Lundin sees metals staying strong, nickel to star

By Carole Vaporean

NEW YORK (Reuters) - Lundin Mining Corp. (LUN.TO) takes a bullish view of base metals prices and sees nickel as the star performer amid delays in new supply and rising global demand, its vice chairman said on Wednesday.

"My view is that it's being driven by the impact of China, supported by increasing demand in India, Brazil and the emerging nations," Colin Benner told the Reuters Global Mining and Steel Summit.

Speaking by phone from Lundin headquarters in Vancouver, Benner said he thinks nickel, copper and zinc are in a long-term bullish cycle, driven by strong industrial and consumer demand, especially in emerging markets.

"There's just not enough product out there to satisfy their needs," he said. "I'd suggest that will keep prices buoyant for some time to come."

Judging by thin inventories, Benner said he thinks nickel, used primarily in stainless steel, will be the star.

Lundin is making its foray into the metal with the planned acquisition of Rio Narcea Gold Mines Ltd. RNG.TO.

"We're doing it cautiously," he said. "We're moving into sulphites and we suspect that we'll stay in that space for awhile."

Large laterite deposits, developed to fill robust demand for nickel, did not ramp up as rapidly as projected. A resulting shortfall in the raw material began starving smelters, Benner said.

"It's a bit of a phenomenon. Everyone is building. Everyone is growing," he said. "As a consequence, I think nickel will be stronger for longer than copper and zinc."

On Wednesday, nickel slid on the London Metal Exchange, along with the rest of the base metals complex, to close at $46,350 per tonne. Since early January, however, it has surged beyond anyone's forecast from a 2007 low at $30,100 a tonne.

Zinc is up about 18 percent and copper up 16 percent since the first quarter.

COPPER AND ZINC 'HUGE'

Benner called demand for both copper and zinc "huge," but he said zinc prices should gain more than copper this year and into early next year with less new zinc production expected. He sees copper stabilizing near current levels.

"I believe we're still in that metals super-cycle, but you'll see ups and downs along that super-cycle curve," Benner said.

Lundin's own order books are filled, he said, adding that 80 percent of copper output at its Neves-Corvo mine in Portugal is already committed to smelters, and the company has no trouble filling the rest.