies that did short-term negotiations there was a $1 or $2 difference between their price and ours. It’s so little difference it does not matter anyway," he said.

While a number of products, like iron ore, have moved to quarterly pricing, this isn’t an approach Freeport wants for copper, Targhetta said. "I believe in long-term business and long-term contracts," he added.

At the same time, Freeport stands by its decision to grow organically rather than through acquisition, Targhetta said. "Organic growth is a much more certain investment," he said. "By acquiring, you are giving value away to other shareholders; by growing what you already have, (it) gives value to your shareholders."

His comments came less than a day after Corporación Nacional del Cobre de Chile (Codelco) chief executive officer Diego Hernandez said the trend is moving back toward acquisitions rather than building new projects (AMM, April 18).

"We are happy with our portfolio distribution," Targhetta said, noting that Freeport remains optimistic about copper demand in the long term.

"It’s been flat to declining in Europe and going up in the United States, but China is more of a roller coaster," he said. "In the long term, we are very positive; we think there is a lot to be done in China."

The recent slowdown in Chinese activity isn’t concerning, as the company is focusing instead on the longer-term needs of the country, Targhetta said.

"We’ve seen the level of inventories dropping a little or staying the same during the biggest crisis in 100 years, (and) that says a lot," he added.

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