The world's largest copper miner: copper supply will be tight for a long time, it is difficult to find new supply in the next 8-10 years
As the LME copper mine rises above US$9,000/ton, a nine-year high, global copper mining companies may also be ready to speed up the development of new mine projects in order to obtain high profits as soon as possible.
Raul Jacob, chief financial officer of Southern Copper Corp., one of the world’s largest copper companies, said that the current copper ore price is far higher than the incentive level for new mining projects. Will help to ease the tight supply through expansion. However, the time required to build a mine may be twice as long as it used to be, which means that the market will not see new supply until eight to ten years later.
The predecessor of Southern Copper can be traced back to the acquisition of Peru Southern Copper by Mexican copper producer Minera México in 2005. The company is currently listed on the New York Stock Exchange with a market value of nearly 60 billion US dollars. The Mexican Mining Group (GrupoMéxico) owns 88.9% of Southern Copper.
Southern Copper has no intention of accelerating the development of mineral projects
Southern Copper has the largest copper reserves in the industry. They plan to nearly double production by 2028 and may become the world's largest copper producer.
At present, Southern Copper's projects in Peru and Mexico are already very busy and do not intend to accelerate the construction in any meaningful way. But Jacob said that given that the current copper price has exceeded $4 per pound, which is much higher than last year's average price of $2.80, other companies may accelerate project construction. He predicts that the incentive price for mining companies to develop new mine projects is approximately US$3.25 to US$3.50 per pound.
Jacob said: "If the price level (for copper mines) remains unchanged, we should see new projects enter the market... But the lag from decision-making to production will make the copper price cycle a little longer than in the past."
Jacob pointed out that the next generation of copper mines may have to solve the problem of declining ore quality while at the same time complying with higher environmental and social standards, which may cause the time cost and capital cost of the project to be increased.
This is also part of the reason why Southern Copper abandoned its accelerated expansion plan in order to make profits as soon as possible. He said, "For safety, the project will take as long as it will take...there should be no shortcuts."
The company intends to look for acquisitions
Like other peers, the company currently has plenty of cash. According to Jacobs, according to the current copper price, the company's profit this year will be around US$5 billion, setting a historical record.
He said that although the company's current investment focus is still on its own project management, Southern Copper will also look for acquisition opportunities.
"The (acquisition project) valuation may be higher because the current copper ore price environment is better, but at the same time our own valuation will be higher," Jacobs said. He said that Southern Copper's balance sheet "may be underutilized", with a P/E ratio of 24 times, much higher than the median P/E ratio of its peers.
As for the types of opportunities the company may be interested in, he said that all of this will depend on the quality of the assets. He said: "We are assured of the Latin American market, and we are very relieved and optimistic about the copper market."
