SANTIAGO, Chile, July 23 (UPI) -- Chile's National Copper Corporation, Codelco, the world's largest copper producer, is looking for prospective partners for its new $1 billion venture: the Mejillones custom copper smelter and refinery.
So far, the likeliest candidate seems to be the Finnish metal giant Outokumpu -- already signed up as the project's technology provider -- although company executives have said they are holding talks with several other foreign firms.
Located in the country's northern region of Antofagasta, the Nueva Mejillones plant is projected to generate 800,000 tons of fine copper annually.
The initiative is being looked at by the National Environment Commission in Conama. According to Juan Villarzu -- executive president of Codelco -- the environmental authorities should give Mejillones the go-ahead by the end of this year. It should be operating in 2005.
Mejillones is one of several initiatives planned by Codelco in the present decade to expand its production. The state-owned company is also hard at work in the completion of its Division Codelco Norte project, a new $3 billion company division to manage several mining assets in northern Chile.
Division Codelco Norte is to merge the Antofagasta mining deposits of Chuquicamata and Radomiro Tomic and manage several deposits that are not yet in operation, such as Mansa Mina, Ojo de Apache, Gaby, Atagualpa and Toqui. Codelco Norte Manager Carlos Rubilar has said the initiative should double both the value and copper extraction volumes of Chuquicamata and Radomiro Tomic. The remaining deposits should begin operations by 2010.
Among the rumored candidates for a Mejillones strategic partnership, analysts agree that Outokumpu looks like the frontrunner. In the past, the Finns have repeatedly stated their interest in developing a smelting plant in the region. However, the main indicator for an eventual partnership is that already in March the companies signed a preliminary agreement to jointly develop technology as well as production and mineral treatment initiatives both in Chile and abroad.
The alliance between the two mining giants could lead to long-term projects in Russia and China, according to Codelco representatives. The agreement should help open the door to the Chinese and Russian markets, as the Finns already have experience in those countries.
A partnership with Outokumpu would strengthen Codelco's strategy to expand operations beyond Chile. The company has already reached agreements in Mexico and Brazil and announced a strategic alliance with Brazil's Compania Vale do Rio Doce earlier this year.
Nonetheless, not everything looks rosy for the Mejillones project. Analysts have said the construction of a new smelter plant in the country is not feasible until 2005 because of the limited supply of copper concentrates. A Chilean Copper Commission shows this year's copper concentrates exports should amount to 1.6 million tons; increase to 2.3 million tons next year, and stabilize to an average of 1.9 million tons between 2005 and 2010.
Available copper concentrates -- those not tied up by long-term contracts with foreign smelters and refineries -- will increase from 300,000 tons this year to 400,000 in 2003. Cochilco's projections show that these should rise to 800,000 tons in 2007 and reach 1.5 million tons in 2010.
Villarzu has said the plant could increase capacity later in its construction. But the total output would depend on Codelco's ability to secure sufficient copper concentrates from other mines to feed the plant. The company is negotiating the availability of concentrates from third parties.
Tapan Jarvinen, Outokumpu's general manager in Chile, said Mejillones' estimated processing capacity could only be reached if several of the area's mining companies participate in the project.
Codelco has also set its sights on the operation of the Ventanas smelter and refinery, which is owned by the National Mining Company, Enami. The latter government company is currently struggling with its $480 million debt and is actively seeking a joint venture with Codelco.
Although Enami experienced some $27 million in losses during 2001, it still plans to increase Ventanas' production capacity should it fail to attract a partner. To this effect, company executives have already held talks with Outokumpu for eventual technological support and advisory.
Last year, Outokumpu invited to the United States a delegation of executives from both Codelco and Enami to visit a processing plant belonging to the Kennecott mining company. The plant uses Outokumpu's converter and oven technologies, which are similar to those that both Mejillones and Ventanas will eventually need.
Codelco increased its 2002 exploration budget by 8.7 percent to $25 million. The company expects to produce 1.5 million tons of refined copper in 2002, compared to 1.7 million tons in 2001.