JX Nippon Mining says Caserones costs balloon to $4.2 bln, up 40 pct

Company News 10:13:26AM Oct 12, 2013 Source:SMM

Fri, 11 Oct 10:30:00 GMT
 
 
* 150,000 tonnes of copper production a yr will start from mid-2014
* Caserones project to yield $408 mln a yr profit from 2015

(Recasts with details, comments)

TOKYO, Oct 11 (Reuters) - JX Nippon Mining & Metals Corp, parent of Japan's top copper smelter, said on Friday that its project cost at Chile's Caserones copper mine has ballooned to $4.2 billion, up 40 percent from its earlier plan due to spiking labour costs and bad weather.

The latest estimate doubles its original plan of $2 billion announced in 2010, which was revised to $3 billion in 2011 because of the strong Chilean peso and higher labour costs.

Since 2000, the cost of building and developing mines has spiralled as China's voracious appetite for natural resources boosted metal prices to record highs, increasing competition for resources and lengthening the time miners and contractors had to wait for key pieces of equipment.

"Due to a shortage of local construction workers, wages of these workers have soared 30 percent since 2011," Tatsuji Ota, an executive officer at JX Nippon Mining, told reporters.

A labour strike late last year and unexpectedly heavy snowfall between May and July this year at the Caserones also delayed construction and development and raised costs, he said.

The Caserones project, owned 75 percent by JX's unit Pan Pacific Copper and 25 percent by Japanese trading house Mitsui & Co Ltd. <8031.T>, will start operation in January next year and start producing 150,000 tonnes a year of copper concentrate from mid-2014, JX said. Previously, it planned to begin operating in October-December period this year.

The extra costs will be shared by the shareholders in a form of equity or a loan, but details have not been decided, Ota said.

Pan Pacific is 66 percent owned by JX Nippon Mining, which is under JX Holdings Inc. <5020.T>, and 34 percent by Mitsui Mining and Smelting <5706.T>.

"Even with the cost overrun and the weaker copper price this year, we can still make a profit," Ota said. "But the latest cost hike means the cost of the project will not be covered until 2021, two years longer than previously projected."

The project is slated to generate 40 billion yen ($407.79 million) in pre-tax profit per year from 2015.


COOLING INFLATION

Development costs across the mining industry escalated during the boom years as miners competed for equipment and workers, but most say that has now begun to cool as miners pull back on spending.

Diego Hernandez, who took the helm at Chilean miner Antofagasta Plc last year, said earlier this week that he expects the cost of new projects to fall further following two years of declines, as copper prices weaken into 2014, taking the steam out of rampant inflation that has hampered development.

Antofagasta has struggled, along with peers, to contain operating costs and the cost of building and expanding mines in an environment of rising prices over the last decade. But Hernandez said project costs had already dropped 10 to 15 percent in the last two years.

"We don't feel that that's enough because project costs have increased much more than any inflation rate," Hernandez said in an interview, on the sidelines of London Metal Exchange week.[ID:nL6N0HY28X]

($1 = 98.0900 Japanese yen)

 

(Reporting by Yuka Obayashi; Editing by)

((Yuka.Obayashi@thomsonreuters.com)(+813-6441-1798)(Reuters Messaging: yuka.obayashi.thomsonreuters.com@reuters.net))
 

Key Words:  JX MINING/CASERONES 

JX Nippon Mining says Caserones costs balloon to $4.2 bln, up 40 pct

Company News 10:13:26AM Oct 12, 2013 Source:SMM

Fri, 11 Oct 10:30:00 GMT
 
 
* 150,000 tonnes of copper production a yr will start from mid-2014
* Caserones project to yield $408 mln a yr profit from 2015

(Recasts with details, comments)

TOKYO, Oct 11 (Reuters) - JX Nippon Mining & Metals Corp, parent of Japan's top copper smelter, said on Friday that its project cost at Chile's Caserones copper mine has ballooned to $4.2 billion, up 40 percent from its earlier plan due to spiking labour costs and bad weather.

The latest estimate doubles its original plan of $2 billion announced in 2010, which was revised to $3 billion in 2011 because of the strong Chilean peso and higher labour costs.

Since 2000, the cost of building and developing mines has spiralled as China's voracious appetite for natural resources boosted metal prices to record highs, increasing competition for resources and lengthening the time miners and contractors had to wait for key pieces of equipment.

"Due to a shortage of local construction workers, wages of these workers have soared 30 percent since 2011," Tatsuji Ota, an executive officer at JX Nippon Mining, told reporters.

A labour strike late last year and unexpectedly heavy snowfall between May and July this year at the Caserones also delayed construction and development and raised costs, he said.

The Caserones project, owned 75 percent by JX's unit Pan Pacific Copper and 25 percent by Japanese trading house Mitsui & Co Ltd. <8031.T>, will start operation in January next year and start producing 150,000 tonnes a year of copper concentrate from mid-2014, JX said. Previously, it planned to begin operating in October-December period this year.

The extra costs will be shared by the shareholders in a form of equity or a loan, but details have not been decided, Ota said.

Pan Pacific is 66 percent owned by JX Nippon Mining, which is under JX Holdings Inc. <5020.T>, and 34 percent by Mitsui Mining and Smelting <5706.T>.

"Even with the cost overrun and the weaker copper price this year, we can still make a profit," Ota said. "But the latest cost hike means the cost of the project will not be covered until 2021, two years longer than previously projected."

The project is slated to generate 40 billion yen ($407.79 million) in pre-tax profit per year from 2015.


COOLING INFLATION

Development costs across the mining industry escalated during the boom years as miners competed for equipment and workers, but most say that has now begun to cool as miners pull back on spending.

Diego Hernandez, who took the helm at Chilean miner Antofagasta Plc last year, said earlier this week that he expects the cost of new projects to fall further following two years of declines, as copper prices weaken into 2014, taking the steam out of rampant inflation that has hampered development.

Antofagasta has struggled, along with peers, to contain operating costs and the cost of building and expanding mines in an environment of rising prices over the last decade. But Hernandez said project costs had already dropped 10 to 15 percent in the last two years.

"We don't feel that that's enough because project costs have increased much more than any inflation rate," Hernandez said in an interview, on the sidelines of London Metal Exchange week.[ID:nL6N0HY28X]

($1 = 98.0900 Japanese yen)

 

(Reporting by Yuka Obayashi; Editing by)

((Yuka.Obayashi@thomsonreuters.com)(+813-6441-1798)(Reuters Messaging: yuka.obayashi.thomsonreuters.com@reuters.net))
 

Key Words:  JX MINING/CASERONES