While much of the world has focused on the export of petroleum and other hydrocarbons as the principal player in South American economic development, the mining industry has very quietly been doing quite well on its own, thank you very much.

Currently, copper prices are in excess of $3 a pound – a price that is more than four times the metal was selling for five years ago. The push in construction in developing countries, particularly China, has been the engine behind the surge.

The International Copper Study Group reports that copper production rose to 15.17 million metric tonnes last year, an increase of 290,000 tonnes over 2005. Total production this year is targeted at 16.20 million metric tonnes. ICSG expects growth of about 4.2 percent this year or about 725,000 tonnes.

The result has been an increase in production on the part of mining companies like Codelco and BHP Billiton to take advantage of higher prices. Last week, the sixth annual Commodity Research Unit World Copper conference took place in Santiago, Chile, and with prices for the metal continuing to remain high, the outlook of the participants is optimistic.

According to The Australian, many big players are planning on pouring some serious money into the copper industry in the near future; BHP investing $17.3 billion in the next five years, Codelco spending $11.5 billion to expand capacity by 2012 and Anglo American committing $7 billion, and Bechtel pondering an investment between $10 billion and $15 billion.

But the success has come with headaches as well. Chile's Escondida mine, the world's largest copper mine, operated by BHP Billiton, saw production fall in 2006 due to the 25-day strike over wages. In addition, big mines are feeling shortage on big equipment as well with yearlong waits for heavy machinery and tires becoming commonplace.

Despite those obstacles, companies have been aggressive in increasing production. Last month BHP unveiled its Spence copper mine in northern Chile which will produce 200,000 tonnes of copper cathodes a year when it reaches its capacity in the third quarter of 2007.

Industry giant Southern Copper stated at the conference that it wants to double production by 2012 with expansions at its Mexican and Peruvian mines. The company expects copper production at close to 700,000 tonnes this year.

The company has announced major expansion projects for its Cananea mine in Mexico and at Cuajone and Toquepala in Peru. It also has copper projects at Tia Maria and Los Chancas in Peru.

And others are working hard to get involved in the boom as well. Last month a new project, the $10 million Canariaco Norte copper project in northern Peru was listed in Lima. The owner Canada's Candente Resources Corp. says they hope to have the facility online by 2009.

Yet some are being a bit more sanguine about copper’s future. The lofty price of copper in the US took a significant tumble earlier this year due to the drop of homebuilding and the lower spending in the construction industry. That downturn was offset in late March when copper prices reached a three-month high on improved U.S. housing data and tight global supplies.

Furthermore some analysts believe that rising global inventories indicate a weakening demand and the increased production allied with growing stockpiles will turn the bull market bearish.

The International Copper Study Group preliminary data for 2006 showed a production surplus of 350,000 tonnes, as compared to a production deficit of 100,000 metric tonnes in 2005 and a cumulative production deficit of 1.45 million tonnes between 2003 and 2005. Global inventories have increased only about 237,000 tonnes.

Bloomberg recently reported that tockpiles monitored by warehouses in London, Shanghai and New York were at the highest levels since June 2004.

Despite those concerns, many of the major players insist the future of metals will remain rosy for the foreseeable future.

``I'm excited about what we'll see over the next several decades as 2.5 billion people in China and India and other parts of the developing world enter the world economy,'' said BHP Billiton Ltd. Chief Executive Officer Chip Goodyear in an interview with Bloomberg in Santiago last week. ``Is China and India the next reason for a multidecade increase in commodity prices? We're positive about that.''

April 11, 2007

China and India have 3/5 of the world's population and people in both countries are just now waking up to what "could be" if they capitalize as in the U.S., Europe, and Japan! Expansion in China and India will dominate the world markets for the next decade if not longer! Anyone who doesn't believe this has their head in the proverbial sand!

Thomas Lanza
Director of Business Development
Monument Constructors, Inc.