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Copper Processing Fees to Rise 29% in 2014, UBS’s Yamaguchi Says

Copper treatment and refining charges will probably climb 29 percent in 2014 as mine production increases, a UBS AG analyst said.

Benchmark treatment costs will likely rise to about $90 a metric ton, from $70 this year, as refining charges increase to 9 cents a pound from 7 cents, Atsushi Yamaguchi, who specializes in Japan’s steel and non-ferrous industries, said in an interview today. In mid-January, Asian smelters including Pan Pacific Copper Co. and Jiangxi Copper Co. set the 2013 fees with Freeport-McMoRan Copper & Gold Inc.

Mining companies including BHP Billiton Ltd. and Freeport have been negotiating with smelters to set the charges for 2014. The higher fees may boost revenue for smelters including Pan Pacific, which forecast global supply will outstrip demand by 305,000 tons in 2014 and world mine output will increase 13 percent to 16.2 million tons.

World supply of mined copper will expand no less than 4 percent annually in the 2012-16 period, Standard Bank Plc said in an October report, compared with less than 1 percent in four of the six years before 2012. Mines from Rio Tinto Group’s Oyu Tolgoi in Mongolia to Vale SA’s Salobo in Brazil are adding production.

Treatment fees are expressed in dollars per ton of concentrate received and refining fees in cents per pound of copper in the ore. The fees are deducted from the price paid by smelters to mining companies for the raw material.

BHP owns Escondida in Chile, the world’s biggest copper mine. Freeport operates the Grasberg mine, the world’s second largest, in Indonesia.

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