* China orders down, warehouse stocks high
* Miners costs soar, accessible projects dwindle
* Africa seen as growth area
By Susan Thomas and Julie Gordon
SANTIAGO, April 9 Rising costs, falling demand and the dearth of quality new projects dominated talk for the second year in a row at an annual copper conference in Chile, creating a decidedly subdued mood at the gathering of the world's top copper miners.
Orders from China are down, warehouse stocks of the metal are at a 10-year high and the London Metal Exchange benchmark price has remained stubbornly below $8,000 per tonne, partly due to a deeper market surplus this year.
Chief executives attending the CESCO/CRU copper conference in Santiago acknowledged that something needs to be done, but no one had immediate answers. This was during a 24-hour strike by Codelco's workers over better pensions and job security that threatened to dent the state-owned miner's output.
The only presenter to break free from the monotony of slowing Chinese growth rates and cost risks was charismatic financier Robert Friedland, a guru of the junior mining sector, who proclaimed Africa the new horizon for growth.
Rio Tinto copper division chief executive Jean-Sebastien Jacques predicted that by 2015 copper production would begin to drop off on the back of a decline in ore grades.
Between 2012 and 2024 the industry will need to add an increment of 4 million tonnes of annual capacity just to maintain 2012 levels of mine production.
"So while the industry must make significant investment to maintain current production, we're also facing structurally high operating and capital costs," Jacques told the conference.
"And the challenge of moving a project from a blueprint into a producing mine requires us to be much more disciplined in our approach to developing projects."
COSTS SEEN RISING
Cost escalation in Chile, the world's largest producer of copper, will be driven mainly by power and labor. Those labor costs, though, will not be fully offset by productivity, and a rising Chilean peso is hurting.
"We're victims of our own success," lamented Thomas Keller, chief executive of Codelco, which produces a third of the world's copper supply. Keller spoke of an "explosion" in costs.
Copper mining costs around the world rose by about 30 percent between 2007 and 2012, mostly due to labor and fuel, but also on declining ore grades and stronger currencies in some regions, said Vanessa Gordon, consultancy CRU's group manager copper.
In Chile, though, costs had risen 60 percent over the same five-year period, she said.
"If the cost escalation continues, then we're likely to see a situation where Chile become a lot less competitive," she said.
As for the price of the metal, FCStone analyst Ed Meir noted a "somewhat guarded mood". Most people he spoke to saw the price of copper moving somewhat lower this year, but no one was calling a big fall.
A few bright spots are a rebound in U.S. housing activity and an expected uptick in Chinese demand this quarter, typically a strong one. Further strikes in Chile during the electoral year could put a dent in output, potentially reducing global supply.
GROWTH SEEN IN AFRICA
Delegates noted the absence of Chinese participants at the meeting.
But breaking the gloom at the staid copper meeting was Friedland, who gave little credence to worries over slowing Chinese growth rates and proclaimed Africa the region with the most growth potential.
"This is the beginning of the African decade," he told a packed room. "When you take out of the obvious places you might not want to go in Africa, the rest of it is very interesting."
Known for his talent for picking winners in a risky business, the outspoken financier was in town to trumpet his latest venture, Ivanplats Ltd, which is developing projects in South Africa and the Democratic Republic of Congo.
"Global inflows of capital to Africa are now at a two-year peak, everybody and his brother are getting interested," he said, noting "Asian-like" GDP growth rates in countries like Ethiopia and Mozambique.
"This is a continent whose average GDP growth last year was 5.8 percent, and that includes really horribly run countries where we might not want to go - like Somalia," he said.