Sheets of copper cathode are seen at a copper cathode plant inside the La Escondida copper mine near Antofagasta city, north of Santiago in this March 31 2008 file photo.  Picture: REUTERS
Sheets of copper cathode are seen at a copper cathode plant inside the La Escondida copper mine near Antofagasta city, north of Santiago in this March 31 2008 file photo. Picture: REUTERS

Santiago — Anglo American is looking past global trade tension and local political upheaval as it moves towards a multibillion-dollar decision on building the world’s next major copper mine, in Peru.

The London-based company was on track to present the Quellaveco project to its board around midyear and was close to bringing in a partner to shoulder some of the cost, Hennie Faul, the head of Anglo’s copper business, said in an interview in Santiago on April 6.

Anglo had secured a permit and was reviewing a feasibility study along with its 18% partner in the project, Japanese conglomerate Mitsubishi.

Mitsubishi has said it is in talks with Anglo about increasing its stake.

Faul said there had been plenty of interest from other prospective buyers. Anglo intended to retain at least a 51% ownership and remain as operator, he said.

While Faul declined to identity other interested parties or the size of the stake to be sold, he said the sale process was "happening right now" and would be part of the project’s approval.

"Mitsubishi is part of that process as well, but there’s been lots of interest from others," he said. "That just shows Quellaveco is a good resource but also that there is a lot of interest in copper."

Supply struggles

Speaking on the eve of the annual Cesco Copper Week gathering in Santiago, Faul painted a positive picture of the metal’s longer-term prospects.

While producers were emerging from a sharp price downturn with stronger balance sheets and healthy margins, they would struggle to keep up with demand after years of belt-tightening given how expensive and slow it was to expand output, Faul said.

China’s economy, and thus its demand for the industrial metal, continued to grow, albeit at a slower pace, and electrification would help bolster the use of copper wiring, he said.

In the short term, warehouse stockpiles have risen, but they were still at levels that were supportive of current prices, said Faul, who predicted that the market would move into a slight deficit.

An escalating trade brawl between the US and China might push prices around for the next six months to a year, he said.

Peru turmoil

"I still believe the demand will be there; it is more the supply that becomes a question," he said. "It’s going to be tough to keep up even with slow-growth demand."

Given the challenges, producers probably will turn more towards deals to secure growth, although in Anglo’s case the focus remained on squeezing more value out of its current operations, Faul said.

At Los Bronces, northeast of Santiago, Anglo is using artificial intelligence and machine learning to bring down energy costs, for example. Pre-feasibility work is under way on expansion options at both Los Bronces and the Collahuasi mine in northern Chile.

Anglo has not been deterred by recent political turmoil in Peru, which culminated in March with the resignation of president Pedro Pablo Kuczynski after less than two years in office.

New President Martin Vizcarra has a record as a conciliator who defused protests in a country that has seen billion-dollar projects blocked by community opposition. The new energy and mines minister is Francisco Ismodes, who is a former mining executive.

Peru’s institutions mostly carried on during the political shifts, and Anglo did not expect any civil unrest. The board understoon the country and the Quellaveco project, Faul said.

"We have to manage those political uncertainties, but we don’t see that as a major risk for Peru," he said. "It’s not Venezuela by a long shot."

Bloomberg

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