Codelco to expand copper mining capacity

After some news sources report its annual output declined in 2007, Chilean copper miner Codelco plans to increase capacity in 2008 by upping its capital spending to $2 billion, up from $1.69 billion last year. Of that, $241 million will go to its new mine in Gaby due to start production in March, pumping out 100,000 metric tons of copper this year.

Codelco said this week its biggest risk to production is lack of energy. Bloomberg reports that energy prices in Chile, the world's largest supplier of copper, surged 29% in 12 months because of a shortage of natural gas from neighboring Argentina.

Copper prices in the U.S. hit their highest point in three weeks after the reports of Codelco’s reduced output hit the market to combine with weather-related concerns in China and lower stockpiles on the London Metal Exchange.

"It's a combination of these copper-specific fundamentals against the macro, and certainly with copper prices at $3.45/lb, the macro is losing," said Bill O'Neill, managing partner of LOGIC Advisors in a recent Reuters report.