Southern Copper Sees Earnings Gain as Mine Opens After Three-Year Stoppage

Aug 14, (Bloomberg) ----

Southern Copper Corp., the largest producer of the metal in Peru and Mexico, said rising prices and the restart of the world’s largest copper mine after a three- year stoppage will bolster earnings next year.

Southern Copper will invest $100 million in repair work to bring the Cananea mine back online after a strike ended in June, Chief Executive Officer Oscar Gonzalez Rocha said yesterday in an interview. The strike began in 2007.

"Our earnings will improve because prices were low during the crisis,” Gonzalez, who declined to give a specific profit forecast, said in Ica, Peru. “Prices will rise for copper, as well as gold, zinc and lead.”

Copper futures in New York more than doubled since the end of 2008. The metal dropped 1 percent to $3.2735 a pound at 12:53 p.m. New York time. Silver has risen 60 percent this year.

Southern Copper last year sold its 500,000 metric tons of copper output for an average price of $2.35 a pound. Annual output has declined from the 700,000 tons a year it produced in 2005, when Cananea was operating. The company has hired 3,000 workers to carry out repairs at the mine, Gonzalez said.

"The mine was in a very bad state as workers damaged electric substations and stole copper cables,” Gonzalez said. “We hope to restart production at the end of the year.”

Phoenix, Arizona-based Southern Copper said April 29 it may invest $3.8 billion to more than double Cananea production to 460,000 tons. Southern Copper plans to build a concentrator and molybdenum plants at Cananea, plus a copper smelter and power plant in the state of Sonora, he said.

The company is also planning to increase molybdenum output this year at its Cuajone and Toquepala mines in Peru on higher ore grades, Gonzalez said. The company is currently selling molybdenum at $15 per pound, he said.

Southern has begun wage talks with three of its eight Peruvian unions after contracts expired, Gonzalez said. Talks haven’t started yet with communities in the southern Andes on the $900 million Tia Maria project, which stalled after farmers protested against the company using the local water supply.

Southern Copper was little changed at $29.58 at 1:52 p.m. in New York Stock Exchange composite trading. The stock has risen 7.5 percent over the past year.