Our primary focus is on copper because of our experience with and the prospects for this metal. All four of our operations produce copper.
Copper occurs naturally in various forms. It can be found in:
- sulphide deposits (as chalcopyrite, bornite, chalcocite and covellite)
- carbonate deposits (as azurite and malachite)
- silicate deposits (as chrysycolla and dioptase).
It can also be found as pure “native” copper.
How it’s mined and produced
Copper-bearing ores are extracted from underground or open pit mines, then crushed, ground into powder and processed into concentrate. Copper can also be leached out of the rock or ore.
Minerals or concentrate can be processed into metal using one of two methods:
- smelting and refining (which our current operations support)
- leaching and electrowinning (which Las Cruces, our development property in Spain, will use to produce copper cathode).
How it’s used
Copper has been used for centuries and remains in widespread use today. Because of its chemical, physical and aesthetic properties, it’s a strong choice for a wide range of domestic, industrial and high-tech applications, including among other things:
- building wire
- power transmission
- heating, cooling and air conditioning
- electronic circuitry
- plumbing fixtures
- automotive parts
- cookware
- coins
- feed supplement to protect plants and crops.
Copper can be drawn into long, thin wires (called ductile) and is corrosion resistant, malleable and an excellent conductor of heat and electricity. When it’s alloyed with other metals, such as zinc (to form brass), aluminum or tin (to form bronzes), or nickel for example, it can acquire new characteristics so it can be used in highly specialized applications.
Copper is one of the most recycled metals. It’s almost impossible to distinguish between recycled copper (or secondary copper) and primary copper (copper originating from ore), once it’s been reprocessed.
The graph below shows the use of copper by industry sector.
Supply vs. demand
We believe the long-term outlook for copper is excellent as the demand for copper is projected to grow for the foreseeable future. The graph below shows the projected supply and demand for copper.
As at December 31, 2007.
Our copper business
All of our operations produce copper concentrate (about 25 percent copper) and sell it directly to smelters and refineries who process it into refined copper. Smelters charge a fee for smelting and refining the concentrate, which varies based on the supply and demand fundamentals in the concentrate market.
The refinery sells the metal to fabricators and traders of copper wire or tube.
We sell most of our copper concentrate under long-term contracts. We also sell on the spot market where the economic return is more volatile than in the long-term market.
Copper prices
The most significant factor affecting our performance is the price of the metals we produce. Copper prices are mainly affected by global supply and demand. They’re also affected to some extent by fluctuating exchange rates and demand from the investment community.
The market prices for refined metals are affected by many factors beyond our control. These factors include:
- global supply and demand
- regional supply and demand
- political and economic conditions
- exchange rates relative to the US dollar
- inflation expectations
- speculative activities
- production costs in major producing regions.
The graph below shows the change in metal prices over the last several years.
State-of-the-art project
Las Cruces is our copper development project in southern Spain. It will produce copper cathode (about 99.99 percent copper) and sell most of it directly to manufacturers. Because the process bypasses smelters and refineries, it eliminates our exposure to the volatile concentrate market.
Las Cruces is designed to be a low cost operation and should allow us to almost double our copper production after it begins full operations in the fourth quarter of 2008.
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