Dow Jones Newswires - 25 Aug 2006

Imperial Set To Drill Giant Copper Property


VANCOUVER, BRITISH COLUMBIA - Imperial Metals Corporation announces that drilling will begin shortly on a 1,500 metre diamond drillhole at its wholly owned Giant Copper property.


The AM Zone, a breccia pipe with a horizontal dimension of 300 metres by 200 metres, is the most explored zone on the Giant Copper property. The breccia pipe has been explored since the 1930's by drifting, raising and diamond drilling over a vertical interval of 460 metres, and remains open for expansion to depth. The planned 1,500 metre drillhole will test the depth extent of this zone, with emphasis on the extension of the higher grade mineralization which is focused on the northern nose of the breccia pipe.

Drilling in 1995 and 1996 by Imperial continued to expand the known mineralization in both the AM Zone and Invermay Zone. AM Zone hole GSC95-5 located in the southern part of the breccia intercepted 0.64 metres grading 8.12 g/t gold and 7.0 g/t silver, and 26 metres grading 0.417% copper, 0.313 g/t gold, 16.0 g/t silver and 0.012% molybdenum.
Invermay Zone hole GCS96-4 intercepted 3.0 metres grading 0.658% copper, 9.859 g/t gold and 26.7 g/t silver, not included in a longer interval of 92.4 metres grading 0.198% copper, 0.23 g/t gold and 7.8 g/t silver. Both of these holes are located outside the north nose of the AM breccia, which was the focus of historic exploration.


The 2,880 hectare property, located 220 kilometres east of Vancouver near Hope, hosts a copper-gold-silver-molybdenum system with an associated breccia pipe and base metal veins. All of the showings appear to be related to a central hydrothermal system driven by a multiphase porphyritic intrusive. Numerous widespread showings attest to the strength of the system, and all of the showings appear to be related to the central hydrothermal system.

Recent world wide exploration for high grade deposits at the root of porphyry systems and the buoyant commodity market encourages deep exploration at Giant Copper.

Steve Robertson, P.Geo. is the Qualified Person as defined by National Instrument 43-101 for the exploration program. The Company has filed a 43-101 Technical Report for the Giant Copper property which can be viewed on the Sedar website www.sedar.com or on Imperial's website www.imperialmetals.com.

Imperial is a mine development and operating company based in Vancouver, British Columbia. The Company's key properties are the Mount Polley open pit copper/gold producing mine (100% interest) in central British Columbia, the Huckleberry open pit copper/molybdenum producing mine (50% interest) in northern British Columbia, and the development stage Sterling gold mine (100% interest) in southwest Nevada.

Dow Jones Newswires - Monday, August 28, 2006

Copper Fundamentals In Hands Of Disruptions


Copper market in 2007 to be in similar position as in past 2 years - looks as though market could move into oversupply particularly if demand weak, but surplus remains dependent on delivery of projects on schedule, and less supply disruption than has been case this year, says Macquarie Research. Base case is for 190,000-ton surplus in refined copper in 2007, then if demand bounces back in 2008, refined copper market could move into deficit in first half of 2008; "this could mean some weakness next year, but a rebound in prices again in 1H08."

Mining Weekly - 28 August 2006

BHP to increase production at Escondida copper mine


BHP Billiton will seek to increase production in Chile at its Escondida copper mine, the biggest in the world, as more than 2 000 workers extend a strike that's cut output in half into a fourth week.

The mine may try to hire more replacement workers this week, adding to the 50 already employed, Alejandra Wood, a spokeswoman for the Melbourne-based company said late yesterday from Santiago. Neither BHP nor the labor union have plans to restart talks, which have been frozen since the union rejected the company's August 21 offer.

The goal is to produce as much as possible, given the situation, Wood said. Production is now at 50% of pre-strike levels. Output at the cathode plant, where copper ore is refined into a metallic form, is at 15%, Wood said.

Workers at the mine, which accounted for about 8,5% of the world's mined copper last year, began striking August 7 in pursuit of increased pay and benefits. They are seeking a bigger share of the company's profits after copper prices surged to a record this year.

BHP, which owns 57,5% of the mine, reported a 63% jump in full-year profit to a record $10,45-billion last week. Escondida's owners, which include London-based Rio Tinto Group and Tokyo-based Mitsubishi Corp., have said the strike is erasing about $16-million a day in profit.

Copper prices in Shanghai rose for the first day in four on concern rival copper mines may also face strikes. Labor talks are scheduled later this year at Chile's state-owned Codelco, the world's biggest producer.

Copper for October delivery on the Shanghai Futures Exchange gained as much as 570 yuan, or 0,8%, to 68 050 yuan ($8 537) a metric ton. The contract traded at 67 910 yuan a ton at 1:59 p.m. in Shanghai.

Copper supply in the medium term remains tight, Yu Mengguo, metal analyst at Jinpeng Futures Co., said by phone from Beijing. Stories of labor unrest in such a market make people more nervous about supply.

The Escondida union's lawyers are reviewing company plans to use subcontractors in new areas of the mine to increase production and may file a claim against the practice, union spokesman Pedro Marin said in a phone interview from Antofagasta, 1 200 km north of Santiago.

BHP's Wood said Chile's labor inspector in Antofagasta has approved of how the company is using subcontractors at the mine.

