Mines to shine as coal, base metals prices soar

Staff Writer | Tuesday January 12, 2010 00:00

BCL Mine, Morupule Colliery, African Copper and Discovery Metals are some of the local mines positioned to benefit from rising coal and copper prices. Last week, copper prices hit a 17-month high, triggered in main by a strike at a Chilean copper mine, the world's biggest producer of the base metal. The metal rose to US$7 400 a tonne, up from about US$2 900 a tonne at the beginning of 2009.Besides the Chilean strike, the copper price has also been influenced by investor demand, economic optimism and strong demand, particularly from China. The Oriental giant is stockpiling the base metal as extremely cold weather conditions are expected to impact output from its own copper mines.

International traders report that Beijing plans to secure 300,000 tonnes of copper and could ramp this up to 1.2 million tonnes before the end of the year.

BCL Mine and African Copper, the country's only copper producers, are well positioned to tap into the spiral in copper prices, with the latter particularly desperate to avoid a repeat of the economic conditions that forced the closure of its Mowana Mine early last year.

African Copper re-opened Mowana Mine last September, re-energised with funding and strategic support from Zambia Copper Investments. The mine's re-opening tactically coincided with the rise in the copper price, marking the beginning of an ascent still continuing today.Discovery Metals Limited (DML), whose Boseto Copper Project is expected to come on line next year, is expecting the copper price's rise to boost its project economics and support from financiers. The Australian developer is due to complete a Bankable Feasibility Study for Boseto in March and funding for this process has been helped by the rise in the copper price. Thus far, DML has raised 13.1 million Australian Dollars (P81.1 million) through an October share placement, followed by a share purchase plan which raised a further 2.7 million Australian Dollars (P18.1 million).Buoyed by the copper price, DML could tap into 9 million Australian Dollars (P60.3 million) worth of options set to expire in May 2010. Should the copper price hold strong, DML will be in a sound position to commence commercial production next year at two million tonnes of copper per year. Morupule Colliery, the country's sole coal producer, is also smiling to the bank, riding on the energy mineral's upward trend. Demand from China and India, coupled with lower inventories worldwide, have seen the mineral's price near the US$100 per tonne mark, as buyers compete for limited supplies.Last December and early this year, South African coal prices breached the US$90 per tonne mark.A recent JP Morgan report estimated that China and India could import a combined 63.9 million tons of coal for power stations this year and 56.4 million tons in 2011. In addition, severe cold weather in China has strained the Oriental giant's domestic supplies and contributed to a rise in prices. Last year, coal averaged US$70 per tonne and this year it is estimated the mineral may hover around US$85 per tonne with high chances of further spikes.The rise in coal prices will lend weight to Morupule's supply contract negotiations with off takers such as the Botswana Power Corporation, BCL Mine, BMC and others. The price will also support the Colliery's planned expansion, in which it hopes to increase production to three million tonnes per year, from the current average of one million.