High cost copper miners facing stark choices

7th Apr 2014 08:41

High-cost copper miners face a stark choice between enduring losses or cutting production, as the price of copper drops below their breakeven level for the first time since 2008.According to research from commodities consultant CRU, that is the decision which miners in the most costly 90th percentile - located mostly in China but to a lesser extent also in Chile - will have to make now that three-month copper futures are near their $6,613/metric tonne mark, the threshold for operating losses at these outfits, according to the Financial Times. Companies in the 90th percentile are those which produce the top 10% of copper, in terms of cost. Bigger companies such as BHP or Glencore Xstrata have greater leeway, with average cash costs, plus sustaining capital expenditure, below $5,000/tonne. In 2008 the price of the industrial metal only briefly moved that low. This year, however, Goldman Sachs believes copper prices will drop as far as $6,000/tonne, due to lower demand from China and as new capacity comes online next year from two big copper projects. AB