(AP Online via COMTEX) - SANTIAGO, Chile, Aug 28, 2006

Striking Miners Seek Share of Profits


The world's largest mining company has had a very good year, something not lost on its miners in Chile. Some 2,000 miners at BHP Billiton's Escondida mine in Chile have been striking since early August, demanding a larger slice of what one worker called "the cake" being enjoyed by the Anglo-Australian company in the form of record profits from soaring world metal prices.

The strike has roiled world copper markets, often setting off buying and selling waves. Copper from Escondida represents about 8 percent of world production, and the strike has brought about half that production to a halt - stoking fears of a shortage in an already tight market.

The strike is being closely followed across Chile, the world's largest copper producer, where the government is under pressure to spend more of its copper windfall and unions are waiting to see what kind of concessions the Escondida strikers gain.

But executives of BHP Billiton Ltd and other mining companies are wary of being locked into contracts that will mean significantly higher labor costs just as metal prices may be peaking.

There's no doubt, however, these are bonanza days for BHP Billiton. The Melbourne-based company reported it earned $10.45 billion for the year through June, an Australian corporate profit record.

When the Escondida miners' union last negotiated a contract with BHP Billiton three years ago, copper sold for about 80 cents a pound. Mines were mothballed. The industry was near the bottom of a bust cycle.

Since then, demand from fast-growing economies such as China and India have helped drive the price of copper to about $3.50 today. Strong demand, supply constraints and a broader rally in the commodities market pushed the price of copper to an all-time high of $4.08 a pound in May.

This time around, the workers want their share of the boom times. About 800 workers have been camped in tents in a sports center the company owns in the port city of Antofagasta since Aug. 7, having refused the company's contract offers.

The copper mine cuts a deep bowl into Chile's Atacama Desert, bordered by the Andes on the east and the Pacific Ocean on the west, outside of Antofagasta, 870 miles north of Santiago.

Oscar Moreno, 44, has worked 17 years at Escondida, where he drives the heavy-duty trucks and tractors used in mining operations. He lives with his wife and two of their children, in a house partly paid for with a loan from the company, in Antofagasta, about 125 miles away.

Moreno said he and the other workers generally work four 12-hour days, sleeping and eating at the mine, then have four days at home. He earns about $1,490 a month, plus quarterly bonuses.

"I feel my situation is good, compared to the general situation of workers in Chile," he said in a telephone interview from the strike camp. "I cannot complain, really, and I do not complain about my situation. My complaint is about the money that the company makes. We are asking for just one percent of the 'cake' it gets."

In reporting its annual profit - up 63 percent from the prior year - BHP Billiton noted the Escondida mine produced record volumes for the company.

But costs are on the rise, too. Labor is the company's third-largest cost, behind energy and mining expenses, according to the company's latest annual report.

BHP has offered workers a four-year contract that includes a 4 percent wage raise plus bonuses, up from an initial 3 percent offer. The workers want 8 percent plus bonuses, after initially asking for 13 percent.

"Our work force at Escondida is some of the highest-paid in Chile, and this is essentially the most attractive package that has been offered to the work force in that region," said Chief Executive Chip Goodyear, in a conference call.

Although the mine's name means "hidden" in Spanish, Escondida is now the center of attention for copper traders in New York and London. The slightest news or speculation will set off a flurry of buying or selling in the New York Mercantile Exchange, where millions of dollars in copper contracts change hands daily.

"Everyone is focused on Escondida," copper trader John Hanemann said.

The result of the Escondida walkout will have repercussions throughout the industry, traders and analysts say.

Contract talks at a number of copper mines - mainly in Chile - are due to expire in coming months, including Chile's state-owned Chuquicamate, the world's largest open pit copper mine. If workers at all six of the mines with expiring labor contracts opt to strike, 18 percent of world copper supply could be at risk, Merrill Lynch commodities strategist Francisco Blanch said in a recent report.

Chile represented about 36 percent of world copper production in 2005, well ahead of second-placed producer the United States, with about 8 percent of world output, according to the U.S. Geological Survey.

The country's leftist government has not intervened in the strike, although the impact on the economy is strong. Escondida paid $1 billion in taxes during the first half of this year alone, BHP Billiton's chief executive in Chile, Diego Hernandez, told the daily El Mercurio.

Other Chilean labor groups are also calling for some of the copper windfall, including powerful government-employee organizations representing school teachers and health workers.

And voices are emerging from inside President Michelle Bachelet's center-left coalition to increase government spending, especially in social sectors. The Christian Democratic Party, the largest in the four-party coalition, asked Bachelet for a double-digit increase in the 2007 budget now being drafted. Bachelet said the budget increase will be below 10 percent.

The Escondida miners, meanwhile, say they only want BHP Billiton to share a little of the bounty.

Carlos Munoz, a 45-year-old metallurgic plant operator, said the $1,080 he earns each month covers his family's basic expenses but not the needs of his 10-year-old daughter, Camila, who suffers from a chronic medical condition and needs an ear operation.

"Not even the bonuses are enough for me to give her everything she needs," he said. Bottom line, he said, "we live very tight."

Copper Falls as Rising Inventories May Signal Demand Is Slowing

By Millie Munshi

Aug. 28 (Bloomberg) -- Copper futures in New York fell as rising stockpiles fueled speculation that demand may be slowing.

