By Frank Jack Daniel and Vanessa Padilla
MEXICO CITY (Reuters) - Southern Copper (SPC.LM: Quote, Profile, Research, Stock Buzz) sees little or no EBITDA growth this year because lower copper prices will offset a jump in output, the mining company's chief financial officer said on Friday.
Speaking at the Reuters Latin American Investment Summit in Mexico City, Eduardo Gonzalez said weaker U.S. demand for copper may even reduce the company's earnings before interest, taxes, depreciation and amortization (EBITDA) compared with last year's level.
"If we hang around the $2.80 to $2.90 level (for copper prices), I think our EBITDA should be just as strong or a little stronger than last year," he said. "If it is not, then it is not going to be as strong as last year."
Southern Copper (PCU.N: Quote, Profile, Research, Stock Buzz) expects to produce about 696,000 tons of the orange metal in 2007, up 15 percent from last year when major strikes closed its top Mexican mines for months.
Gonzalez said he expected no labor disruptions in 2007, despite an ongoing leadership dispute that has split Mexico's mine-workers union.
He said that despite sustained or stronger demand from China, a slowdown in the U.S. home construction market, a major copper consumer, would weigh on prices for the metal.
"This has to work its way down," he said. "We still see stable prices going forward, albeit I'm not sure it will remain at the $3-plus level."
Copper prices hit $3.1330 a lb in pre-session trading on Friday, its highest level since December. Copper averaged over $3 a lb on New York's COMEX exchange last year.
Southern Copper's growth plans are largely focused on expansion projects at its main mines and properties in the mid-term, Gonzalez said. A large green-field site in Mexico's Baja California peninsula would not be developed in the near future, he said.
He said Southern Copper was always on the lookout for acquisition opportunities but said that after a spurt of takeovers last year there was little in the mining sector that would interest Southern Copper.
"Less companies are available today than they were just a year ago. Consolidation has been rampant and that leaves us with relatively few alternatives," he said.
Southern Copper looked closely at making acquisition bids for rivals Phelps Dodge and Freeport last year but backed off in the end, Gonzalez said.
"At the end of the day we thought that it was not the best timing for us to go into the fray of things," he said.
He also said it was highly unlikely Southern Copper's parent company Grupo Mexico (GMEXICOB.MX: Quote, Profile, Research, Stock Buzz) could itself be taken over, even as other miners hunt for takeover opportunities.
Grupo Mexico is controlled by German Larrea and other members of the Larrea family. Continued...
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