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Eric Ng

China copper producer will invest in 16 projects and boost its smelting capacity

Jiangxi Copper plans to spend  nine billion yuan on 16 projects  until 2008 that include expanding  its smelting capacity by 75 per cent,  developing mines and setting up  a copper processing plant.

The mainland's largest copper producer  will boost its annual smelting capacity  to 700,000 tonnes by June next year from 400,000 tonnes, through a 3.4 billion yuan four phase expansion of its Guixi smelting plant.

The plan comes as international copper prices  climb to record highs on the back of speculation by funds, boosting profits of companies that own copper resources.

Jiangxi Copper produced 41 per cent of its copper concentrate from its own mines and sourced the rest from imports, other domestic mines and recycled copper.

'I think copper prices will remain high for some time this year, supported mainly by trading by investment funds,' said president He Changming.

Three-month copper futures contracts traded near US$6,440 last night in London. The metal has soared fourfold over the past three years. Record metal prices and better than expected financial results drove up Jiangxi Copper's shares 12.42 per cent to $9.05 yesterday.

The company planned to raise its copper output 6.6 per cent to 450,000 tonnes this year, gold  7.4 per cent to 13 tonnes and silver 8.3 per cent to 350 tonnes, Mr He said.

He was speaking after the company posted a 68.9 per cent jump in net profit last year to 1.87 billion yuan and a 96.3 per cent year-on-year jump in this year's first quarter earnings to 914 million yuan.

The profits would have been higher had the  firm not locked in its selling prices by entering into forward contracts.

Jiangxi Copper incurred a 546.12 million yuan loss  from forward contracts last year. The management would not disclose the forward loss or gain in the first quarter.

Mr He said the company has a policy of hedging about  35 per cent of its copper selling prices.

China's copper demand last year reached 3.6 million tonnes, while domestic smelters supplied only 70 per cent of that.

The central government, concerned about over-investment in the industry as metal prices rose, last year raised entry barriers.

The government projected late last year that total smelting capacity would rise to 3.7 million tonnes by the end of next year from 1.63 million tonnes at the end of 2004. It said the expansion, if not curtailed, would outstrip the supply of copper concentrates from both domestic and overseas sources.

Jiangxi Copper plans to acquire three copper mines from its parent to  bolster its  reserves of copper 35.8 per cent to 10.81 million tonnes, gold  84.4 per cent to 212 tonnes and silver  79.6 per cent to 4,137 tonnes.

Mr He said a precondition was the government's sanctioning a resumption of new equity issues.

Jiangxi Copper plans a capital expenditure of 3.5 billion yuan this year and 5.5 billion yuan for next year and 2008.



Jiangxi earmarks 9b yuan for expansion