Copper to rally at $ 3 after virus passed, says Minister of Chile

(Bloomberg) – The deadly coronavirus that has rocked the markets since January will not prevent the price of copper from climbing to $ 3 a pound this year, according to Chilean Minister of Mines Baldo Prokurica.

The price of copper, often used as a barometer for the global economy, has fallen by around 7% so far in 2020, signaling that demand for the metal used throughout, from automotive electronics has cooled as investors withdraw from the riskiest assets.

Copper supplies to warehouses tracked by the Shanghai Stock Exchange increased to the highest level of this time of year, with logistical constraints inside China preventing production from reaching end users, further lowering the price of the metal.

Copper prices are expected to stabilize once the coronavirus has passed, Prokurica said in an interview at the PDAC conference in Toronto. No one has information to say that the coronavirus will last one or two or three months, but SARS and the like have lasted between two and three months, so we think that's what will happen. with the coronavirus.

Copper rose 2.2% in New York on Monday to $ 2,595 per pound, supported by gradual reopening of factories across China and signs of imminent bank support power stations to combat the economic fallout from the epidemic.

I feel like the price should be somewhere between $ 3 and something more, said Prokurica, citing the supply and demand situation and the wage negotiations due in the mines from Chile as potential factors.

Cochilco, the Chilean copper commission, lowered its price projection to $ 2.85 a pound from a previous estimate of $ 2.90 in January.

Chilean copper deliveries

No copper cargo from Chile to China has been suspended and Chilean miners have not seen a reduction in orders related to the coronavirus, said Prokurica.

China's copper buyers were in talks with suppliers to reschedule certain deliveries last month as the Asian country extended New Years holidays and ordered entire cities to remain in quarantine, according to Cochilco.

More than a quarter of the world's copper supply is extracted from Chile, and fewer orders from its largest buyer would hinder growth in this South American country.

We are confident that the measures announced by President Xi Jinping, special measures to reactivate the economy, will work, said Prokurica.

Bond issue

The world's leading producer of copper, Codelco, plans to tap international markets with a new bond issue in April, said Prokurica.

It will be in the U.S. market but open to the world, he said, adding that the state miner has no problem with funding.

The offer would mark the first time the company has sold debt since Moodys Investors Service lowered its benchmark credit rating for the miner, citing declining ore grades and increased production costs. Its debt rating was reaffirmed at A3, the fourth lowest investment rating.

The company, which hands over all of its profits to the Chilean government, plans to spend more than $ 20 billion over a decade to modernize its aging mines and prevent an imminent collapse of production.

Codelco entered the market in January, offering $ 2 billion in 10- and 30-year bonds.

Mining royalties

President Sebastian Pineras' administration is discussing a better alternative to the proposed 3% hike on mining royalties, said Prokurica.

Legislators of the Mining Committee of the Lower House of Chile are expected to vote on Wednesday on a proposal to increase royalties on copper and lithium miners. The bill provides an exception for operators extracting more than 12,000 metric tonnes of fine copper or 50,000 metric tonnes of metallic lithium per year.

The proceeds from the royalties would be used for development work in the communities where the materials are mined to help mitigate the environmental effects.

Prokurica said government officials are designing an environmental, social and governance mining policy for the period 2020-2050.

(Updates to details of bond issuance and mining royalties from the eighth paragraph)

To contact the journalists on this story: Maria Elena Vizcaino in New York at [email protected]; Esteban Duarte in Toronto at [email protected]

To contact the editors responsible for this story: Luzi Ann Javier at [email protected], Joe Richter, Steven Frank

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