March 6, 2012 / 7:05 PM / 7 years ago

WRAPUP 3-Codelco boosts investment, sees tight copper market

* Codelco says China demand firm; Europe has picked up
    * Miner expects tight supply-and-demand dynamic
    * Codelco to invest record $4.3 bln this year
    * Output seen dipping to 1.7 mln tonnes in 2012

    By Alexandra Ulmer and Fabian Cambero	
    SANTIAGO, March 6 (Reuters) - The world's top copper
producer, Chile's Codelco, said on Tuesday it will
invest a record of more than $4.3 billion this year and sees
output dipping slightly in what it forecasts will remain a tight
market, with firm demand from No. 1 consumer China.	
    The state miner expects its output to dip to 1.7 million
tonnes in 2012 from 1.735 million last year, before picking up
sharply as of next year as new projects come on line.	
    Codelco has several key projects planned as part
of a long-term investment valued at about $17 billion to boost
output to more than 2.1 million tonnes by 2020 and counteract
dwindling ore grades.	
    Codelco, which owns around 11 percent of the world's copper
reserves, has also been battling labor strife, extreme weather
and energy problems in Chile, which mines a third of the world's
    The copper giant will boost investment 70 percent from last
year, pouring money into more than 30 studies and projects to
maintain its leadership.	
    Among crucial projects are the $3.8 billion transformation
of century-old Chuquicamata, the world's No. 1 open-pit mine,
into an underground operation and the expansion of Andina, aimed
at doubling that mine's output to around 600,000 tonnes per
    Chile boosted its overall mining investment estimate by 37
percent to around $91 billion by 2020, the mining ministry said
separately on Tuesday, as robust growth in emerging nations
buoys miners to increase production of key metals.Codelco's CEO Diego Hernandez said copper prices should hold
near last year's levels if the market remains tight, adding
China's copper market was firm. 	
    The metal, used in power and construction, posted its first
annual decline in three years in 2011 when it lost a fifth of
its value on fears related to the euro zone debt crisis and a
global economic slowdown. 	
    Prices have recovered to gain around 9 percent so far this
year, with three-month copper on the London Metal Exchange
 closing at $8,289.50 a tonne on Tuesday. 	
    "The demand-and-supply equation this year is going to be
pretty tight," Hernandez told a news conference. 	
    Copper inventories in warehouses monitored by the Shanghai
Futures Exchange rose to their highest in nearly a decade, data
showed last week, suggesting oversupply in China.
    "This has happened in previous cycles and it didn't affect
prices," Hernandez said. "We don't see any weakness in China
yet, but we always have to remain vigilant."	
    Chinese mainland consumers will likely use up the material,
which probably will not be diverted to other markets, said Cesar
Canali, head of metals for Latin America at Newedge brokerage in
New York. On the fundamentals side, he said the market was
chronically short of material and unlikely to tip into surplus.	
    Hernandez said European demand had picked up in recent weeks
and stronger-than-expected economic data in the United States
suggested that market would help compensate for a potential sag
in Chinese demand.	
    He said Codelco had no plan to issue debt this year or
exploit projects linked to lithium reserves.	
    The state mining giant has held no new negotiations with
global miner Anglo American amid a clash over a stake
option, reiterating that a court battle remained the most likely
route to resolve the dispute, he said.	
    The mining titans have been embroiled in a bitter spat after
Anglo preemptively sold 24.5 percent of its south-central
Chilean properties, frustrating Codelco's bid to exercise an
option to buy up a 49 percent stake in them.
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