DESPITE a number of miners reconsidering the pace of their long term expansion plans amid global economic concerns Xstrata Copper, the world’s fourth largest copper producer, has committed to a multi-billion dollar development of its Latin American copper projects.
The company’s Latin American operations account for 70 per cent of its earnings before interest and taxes (EBIT), and underpin its new $7 billion commitment to a 60 per cent boost to total annual copper output by 2015.
“We are currently producing 900,000 tonnes per annum to contribute 42 per cent to the parent Xstrata group’s EBITDA [earnings before interest, tax, depreciation and amortisation] of US$11.6 billion, but are looking to annual output nearer 1.5 million tonnes per annum,” Xstrata Copper chief executive Charlie Sartain said at the inaugural Paydirt 2012 Latin American Downunder Resources Conference on May 22.
“This is an ambitious program and a strong growth pipeline but new projects now under construction or development in Peru and Chile and to some extent, Argentina, will help to progressively deliver this objective.
“The growth strategy will also extend some of our existing mines lives and reduce our overall unit costs to emerge by 2015 as a leading custom concentrate copper producer.”
Xstrata Copper boasted an operating profit of US$3.9 billion in 2011, with its Latin American operations contributing 68 per cent.
Mining investment in Latin America has more than doubled in the past 10 years, with a report by the Metals Economic Group, World Exploration Trends 2012, declaring it the foremost destination for mining exploration investment in the world.
More than $425 billion in investments have already been announced for the next five to ten years, with a focus on Chile, Peru and Colombia, from companies including Xstrata, BHP Billiton and Rio Tinto.
“We are making the transition to an exciting new era of copper operations, particularly in Chile and Peru, and several projects will need to have development decisions made on them within 18 months,” Mr Sartain said.
“This next major phase will take in the current US$90 billion Xstrata-Glencore merger.
“Once complete, this should deliver a copper business spanning four continents and 10 countries, at which point we will progressively become the leading copper miner and major participant in the global copper smelting and refining industry.
It will also give us a strong entry into Africa’s copper potential.” Glencore and Xstrata’s all-share merger, announced in February, will create a commodities powerhouse spanning mining, agriculture and trading.
By Reuben Adams