The share of mine production from solvent extraction-electrowinning (SX-EW) operations has stabilized at about 19%. During the 1990s, expanding SX-EW production drove high-cost smelter route operations out of business. It also made some industry smelting and refining capacity redundant, depressing treatment and refining charges (TCRCs). The average costs of production from the two routes are now closely aligned. However, the top quartile of the cost curve remains dominated by smelter-route operations. These operations are at risk during periods of sustained low copper prices and are vulnerable to increases in TCRCs.

Recently, the estimated average cash cost of producing copper via the smelter route has been falling by 10% a year in real terms. AME’s Cost Report shows how this is largely being achieved through ongoing reduction in site costs, aided by exchange rate movements. Site cost savings were supplemented by higher by-product credits from a handful of major mines. The lowest cash cost major producers – PT Freeport Indonesia and WMC – derive their copper output from single mines that benefit from substantial by-product credits.

We project that TCRCs will increase sharply in real terms in 2004-06, with increases in the LME price of copper compounded by a greater share of value accruing to the smelting and refining industry. The latter effect will result from refinery capacity utilization rates moving higher while mine capacity utilizations remain depressed – which means that concentrate buyers will regain the upper hand. For copper produced by the concentrate/smelter route, mine site cost savings will not completely offset the higher TCRCs and reduced by-product credits beyond 2003.

Created on ... décembre 13, 2003