Mexico Copper Output to Rise 5 Per Cent

2010 Production To Hit 250,000 Tonnes

Grupo Mexico Sees Country Becoming No 2 In World

Mexico’s copper output is expected to be 250,000 tonnes in 2010, a rise of 5% over the 2009 figure, according to the head of Grupo Mexico’s mining division, Xavier Garcia de Quevado told reporters on Wednesday.

He added that this figure did not include any output from the company’s Cananea mine near the US border, which has been shut for almost three years due to a strike by the mine’s workforce. A court recently ruled against the strike, but the union has refused to end its occupation of the facility.

Mr Garcia de Quevado said that the strike was blocking $5 billion in investments planned by Grupo Mexico for Cananea and the El Arco project in Baja California. The $2 billion El Arco is expected to start production on 2012; copper mined there and at other sites owned by Grupo Mexico would probably be sent to Cananea. Capacity at El Arco would be around 190,000 tonnes per year.

Cananea itself is line for a $3 billion investment which will boost output to 460,000 tonnes a year from the present 190,000 tonnes. Once El Arco and Cananea are working at full capacity, it is expected that Mexico will become the world’s second-largest copper producer behind Chile. Grupo Mexico is the country’s largest copper miner.

However there is no indication as to when Cananea will reopen. Despite the recent court ruling Mr Garcia de Quevado could not say if and when the unions are likely to hand back the facility to its management and indicated that the unions are still refusing to back down in the dispute, which is over health and safety issues.

Grupo Mexico Shuts San Luis Potosi Copper Smelter

Grupo Mexico copper-mining subsidiary, Southern Copper, said on Friday it had closed its copper smelter in San Luis Potosi, Mexico.

In a filing with the U.S. Securities and Exchange Commission Grupo Mexico said that all 300 workers at the smelter, which had been used to treat copper concentrate from a number of mines in Mexico, will be laid off.

No reason was given and the company expects no material charges due to the closure.

The smelter had an annual capacity of 230,000 tonnes per year, according to the company's website.

Southern Copper Sees Prices Remaining Strong In 2010

Southern Copper Corp - a subsidiary of Grupo Mexico - said on Tuesday it expects average copper prices of $3.25 per pound in 2010, as it expects demand to be boosted by emerging and developed economies.

The price of copper rose 140 percent in 2009 on strong Chinese buying and supply concerns, but fell 8.5 percent in January as rising inventories suggested demand outside China was weak. Current price is a little over $3 a pound.

"We believe that inventories of copper will start to die off during the year, reversing the last month's trend," Southern Copper's Chief Financial Officer Genaro Guerrero said on a conference call with buying from emerging economies like China supporting prices through this year. Mr Guerrero also said that he expected consumption to rise in developed countries.

Southern Copper estimates copper production for this year at 500,000 tonnes, slightly above the 485,376 tonnes it mined this year, with molybdenum production forecast at 18,500 tonnes, in line with last year's output. Zinc sales this year are expected to be around 110,000 tonnes and silver sales to come in near 16 million ounces.

The company's 2010 copper forecast does not include potential output from the Cananea copper mine in Mexico, which usually produces around 20 per cent of the company’s copper but which has been closed by a strike for two years. The company was not able to give an estimated date for production to re-commence at Cananea.

Earlier this week copper trader Mr David Threlkeld said he expected the price of copper to plunge to around $1 a pound as he believed there to be much higher inventories than have been reported.

Sterlite Close To Buying Asarco

Sterlite Industries (India) Ltd is close to deal to buy Grupo Mexico's troubled US copper mining subsidiary, Asarco. The companies have reportedly agreed on a dollar value for the sale of Asarco’s assets and other major points of a proposed contract which may be signed within two weeks.

It is understood that Sterlite would pay less than the $2.6 billion it offered for Asarco last year before copper prices fell. The original sale was part of a plan to reorganize the company, pay off its debts and allow the miner to leave court supervision intact after four years in bankruptcy. However, Sterlite pulled out that sale in October saying that a drop in the copper market no longer justified the price.

Any sale may also end Grupo Mexico’s exposure to any asbestos lawsuits against Asarco.

Southern Copper Posts Fourth Quarter Loss

Southern Copper Corp, the Grupo Mexico unit that is one of the world's largest copper producers, posted a fourth-quarter net loss on Friday and slashed its 2009 capital and exploration budget amid plummeting metals prices.

The company reported a net loss of $124.7 million, compared with a profit of $310.9 million a year earlier on net sales down to $449.7 million from $1.294 billion.
For the full year, Southern Copper said net profit totalled $1.406 billion, down from $2.216 billion in 2007.

Profit fell on lower copper prices, which have plummeted in the global financial crisis. The company said the crisis has caused it to scrutinise or stop new projects.
For 2009, Southern Copper slashed its capital and exploration budget to $415.3 million from a prior estimate of $1.07 billion.

The company is currently evaluating putting on hold or stopping its Tia Maria project and has delayed spending at its Toquepala mine expansion project. Its metals projects at El Arco, Los Chancas and Angangeo remain under evaluation.

Grupo Mexico To Take Hit On Copper Price Plunge

Mexico's largest mining company, Grupo Mexico SAB, looks set to reduce the value of its booked copper sales in the fourth quarter after a plunge in copper prices.

The company records sales under a method known as provisional pricing, where sales on copper concentrate are booked at the time of shipment but are altered to reflect market prices when payment is received. Copper prices have fallen by almost two-thirds since hitting a high of $4.2605/lb.

“There will be an impact and it will be considerable,” said Juan Rebolledo, a spokesman for Grupo Mexico said.

However, Mr Rebolledo also said that the adjustment may be offset by hedges and exchange-rate fluctuations, Rebolledo said. The company is set to report fourth-quarter earnings on 30 January.

Rodrigo Heredia, an analyst with Ixe Casa de Bolsa SA, estimates the pricing adjustment could cause net income to fall 62 percent to $80 million in the quarter. with the price of recorded sales of copper and molybdenum cut by $231 million. The adjustments are limited to the fourth quarter and are unlikely to be repeated, he said.