Nippon Mining Seeks Higher 2010 Copper Fees After Yen Advances

TOKYO, Nov. 25 -- Nippon Mining & Metals Co., Japan's top copper smelter, wants to charge mining companies higher 2010 processing fees compared with mid-year levels after the yen's gain and lower byproduct prices cut revenue.

    "Given the tough business environment for smelters, we want higher treatment and refining charges for 2010," Masanori Okada, president and chief executive officer of Nippon Mining & Metals, said today in an interview in Tokyo, without specifying a level. The company is a unit of Nippon Mining Holdings Inc., which owns 66 percent of Pan Pacific Copper Co.

    Japanese smelters have met with Freeport-McMoRan Copper & Gold Inc. and BHP Billiton Ltd., the world's largest mining company, in the past two weeks and outlined the effect of lower byproduct prices, such as sulfuric acid, a slowing economy and the yen's strength, Okada said. The two sides earlier this year agreed to a 33 percent fee cut for contracts started in July.

    "We are hearing that one mining company has indicated the 2010 fees at $45 a ton and 4.5 cent a pound" while smelters have wanted around $60 and 6 cents, Okada said. Fees were set at $50 a metric ton and 5 cents a pound mid-year, down from $75 a ton and 7.5 cents a pound for contracts started January.

    Treatment fees are expressed in dollars per ton of semi- processed ore received and refining fees in cents per pound of copper in the ore. The fees are deducted from the price paid by smelters to miners for the raw material, known as concentrate.

    Yen Advances

    The yen has gained about 8 percent against the dollar since the end of June, reducing sales in Japanese currency terms. The yen traded at 88.54 per dollar at 8:31 a.m. Tokyo time.

    Sulfuric acid, a byproduct of copper production, dropped to less than $10 a ton in the six months ended Sept. 30, from $135 a ton a year earlier, London-based Vedanta Resources Plc, the largest copper producer in India, said Nov. 5.

    Mid-year fees slumped because of a shortage of concentrate as smelters competed for supplies from mining companies. The global deficit of the raw material may rise five-fold to 1 million tons next year, Christine Meilton, an analyst at London- based research company CRU, said Nov. 9.

    Copper for delivery in three months rose 0.5 percent to $6,905 a ton on the London Metal Exchange at 10:06 a.m. Tokyo time. The price has more than doubled this year as China's imports rose to a record.

    Mine Investments

    Nippon Mining plans to increase raw material procurement rates from its own mine investments to 50 percent by 2015 from less than 20 percent currently as the Caserones copper and molybdenum deposit in Chile and the Quechua copper deposit in Peru start production, said Okada, also chairman of the Japan Mining Industry Association. The company is investing a total $2.3 billion in the projects, he said.

    Nippon Mining also plans to boost cooperation with existing mines by using advanced metal-recovery technologies, Okada said.

    The company and Newcrest Mining Ltd. in Australia have tested the Nikko Chloride Process that helps recover copper and gold from lower-grade concentrate, prolonging mine life, he said.

    Nippon Mining also established BioSigma SA with Codelco in Chile to study the use of microorganisms in electrolytic copper production. BioSigma and Codelco plan to apply the technology on a commercial basis to the Chilean company's copper deposits by the end of next year.

    (Source: Bloomberg)