Inventories monitored on the Comex division of the New York Mercantile Exchange jumped 52 percent last week, and a U.S. government report showed a decline in new-home sales. Builders are the biggest users of copper in the U.S.

``There were some extra stocks coming into the Comex warehouse,'' said John Hanemann, president of Hanemann Trading Co. in New York. ``There just doesn't seem to be a lot of demand.''

Copper futures for December delivery fell 0.65 cent, or 0.2 percent, to $3.425 a pound at 9:21 a.m. on the Comex division of the New York Mercantile Exchange. Copper, after more than doubling in the past year, has declined 15 percent since reaching a record $4.04 on May 11.

The London Metal Exchange is closed today for a national holiday.

Copper in China Little Changed as Traders Await Funds' Return

By Chia-Peck Wong


Aug. 29 (Bloomberg) -- Copper prices in Shanghai were little changed as traders sought new trading leads while waiting for the return of hedge and investment funds to the market.

Prices of copper have surged 63 percent this year partly due to buying from such funds, which are seeking better returns than those offered by the equity and bond markets. Traders such as Wang Zheng said these funds have been less active in trading commodities this quarter.

``The direction for copper isn't clear and trading activity in Shanghai has fallen,'' Wang, a trader and analyst at Shanghai Dalu Futures Co., said by phone today. ``We're hoping that the funds will return soon or some fresh news will stimulate trading.''

Copper for October delivery fell as much as 340 yuan, or 0.5 percent, to 67,540 yuan ($8,478) a metric ton on the Shanghai Futures Exchange. The contract, which earlier rose as much as 170 yuan, or 0.3 percent, traded at 67,850 yuan by the midday break at 11:30 a.m. local time.

News that union members at BHP Billiton's Escondida mine in Chile will begin demonstrations this week unless the company agrees to restart talks on wages isn't having an impact on prices, said Wang.

``Everyone's tired of the Escondida news,'' he said.

The strike at Escondida, the world's biggest copper mine, has entered its fourth week. More than 2,000 workers went on strike Aug. 7, and negotiations have been frozen since the union rejected BHP's latest offer on Aug. 21.

BHP, Rio Tinto

Copper for cash delivery in Changjiang, Shanghai's biggest spot market, rose as much as 2.4 percent to 68,600 yuan a ton. Chinese users have to pay 17 percent value-added tax, 2 percent import tax, premiums and freight charges for imported copper.

Metal for December delivery fell 0.05 cent to $3.450 a pound on the Comex division of the New York Mercantile Exchange at 11:45 a.m. Shanghai time.

Copper for three-month delivery gained $26, or 0.3 percent, to $7,586 a metric ton on the London Metal Exchange as of 11:41 a.m. Shanghai time. The metal, used in wiring and plumbing, has more than doubled in the past year. It rose to a record $8,800 on May 11.

BHP Billiton, the world's biggest mining company, owns 57.5 percent of Escondida. Rio Tinto owns 30 percent, while a group led by Mitsubishi Corp. owns 10 percent. The International Finance Corp. owns the rest. Mine management said Aug. 16 the dispute was costing the $16 million in lost profit a day.

Aluminum prices in Shanghai rose because more traders preferred to trade the lightweight metal after inventories declined, Li Rong, a metal analyst at Great Wall Futures Corp., said by phone from Shanghai.

``Aluminum's demand and supply factors seem to be better, especially after stockpiles fell so drastically last week,'' he said.

Aluminum stockpiles in Shanghai Futures Exchange warehouses plunged to their lowest level in 15 months as manufacturers used more of the metal instead of pricier copper, and exports increased.

Copper in Shanghai Falls on Concern Demand May Slow in U.S.

By Chia-Peck Wong

Aug. 30 (Bloomberg) -- Copper in Shanghai fell after U.S. consumer confidence dropped in August, increasing concern demand may be curbed in the world's second-biggest user of the metal.

The Conference Board's index of confidence fell to its lowest in nine months, as higher fuel prices raised inflation concern and the housing market slowed. Builders are the biggest users of copper, which has more than doubled in price during the past year as demand surged for wire and pipe.

``The consumer confidence data is a weak sign for copper,'' Li Ling, a trader at Star Futures Co., said from Shanghai.

Copper for October delivery fell as much as 860 yuan, or 1.3 percent, to 66,950 yuan ($8,413) a metric ton on the Shanghai Futures Exchange. It traded at 67,240 yuan by midday break.

The board's index dropped to 99.6 from 107.0 in July, the New York-based business group said yesterday. Sales of pre-owned U.S. homes fell in July to the lowest in more than two years, the National Association of Realtors said last week.

Copper for cash delivery in Changjiang, Shanghai's biggest spot market, fell as much as 1.2 percent to 67,800 yuan a ton. Chinese users have to pay 17 percent value-added tax, 2 percent import tax, premiums and freight charges for imported copper.

Dow Jones - 30 August 2006

LME review: Copper liquidated; long holders grow impatient


Long position holders liquidated London Metal Exchange three-month copper after growing tired of waiting for prices to move outside tight ranges in slow summer trading, traders said.

