SINGAPORE It has been a year of project delays and
deferrals for the copper market, underlining the continued
challenges in bringing supply up to speed with demand.
The latest of these has been at
Xstrata Plcs Tampakan copper-gold project in the
Philippines, where output has been pushed back three years to
2019. The $5.9-billion operation was hit by a local government
ban on open-pit mining and delays in getting environmental
clearance, among other challenges.
Such bottlenecks are making
investors wary of funding operations in the Philippines, the
fifth-most mineralized country in the world and fourth for
Xstrata, a majority shareholder
in the Frieda River copper-gold mine in Papua New Guinea, is
considering selling its stake in the project as it reviews its
Among the reasons behind
producers delays or deferrals are high capital and labor
costs; political legislation; bureaucracy; water or energy
availability; environmental factors; and lower ore grades,
among others. While these factors constrain supply and support
copper prices, they can make project development a risky
In Chile and Peru, water
availability is a big problem, while Australia has high labor
Newmont Mining Corp.s
$5-billion Minas Conga copper-gold project has been postponed
this year as local farmers in Peru protested, saying the mines
would dry up water supplies.
Chiles mines have been
facing an energy shortage for years, and in October state-owned
Corporación Nacional del Cobre de Chile (Codelco) said
power shortages would hit new copper projects in Chile (
amm.com, Oct. 17).
"We represent 33 percent of the
worlds copper production, and China consumes 42 percent
of the worlds copper, so its important for China
that Chile solve its energy problems," Chilean Mining Council
president Joaquin Villarino said in November.
Last month, Codelco chief
executive officer Thomas Keller said its large projects were
still on track.
Codelco invested about $4
billion in 2012some $300 million lower than
forecaston the five major projects the Chilean producer
is undertaking to develop its capacity.
"There have been some minor
delays in the initial phases of construction, but the
$4.3-billion figure was developed in August 2011, and the
delays are nothing major," Keller told AMM sister
publication Metal Bulletin. "Underground mines take
six or seven years to fully develop, and really getting the
phasing of spending right in the beginning is very
BHP Billiton Plc in August
shelved an expansion at its $20-billion Olympic Dam
copper-uranium project in Australia (
amm.com, Aug. 22), citing lower metal prices and
higher costs, again bringing the commodities supercycle debate
to the forefront.
"As we finalized all the details
of the project in the context of current market conditions, our
strategy and capital management priorities, it became clear
that the right decision for the company and its shareholders
was to continue studies to develop a less capital-intensive
option to replace the underground mine at Olympic Dam," BHP
chief executive officer Marius Kloppers said.
The project delays announced so
far this year are unlikely to immediately hit the market, but
they will have a longer-term impact. Copper stocks are seen
moving into a surplus in 2013.