Does Higher Copper Supply Forecast Justify Mine Closure?

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All may not be lost for Aditya Birla’s Australian copper mine yet, as we began to explain here.

The company said that since a strategic review of the Mt. Gordon operations was presently underway, the board of directors of the company had decided not to deplete the existing high-grade resources at the currently high unit cost.

Copper prices did inch up to the US $8,000 mark mid-2012 after the US Federal Reserve policy announcement in September. The infrastructure spending initiatives by China also increased the use of metal in the second half of last year, but the prices fell in November over concerns about the US fiscal cliff. After that, the situation in China improved and so did the prices.

Throughout last year, the global deficit between supply and demand also partly provided support to copper prices.

According to a report by the International Copper Study Group (ICSG), the global copper market had faced a deficit of 513,000 tons between January and November in 2012, compared with a lower deficit of 260,000 tons in the corresponding period in 2011.

According to the Economist Intelligence Unit (EIU), the global demand and supply of copper were expected to grow at a rate of 3.6 and 3.3 percent, respectively, in 2013. On India’s MCX, the metal registered gains of more than 9 percent in 2012, part of it due to depreciation of the rupee against the US dollar.

today's metal prices - MetalMiner IndXBut in the medium to long term in 2013, the prices are likely to erase the earlier gains due to the probability of rise in production in Chile, the world’s largest producer of copper. A rise in the LME stocks is also expected to exert pressure on prices.

All of this must have been playing somewhere in the back of the minds of the head honchos at Aditya Birla when they decided to place the Mt. Gordon mine in cold storage.

Sohrab Darabshaw contributes an Indian perspective to MetalMiner.

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