Copper maintained a tight range between $7,450-$7,580 a metric ton for the morning session before light liquidation in the afternoon pushed prices back 2.7% to an 11-day low of $7,350/ton. Prices closed late kerb in London down $165 on previous PM kerb levels at $7,395/ton.

The bearish tone in copper was reinforced by market talk that labour negotiations at Chile's Escondida copper mine may be nearing a resolution after 23 days, another trader said.

"Rumours are going round the floor that (Escondida) talks are going very well and that's had an impact on prices," said one trader.

Nickel prices retreated to $28,450/ton at late kerb, down $950/ton on previous kerb prices. Earlier in the session, prices found good support following another stock drawdown. Nickel stocks fell by 312 tons to 5,808 tons while LME cancelled warrants rose to 74.28% from 72.65%, leaving just 1,494 tons available to the market.

LME aluminum prices retreated from a high of $2,515/ton to $2,470/ton at late kerb in London and remained bound by resistance at $2,440/ton-$2,500/ton. Prices closed just $3 shy of earlier intra-day lows of $2,470/ton at late PM kerb.

Zinc prices fell $65 from previous kerb levels to $3,295/ton after failing to mount resistance at $3,400/ton.

Bloomberg - 30 August 2006

Copper prices fall on signs of slowing economy, metals demand


Copper fell the most in almost two weeks after a private survey showed U.S. consumer confidence is the lowest in nine months, fueling concern that a slowing economy will curb demand for metals.

The Conference Board's index of confidence dropped to 99.6 this month from 107.0 in July, as higher fuel prices raised inflation fears and the housing market slowed. Builders are the biggest users of copper, which has more than doubled in price during the past year as demand surged for wire and pipe.

"We've been seeing softening economic data and today's consumer confidence report played into that general sentiment," said Chip Hanlon, president of Delta Global Advisors Inc. in Huntington Beach, California. Prices may drop 10 percent by the end of September if economic conditions continue to slow, Hanlon said.

Copper futures for December delivery fell 6.65 cents, 1.9 percent, to $3.384 a pound on the Comex division of the New York Mercantile Exchange, the lowest closing price and the biggest one-day drop for the most-active futures contract since Aug. 17. A futures contract is an obligation to buy or sell a commodity at a fixed price for a specific delivery date.

Copper for delivery in three months dropped $160, or 2.1 percent, to $7,400 a metric ton at 6:44 p.m. on the London Metal Exchange. Nickel fell $900, or 3.1 percent, to $28,500 a ton after earlier rising to $29,900.


Home sales fall

Sales of previously owned U.S. homes fell in July to the lowest in more than two years, the National Association of Realtors said last week. Sales of new homes fell to the second- lowest this year, according to the Commerce Department. Home sales are falling after five years of record gains, slowing price increases and making it harder for owners to extract equity, a source of funding for consumer spending in recent years.

"The housing slump will put a damper on" U.S. copper demand," said Darren Stoody, futures trading manager at Omnisource Inc., a scrap metal recycler in Fort Wayne, Indiana.

Copper also was pushed lower by speculation that a strike at BHP Billiton Ltd.'s Escondida mine in Chile will soon be resolved.

Workers at the world's biggest copper mine, who are seeking a bigger share of BHP's profit after copper prices doubled to a record in the past year, said they expect to resume talks on a settlement. Production at Escondida has been cut by about half, and no negotiations are scheduled, Melbourne-based BHP said.


'Digging' in

"The market's still holding out for a reasonably quick settlement," said David Thurtell, a metals analyst at BNP Paribas in London. "It looks as though BHP is digging its heels in, and although they've only had fairly limited success so far in getting outside workers in, the bottom line is the miners don't really like being on strike."

The metal, which reached a record $8,800 on May 11, has lost 6.6 percent since the strike began Aug. 7, on signs of slowing economic growth and rising inventories.

Also on the LME, nickel plunged $900, or 3.1 percent, to $28,500, zinc dropped $65 to $3,295 a ton, while aluminium was $15 lower at $2,470 a ton. Lead gained $5 to $1,225 a ton and tin was $155 higher at $8,700 a ton.

COMEX copper ends off lows in technical trade - COMEX copper down 2 pct at open on local selling


NEW YORK, Aug 29 (Reuters) - Copper futures in New York settled down but off their session lows Tuesday after an early push to a key support level held and forced some investors to cover their short positions, sources said.

"We came down and tested trend-line support at around the $3.34-$3.35 level, and bounced from there," said one broker at a futures commission merchant.

Active December copper lost 6.65 cents, or 1.9 percent, at the close to settle at $3.3840 a lb on the New York Mercantile Exchange's COMEX division. Trading ranged from $3.46 to an eight-day low at $3.3450, after sell-stop orders were triggered through the $3.3850 a lb level, floor dealers said.

Copper for September delivery closed at $3.3905 a lb, down 6.40 cents on the day, while spot August, which expired after the close, sank 6.10 cents to $3.4230.


COMEX final copper volume was estimated at 18,000 lots, more than double that of Monday's official count of 6,444 lots.

Nearly 3,866 lots of spreads were traded on the day, with market players continuing to roll positions out of September copper and into further delivery months ahead of September copper's first notice day on Thursday.

The market also took a hit following weaker-than-expected U.S. consumer confidence data for August, which fell to their lowest levels since November 2005.

