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Rio Tinto sees short-term volatility for copper

Keywords: Tags  Rio Tinto, Andrew Harding, copper, Oyu Tolgoi, molybdenum, Thorsten Schier

NEW YORK — Volatility in the copper market is likely to continue in the short term due to macroeconomic factors, even as the long-term growth of the industry is assured, according to a top executive at Rio Tinto Plc.

"While we expect continued volatility in the short term, the copper market’s long-term fundamentals are robust," Andrew Harding, chief executive officer of Rio Tinto Copper, said at Dahlman Rose & Co.’s third annual Global Metals, Mining and Materials Conference in New York.

Even while most economic statistics "indicate that we’re going through a period of painful slowdown, particularly in Europe," and the current market weakness could continue into the beginning of 2013, some of the negative short-term economic factors are already showing signs of lifting, he said.

"The recent deceleration in the Chinese economy is showing signs of stabilizing," Harding said, noting that the full extent of recently announced stimulus measures might not be seen until after the country’s political transition.

The global copper market likely will be in a slight surplus for the next couple of years before demand growth and supply cutbacks will again result in a tight market, he said.

In the long run, growth from emerging markets like China will continue to increase copper demand, Harding said. "As billions of people urbanize across the globe, demand for Rio Tinto’s products will grow. The electrification and urbanization of emerging markets will drive copper demand growth through the next decade," he added.

Coupled with growing demand, long-term supply constraints also should keep prices at high levels. "Prices will need to remain robust to incentivize future development," Harding said, adding that about 1.8 million tonnes of copper production will need to be replaced by 2016 due to mine closures, even as mine development costs continue to increase.

Rio Tinto is less than two months away from starting up its Oyu Tolgoi copper-gold project in Mongolia, with commercial production expected to be reached in the first half of 2013. The mine is expected to produce 425,000 tonnes of copper annually at full capacity.

Recent saber rattling by some Mongolian political groups about resource nationalism are unlikely to affect the project, Harding said. "I have full confidence that the investment agreement (with the Mongolian government) is highly respected," he said.

Rio Tinto will start the molybdenum autoclave at its Utah copper-molybdenum mine in the first half of 2013, which will improve recovery grades and allow the facility to process lower grades of molybdenum, according to Harding.

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