Nov. 4 (Bloomberg) -- Copper prices may rebound to $4 a pound next year because of recovering economic growth in the U.S. and Europe and a lack of new supply, Southern Copper Corp. Chief Executive Officer Oscar Gonzalez Rocha said.

“By next year, the American economy and most of Europe will have recovered from the crisis and consumption will be up,” Gonzalez said yesterday in an interview in Lima. “Nor will there be many mines coming online in that timeframe.”

Copper, which closed at $2.977 a pound yesterday in New York, touched $4 for the last time in July 2008 before the economic crisis caused prices to slump to a four-year low in December. Rising construction in China, the world’s largest copper buyer, will also spur price gains, according to Gonzalez.

Phoenix-based Southern, the largest copper producer in Peru and Mexico, is grappling with declining output after a two-year strike at the Cananea mine, which can produce 165,000 tons a year. Production has fallen for three straight years, to about 500,000 tons last year, from 700,000 tons in 2005.

Peru is the world’s third-largest copper producer, after Chile and the U.S. Southern, holder of the world’s second- largest copper reserves, is investing billions of dollars in new mines such as the Tia Maria deposit in Peru and El Arco in Mexico. Production could rise to 1 million tons, Gonzalez said.

Shares Rise

Southern rose $1.07, or 3.3 percent, to $33.78 at 10:12 a.m. in New York Stock Exchange trading. The stock has doubled in the past year.

Southern plans to spend about $934 million on the Tia Maria project in Peru with the aim of producing 120,000 tons a year of copper by mid-2011. The company is also expanding its Toquepala mine by about 100,000 metric tons by 2012.

Copper, averaging $2.22 a pound so far this year, has more than doubled since December on signs of recovering demand in the U.S. and increased Chinese manufacturing. Futures for December delivery rose 1.5 percent at 10:12 a.m. today on the New York Mercantile Exchange’s Comex division.

Gonzalez also said that Southern, the world’s fourth- largest molybdenum producer, is ”interested in three-month” molybdenum contracts that will be traded on the London Metal Exchange starting in February.

The company is slated to produce about 25,000 metric tons of molybdenum. Codelco, Freeport-McMoRan Copper & Gold Inc. and Rio Tinto Group are the three largest producers of the metal used to toughen steel.

‘Better Control’

“It would be good for the LME to have a better control of molybdenum prices,” Gonzalez said. “We’d have more realistic programming than the unregulated weekly estimates we have now.”

Southern could take six months to complete a feasibility study on its $1 billion El Arco copper project in Mexico, Gonzalez said. The mine may produce about 190,000 tons of copper annually, according to the company. The Cananea mine is also located in Mexico.

The company is also exploring for copper and gold in four areas in northern Chile, Gonzalez said.

Southern faces growing opposition to new investment projects such as Tia Maria as regional and municipal elections scheduled next year may generate political instability, said Daniel Mori, a mining analyst at Lima-based brokerage SAB Centura.

“Southern will have to work to convince the communities,” Mori said in a telephone interview. “But they should be able to meet their 2011 target.”

Cananea, Asarco

The company expects the Mexican Labor Ministry to rule by the year-end on an appeal by workers on strike at Cananea since July 2007, Gonzalez said.

Southern Copper partially reopened the Cananea mine in January 2008, then closed it a few months later. A severance package was offered to 1,300 workers after the National Mining and Metal Workers Union refused to recognize a Mexican labor court decision ruling the strike illegal.

A ruling is also pending on Tucson, Arizona-based Asarco, which Southern’s parent Grupo Mexico put under bankruptcy protection in 2005. The company is waiting for a Texas court to rule on who should control the company after Sterlite Industries (India) Ltd. submitted a rival bid, Gonzalez said.

To contact the reporters on this story: Alex Emery in Lima at aemery1@bloomberg.net.

Last Updated: November 4, 2009 11:05 EST