With a lack of any new developments in the ongoing labor negotiations at Chile's Escondida, the world's largest copper mine, dealers said the market's focus would now turn to the spate of U.S. economic data set for release this week.

On Wednesday, attention will turn to second quarter U.S. Gross Domestic Product, expected at 3.0 percent. In the first quarter, the U.S. economy grew 5.6 percent.

Fundamentally, a strike at the Escondida copper mine, now in its fourth week, continued to be a supportive factor as the uncharacteristically long strike weighed on an already tight market.

Talks between the two sides broke off more than a week ago after the 2,052-member union at Escondida rejected an offer for a 4 percent raise in a four-year contract and a special bonus of $18,000.

The strike has seen production of concentrates from the mine cut by 50 percent and cathode production is at 15 percent of normal output.

Chile, the world's biggest copper miner, produced 458,214 tonnes of the red metal in July, up 9.1 percent from the same month last year, the government said Tuesday.


London Metal Exchange inventories fell 700 tonnes to 124,125 tonnes on Tuesday, while COMEX copper inventories rose 1,027 short tons to 12,413 tons in Monday's data.

LME three-months copper closed at $7,390 a tonne, down $160 from Friday's kerb close.

Peru's mine protests flare after eerie calm - By Robin Emmott


LIMA, Peru (Reuters) - After a year of eerie quiet in Peru's anti-mining protests, peasants who forced Latin America's top gold pit to close have rudely reminded President Alan Garcia of one of the most complex problems facing his new government.

Social workers, local priests and analysts say the sort of demonstrations that shut U.S-owned Yanacocha on Monday are unlikely to end until money trickles down to poor Andeans to convince them the industry is not a threat to their livelihoods.

"The problem is that there are people who don't just want to freeze our operations at Yanacocha but to freeze mining in Peru completely," said Carlos Santa Cruz, a senior director at Yanacocha's owner, Denver-based Newmont Mining.

Finding money for poor mining regions is not a problem in the world's No. 3 copper producer as Peru enjoys a three-year bonanza in international metals prices. Garcia won a pledge by miners last week to make a one-off $774 million payment to improve the lives of the half of Peruvians who live on $1 a day or less.

That is on top of a record $800 million that mining regions will receive this year from royalties and mine income tax.

But much of that money is being spent by local mayors who are keen to glorify their term in office and win reelection in municipal elections in November. Monuments ranging from a tribute to the iguana to unheated outdoor swimming pools in the freezing Andes are just some of the public works in towns without running water, roads and electricity, fueling frustrations among locals.

In the northern Andean province of Cajamarca, home to Yanacocha, the local government aims to build a bullring at a cost five times that of the region's annual health budget.

"It's clear the spending isn't satisfactory," said Energy and Mines Minister Juan Valdivia. "There has been permanent conflict."

International mining companies have called on the government to implement a spending reform and Garcia has promised to respond, pledging that his government will work with town halls to draw up better projects that can also create jobs.

But in the short term, the government, communities and miners are only blaming each other for the Yanacocha shutdown ahead of the first talks on Tuesday to end the closure.


BLAME GAME

"It seems to me that (Yanacocha) has handled things badly," Valdivia said, without giving more details. Miners blame the state for being absent in remote areas where miners operate.

"Miners cannot provide schooling, hospitals and jobs to everyone, although increasingly they do that," said Carlos del Solar, head of Peru's National Society of Mining.

The shutdown by protests at Yanacocha is the second since 2004, when farmers forced Newmont to abandon plans to develop its rich Cerro Quilish gold pit within the mine's huge complex.

Officials at Yanacocha say the mine is often targeted because it is so emblematic of Peru's mining boom over the past decade and because Cajamarca is one of the country's poorest provinces.

Farmers and locals say they are forced to protest or risk being forgotten in a country where Andean peasants live in societies unchanged since the Spanish conquest of the 1500s.

"What can we do? Yanacocha has not kept its promises," said Luciano Llanos, mayor of Combayo community near Yanacocha, although he said he did not want the mine to close permanently.

Chile Copper Miners to Vote Today to End Strike at BHP Mine

By Jeb Blount


Aug. 31 (Bloomberg) -- Workers at BHP Billiton Ltd.'s Escondida copper mine are set to vote today in Chile on a new labor contract, ending a 25-day strike that's disrupted supply.

BHP, the world's biggest mining company, agreed to increase wages by 5 percentage points above inflation and pay a 9 million Chilean peso ($16,705) bonus, company spokesman Mauro Valdes said yesterday from Santiago. Workers may return as early as tomorrow, he said. The offer was ``acceptable,'' union President Luis Troncoso said yesterday after presenting it to his members.

The price of copper, used in wires and pipes, has more than doubled in London in the past year on demand from China, prompting unions to seek a larger share of company profits. An accord with BHP may set a precedent for talks expected this year at other mines in Chile, the largest supplier of the metal.

``Escondida will fix a benchmark for all of the mining industry,'' said Leonardo Suarez, an economist at brokerage Larrain Vial SA in Santiago.``It will be difficult to negotiate for less than what they got.''

Copper for three-month delivery fell as much as $50, or 0.7 percent, to $7,400 a metric ton on the London Metal Exchange. The contract traded at $7,433 at 10:27 a.m. Shanghai time.

