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DJ Jiangxi Copper: No Deal Yet On TC/RCs;Talks On With BHP, Freeport

Posted on: Tue, 01 Dec 2009 03:28:00 EST

Symbols: JGXCF

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SHANGHAI, Dec 01, 2009 (Dow Jones Commodities News via Comtex) --
JGXCF | Quote | Chart | News | PowerRating -- Jiangxi Copper Co. (0358.HK), China's largest copper smelter by output, is yet to set 2010 copper treatment and refining charges even though preliminary talks have been completed, a company official said Tuesday.

The company will start the second round of TC/RC talks with global miners BHP Billiton (BHP) and Freeport-McMoRan Copper & Gold Inc. (FCX) by mid-December, said the official who declined to be named.

"We didn't touch anything specific on (TC/RCs) prices during the first round of talks," said the official.

Treatment charges and refining charges, or TC/RCs as they are commonly known, determine the profit margins of copper smelters who buy concentrate from miners at a prices linked to London Metal Exchange three-month copper prices. In times of tight concentrate supply, smelters are forced to lower these charges to ensure sufficient availability of the raw material to keep their smelters running.

Some industry participants expect 2010 treatment charges to be settled around $50 per ton and refining charges around 5.0 cents a pound, 33% lower than those in 2009.

Jiangxi Copper said early November that the company expects TC/RCs to drop next year on tight concentrate supply, but is still seeking 2010 treatment charges above their production cost.

"Our average production cost in TC/RCs term is $77/7.7c," which makes the expected 2010 TC/RCs unprofitable for the copper smelter, said the official.

Chinese smelters usually take 80% of material against the annually-agreed fees, and purchase the rest from the spot market.

Spot market TC/RCs have dropped to $8/0.8c recently, 60% lower than the $20/2.0c just a few weeks ago, amid a tight concentrate market because of a number of mine accidents and strikes, as well as lower output at key mines such as the BHP Billiton Ltd.-operated Escondida mine in Chile.

-Yue Li contributed to this article; Dow Jones Newswires; (8621) 6120 1200; yue.li@dowjones.com

(END) Dow Jones Newswires

12-01-09 0328ET

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