March 1 (Bloomberg) -- Codelco, the world's largest copper producer, said it will meet supply contracts after power cuts caused by an 8.8-magnitude earthquake forced the company and rivals such as Anglo American Plc to halt mine operations.
The state-owned company can compensate for any shortfalls from its affected El Teniente and Andina mines with shipments from undamaged plants in Chile's north, according to a company official briefed on the plans. The company ruled out declaring force majeure, a contractual clause that allows companies to miss obligations because of circumstances beyond their control.
Codelco began a "gradual" restart of operations at the 381,000 ton-a-year El Teniente underground mine in central Chile yesterday after reconnecting the power supply cut by the earthquake. The temblor didn't cause any significant damage to equipment, the company said. The 219,554 ton-a-year Andina mine remained closed through yesterday after a power failure.
"Fortunately, most of Chile's production is up north," Michael Widmer, a strategist at Bank of America-Merrill Lynch in London, said yesterday in e-mailed comments to Bloomberg News. "Mines especially in Chile are generally built in a way so they can withstand these quakes, but this was a big one."
The May-delivery copper contract gained as much as 20.3 cents, or 6.2 percent to $3.4870 a pound before trading at $3.4450 at 11:26 a.m. Sydney time in after-hours electronic trading on the Comex division of the New York Mercantile Exchange. That was the largest intraday gain for the most-active futures since April.
Andina may reopen later today after the power cut and a five-ton bould damaged installations, according to the Codelco official. The Ventanas smelter that processes copper concentrates from Andina is closed for programmed maintenance, according to the official.
Anglo American Plc said Feb. 27 its Los Bronces and El Soldado mines in Chile stopped operating after power cuts. The two mines produce about 280,000 tons annually. Power to the installations was "partially restored" yesterday, spokesman Pranill Ramchander said in e-mailed comments, without giving more details on whether the company was planning a restart.
Copper exports made up about half of Chile's $53 billion of exports last year. The country's production of the metal used in pipes and wiring climbed 0.7 percent to 5.4 million metric tons in 2009. The metal's price has more than doubled in the past 12 months as the world economy recovers. The halted Codelco and Anglo mines account for about 16 percent of output in Chile.
The Chilean ports of Valparaiso and San Antonio, through which El Teniente ships its copper, remain closed to new ships, Raul Maturana, secretary general of the National Federation of Port Workers of Chile, said in a telephone interview. Trucks with cargo aren't leaving the ports either, he said.
There will be a new coordination meeting at 10 a.m. local time with port authorities to evaluate when normal activities may resume, he said.
Bypasses have been set up to reconnect highways in the country after the temblor blocked the country's main thoroughfare at several points south of Santiago, Jose Abumohor, a spokesman for the National Emergency Agency, said during a televised news conference late yesterday.
Chilean Air Force
The Chilean Air Force yesterday began ferrying rescue workers, police and other security forces in hourly flights to the city of Concepcion, close to the epicenter of the quake.
Concepcion is 200 miles (320 kilometers) southwest of the Chilean capital of Santiago. Special forces troops and police with sniffer dogs are among the rescue workers entering the worst affected areas of southern Chile after the quake, which killed more than 700 people.