The offer was ``good'' and ``balanced,'' union spokesman Pedro Marin said yesterday. ``Effectively we'll have a deal,'' BHP's Valdes said in a phone interview. ``We're satisfied.'' The union and BHP held talks yesterday in Antofagasta.

Workers seeking better pay and benefits began the strike Aug. 7, reducing the mine's output by half. Mine executives said Aug. 16 the dispute was costing owners including Melbourne-based BHP, London-based Rio Tinto Group and Tokyo-based Mitsubishi Corp. $16 million in profit a day. Escondida accounted for 8.5 percent of all mined copper worldwide last year.

`Our Fight'

Government-owned Codelco, the world's largest copper company, will be negotiating wage agreements with workers this year at its Andina and Chuquicamata mines in Chile. BHP must reach an agreement with union miners at its Spence mine in Chile by Sept. 12 or face a possible strike. The nation produces 36 percent of the world's copper.

``This is not just our fight,'' said union president Troncoso. ``This is part of the fight by all miners in Chile to share in the high profits and high prices that the mining companies are earning.''

Bolstered by New York copper's surge to $4.04 a pound in May, BHP on Aug. 23 posted second-half profit of $6.1 billion, a record for an Australian company. Profit at Escondida more than tripled in the first six months of the year to $2.92 billion from $936.9 million a year earlier.

Replacement Workers

The Escondida's Workers Union No. 1, which represents 94 percent of the mine's employees, had been seeking a wage increase of 13 percentage points above inflation and a bonus of 16 million pesos a worker for a 36-month contract. Chile's inflation rate was 3.8 percent in July.

Chilean laws allowing the company to replace striking workers weakened the impact of the walkout, the union's Marin said. BHP said Aug. 25 it hired 50 replacement workers while 2,053 walked out.

Resentment of union members' salaries and benefits run strong in Antofagasta, a dusty Pacific-coast port town of 300,000, 170 kilometers northwest of the mine, Pablo Diaz, a non-union mine worker, said in an interview on Aug. 25.

``While people like us don't have enough money to buy a microwave oven, these strikers are driving around in brand-new four-wheel-drive trucks,'' Diaz, 28, a contract worker at the mine, said as he relaxed on a bench in the Plaza Colon, the main square of Antofogasta, where most Escondida workers live. ``They're too greedy.''


Placer Dome

Previous labor disputes at Chilean copper mines have been short lived. Contract employees at state-owned Codelco, the world's biggest copper producer, returned to work after a 17-da strike at El Teniente and Andina mines in January. Placer Dome Inc.'s 500 workers at the Zaldivar copper mine ended an eight- day strike in July 2005 after the company sweetened a wage offer.

The striking miners earn about 1 million pesos ($1,866) a month, three times what Diaz makes as a non-union employee, and he doesn't get the bonuses, health-care insurance, housing subsidies, and interest-free loans union members enjoy as part of their contract with BHP, the world's largest mining company.

Jose Luis Arce, 34, who works for a subcontractor at BHP's Spence Copper mine, also in Northern Chile, said he has worked 20 days of 12-hour shifts in a row with only 10 days off, earns 500,000 pesos a month and gets no benefits. Diaz works seven days and has seven days off. Union miners work on a four-day cycle. The mine hasn't started production.

``We don't even get healthcare,'' Arce said in an interview in Antofagasta. ``I'd gladly take a job at Escondida.''


Pool, Theatre

The union's strike headquarters, where the vote is scheduled to take place, sparked hostility, too. Workers have occupied BHP's community center, an annex to the company's regional headquarters that boasts a pool, theatre and sports facilities, and set up tents in the parking lot where more than half the vehicles are four-wheel drive pickups.

The surrounding fence is festooned with union flags and protest banners with such slogans as ``bloodsucker, let go of the $''. At night, behind the barricades, strikers can be seen playing tennis on well-lighted clay courts.

``Are they on strike or vacation?'' asked Jessica Castillo, 34, a mother of four as she watched her 12-year-old son play soccer at a small sand-pitch stadium beside rail-yards full of copper plates.

During the strike carloads of young men would drive past the protest site shouting obscenities at the strikers and calling on them to ``go back to work.''

Carlos Allendes, 43, a striking dump-truck driver and his comrades on the picket line make no excuses for their demands, salary or benefits. The miners' agreed to their three-year contract when the price of copper was 80 cents a pound, he said. Copper which fell to $3.35 a pound yesterday, reached an all- time high of $3.92 a pound on May 11.

China to Launch Commodity Pricing System


BEIJING, Aug 31, 2006 (AP Online via COMTEX) -- China will have its companies carry out unified price negotiations with foreign suppliers of oil, copper and other commodities to get better deals, a government newspaper said Thursday.

The system will draw on China's recent experience in trying to negotiate lower prices with foreign iron ore suppliers, the Economic Daily said, citing Wei Jianguo, a deputy commerce minister.

The report said the system would be launched as soon as possible but didn't give a timetable or details of how the system would work.

China is one of the world's biggest importers of oil, iron ore and other raw materials.

"In terms of imports, we are big buyers, but we lack the ability to set international prices," Wei was quoted as saying.

Copper scarcity has led to price rises over the past couple of months.
Therefore, expect a downturn in metal prices when official notification
of end-of-Escondida-strike hits the newswires later today and production
rate returns to normal.

It would be advisable to offload metals until after the dust has settled
later today and come back tomorrow to review the situation.

31 August 2006

LONDON (SHARECAST) - Credit Suisse has cut its view on the steel sector to market weight from overweight warning that the industry is about to enter a cyclical downturn.

The Swiss broker did offer a ray of light though, saying Anglo-Dutch steel maker Corus is one stock that should remain interesting going into a macro slowdown.

Chalco Cuts Alumina Price 22%, in Line With Imports (Update1)

By Chia-Peck Wong

Aug. 31 (Bloomberg) -- Aluminum Corp. of China Ltd., the world's second-biggest alumina producer, will cut the price of the raw material used to make aluminum by 22.4 percent tomorrow, the second time in a month that the company lowered the price.

The company, known as Chalco, will cut the alumina price to 3,800 yuan a metric ton ($478), the same level as the imported price, from 4,900 yuan, to bring them in line, the Beijing-based company said in an emailed statement today. Chalco last cut prices by 13 percent on Aug. 4.

Alumina prices have dropped 56 percent since March to $275 a ton, according to data from Metal Bulletin, as companies increased production to meet China's rising demand for the raw material refined from bauxite. China relies on imports for about half of its alumina demand, while Chalco and smaller producers supply the rest.

China's domestic alumina production surged 50 percent to 7.1 million tons in the first seven months this year. China, the world's biggest producer and consumer of aluminum, imported 3.95 million tons of the raw material during the same period.

31 Aug 2006
bbj.hu

Russia to create world's biggest aluminum maker


Russia's two biggest aluminum companies plan to combine, creating the world's largest producer of the metal and giving President Vladimir Putin influence over world aluminum prices. Putin approved a proposal for OAO Russian Aluminium, known as Rusal, to buy smaller rival OAO Sual Group, said a presidential spokesman who asked not to be identified because the accord hasn't been announced. Swiss commodity trader Glencore International AG's alumina assets will also be included in return for a stake in the new company, he said. By adding Sual, valued at $3.3 billion on Russian stock exchanges, Rusal owner Oleg Deripaska will create a company that pours more aluminum than Alcoa Inc., now the world leader. The government's long-term drive has been to establish national champions, as we have seen in energy, said Tim Brenton, political analyst at Renaissance Capital in Moscow. It's Russia's long-term strategy to project power abroad through these companies. Rusal, Sual and Glencore signed a non-binding accord Aug. 25, the Financial Times reported earlier yesterday. Rusal, controlled by Deripaska through his holding company, Basic Element, will buy Glencore's alumina assets by issuing new shares and will own 64.5 % of the new company, with Sual 21.5% and Glencore 14 % respectively, the FT said.

Soaring commodity prices have caused metals and mining companies worldwide to consolidate, with more than $100 billion of takeover offers made this year. Aluminum prices today rose 1% to $2,495 a metric ton, up 9.6% this year, trailing the 71% jump in copper and a more than doubling in nickel. Aluminum's gains have been limited as China, the world's largest producer and consumer of the metal, raised production and curbed imports. The combined Russian companies would produce about 11% of the world's aluminum, excluding recycled material. Consolidation in metals follows Putin's drive to place energy assets under the state-controlled oil and gas companies, OAO Gazprom and OAO Rosneft Oil Co. Putin met Deripaska three weeks ago, one of the Russian leader's regular gatherings with the country's most powerful businessmen. Rusal's owner was added yesterday to the committee organizing Russia's bid to host the 2014 Winter Olympics in the Black Sea resort of Sochi. We expect and hope that Mr. Deripaska will take the combined company public, said Vladimir Zhukov, senior analyst at Alfa Bank in Moscow. He'll make much more money having his company public.

Combined, Rusal and Sual produced 3.71 million tons of aluminum last year, surpassing the 3.55 million tons at New York-based Alcoa. Alcoa, with 2005 revenue of $26.2 billion, will remain the largest by sales. The Russian companies had combined sales last year of $9.4 billion, based on data posted on the companies' Web sites. Rusal has been seeking to acquire companies that produce alumina, the raw material used to make aluminum. Glencore, the world's largest commodities trader, buys and sells base metals including aluminum, nickel, copper, zinc and lead. The company had sales of $91 billion in fiscal 2005, up from $71 billion a year earlier, and has stakes in mines, smelters and metals refineries.

Rusal is short of bauxite, the raw material refined into alumina. Sual, which produces two-thirds of Russia's bauxite, doesn't have enough capacity to process all of it into aluminum. By acquiring Glencore's aluminum assets, Rusal will gain alumina production in Jamaica and Ireland, which can produce about 4.75 million tons a year. About two tons of alumina are used to produce one ton of aluminum. Alfa's Zhukov said the deal represented an ideal way for Glencore to get cash for its aluminum business. Rusal needs the security of alumina supply, said Peter Richardson, chief metals economist at Deutsche Bank AG, in Melbourne. Any merger will go far in entrenching Rusal's growth in alumina. Russia benefits from low prices for energy, which generally represent 25% to 40% of the cost of producing aluminum. Rusal's two biggest smelters get their electricity from Soviet-built hydropower plants.

Putin is using cash from record oil prices to increase Russia's industrial power and boost state control of key industries. Oil and gas assets are being consolidated into state-controlled Gazprom and Rosneft, while state-owned weapons exporter Rosoboronexport said Aug. 12 it has agreed to buy VSMPO-Avisma, the world's biggest titanium producer. Government support also extends to private business. Putin backed a plan in May for steelmaker Severstal to merge with Luxembourg's Arcelor SA, creating the world's biggest steel company. The merger fell through in June when Mittal Steel Co. won the takeover battle. Deripaska is Russia's sixth-richest man, with a fortune Forbes magazine estimates at $7.8 billion. He has extensive interests in the automotive industry, owning OAO GAZ, a producer of light commercial vehicles which bought British van-maker LDV Ltd. on July 31. Sual is owned by Viktor Vekselberg, Russia's fourth-richest man with $10 billion, according to Forbes. The combined company may sell shares in London within three years, the FT said. It will be chaired by Brian Gilbertson, the former BHP Billiton Ltd. chief executive officer who heads Sual, and run by Rusal CEO Alexander Bulygin, the newspaper reported.

Rusal announced yesterday it plans to complete a buyout of minority shareholders in its Russian plants by the end of this year. The plan includes the Krasnoyarsk, Bratsk, Novokuznetsk and Sayanogorsk aluminum smelters, the Achinsk and Boksitogorsk alumina refineries, and the All-Russia Aluminium and Magnesium Institute, the company said. Sual shares last traded on Aug. 28, when they fell 1.5 % to $1.29. Rusal's 7.2% ruble-denominated bonds advanced 0.1 or l ruble per 1,000 rubles ($37.40) of face value on the Micex exchange in Moscow as of 3:58 p.m. The yield declined 0.05 percentage points. (Bloomberg)

1 September 2006 - Copper, nickel prices may plunge, Westpac forecasts

Source: Bloomberg


Copper, nickel and other base metal prices may plunge next year as slower U.S. growth curbs demand and mine supplies increase, Westpac Banking Corp. says.

The spot price of nickel, used to make steel rustproof, could decline 38.5 percent next year while copper, used in wires and pipes, could fall 29.2 percent, the Sydney-based bank said in its quarterly commodities report sent by e-mail today.

The Reuters/Jefferies CRB Index of 19 commodities fell to a five-month low yesterday, and is down more than 10 percent since reaching a record on May 11. The U.S. said yesterday gross domestic product growth slowed to an annual rate of 2.9 percent in the second quarter from 5.6 percent in the first three months.

"The key for us is the downturn in U.S. dwelling activity and the impact of a more cautious U.S. consumer," Westpac's economists including Justin Smirk said. "In 2007, industrial production growth will turn from being a pillar of base metal price inflation to a drag."

Commodities have rallied since 2001, led by demand from China and the U.S. for raw materials to build homes, autos and appliances, and as decades of underinvestment in mines led to supply shortages. Prices also surged as investment funds, helped by low interest rates, bought metals seeking better returns than bonds and stocks.

Metals prices would peak this year and fall "through 2007 as demand growth slows and supply growth gathers momentum," Westpac said. Copper futures in London rose to a record $8,800 a ton in May, and nickel for three-month delivery surged to $29,950 this month, its highest level in at least 19 years.
Falling prices

A survey of brokerages and research companies by Canberra- based Access Economics in July showed analysts expect commodities prices to fall as much as 45 percent over the next two years, due to expanding capacity.

Spot copper prices could average $6,744 a ton this year, before falling to $4,775 in 2007, according to Westpac's forecast. Copper for immediate delivery in London has averaged $6,491.72 this year.

Spot nickel prices could average $22,919 a ton this year, and drop to $14,100 in 2007, the bank said. Nickel has averaged $20,118 so far this year. Aluminium prices could average $2,526 a ton, and then decline to $2,175 next year, Westpac said.

Westpac raised its base metal prices forecasts by an average 6.5 percent for this year due to supply disruptions as companies including BHP Billiton Ltd., the world's largest miner, had to halt production due to strikes.
Inventories

Commodity prices will "broadly track sideways to the end of 2006," Westpac said. Low inventories and supply disruptions caused by strikes mean prices could still spike, it said.

"Given that inventories are expected to remain below critical levels until 2008, base metal prices remain hostage to small movements in inventories for some time," the bank said.

Rising interest rates globally will help to slow raw materials demand, Westpac's report said. The U.S. Federal Reserve raised interest rates 17 times over two years before pausing on Aug. 8. New home sales in the U.S. fell more than expected in July, and the number of unsold houses climbed to a record, according to government data on Aug. 24.

The Bank of Japan raised interest rates in July, the first time it has done so since August 2000. The European Central Bank has raised borrowing costs four times since early December.

Westpac's view doesn't tally with that from Charles "Chip" Goodyear, chief executive officer of BHP, who said Aug. 23 that while the U.S. economy would slow, the impact would not be significant.

"The U.S. is quite a service-based economy, and so there will be a slowdown there and it will have some impact. But again, we expect it to be moderate," Goodyear said. There's "still, a very strong environment, particularly given the supply side."

Slowing growth in the U.S. may be offset by continued expansion in Europe and Japan, Goodyear added.