Biggest Undeveloped Copper Deposit in Australia Gets Greenlight

  • Carrapateena mine, plant being developed by OZ Minerals
  • Companies seen growing more confident on outlook for red metal

OZ Minerals Ltd. aims to begin output from the Australia’s biggest undeveloped copper deposit by 2019 under a revised A$975 million ($729 million) construction plan, another signal that the metal is the hottest play in a burgeoning mining industry rebound.

The Carrapateena project in South Australia will have annual production of about 67,000 metric tons of copper and 76,000 ounces of gold over its first three full years, Australia’s third-largest copper producer said in a statement Friday. The proposal replaces plans for a smaller-scale development outlined in February.

Copper demand may catch up with supply next year and a deficit will then widen on a lack of new mines, according to Freeport-McMoRan Inc., the largest publicly traded producer. Companies and project financiers are growing increasingly confident about the metal’s outlook, Gavin Wendt, Sydney-based founding director at MineLife Pty, said by phone.

Aspirational Metal

“Copper is the metal of the aspirational middle classes across emerging markets, whether that’s Asia or Africa,” Wendt said by phone. “People want the appliances, white goods and air conditioners -- all of which need copper.”

China’s urban population will probably increase by a further 170 million people in the next decade, while globally about 70 million people a year are entering the world’s middle class and boosting demand for materials, according to Rio Tinto Group. Copper wire is used in appliances including washing machines and refrigerators.

The metal posted its biggest monthly gain in a year in April on signs of an improved demand outlook in China. Copper for delivery in three months was little changed at $4,787 a ton on the London Metal Exchange at 12:10 p.m. in Sydney. OZ Minerals rose 2.4 percent to A$5.88 at 12:06 p.m. in Sydney trading, extending its advance this year to 45 percent.

“The larger Carrapateena project is very compelling,” Chief Executive Officer Andrew Cole said in the statement. With “such strong financial metrics,” the company decided to commence initial work and accelerate the prefeasibility study, he said.

Steelworks

OZ Minerals will study construction of a processing plant at Whyalla and is in discussions with administrators called in by Arrium Ltd., the owner of the port town’s 50-year-old steelworks, it said.

Carrapateena’s development plan compares with the initial proposal for a larger scale mine, which had an estimated cost in 2014 of as much as A$3 billion. OZ Minerals will fund the new option from existing cash and cash flow, the producer said in the statement.

Copper and nickel are seen leading an eventual commodities rebound on consumer-led demand, according to T. Rowe Price Inc. The copper market deficit may be as much as 500,000 tons by 2020, Javier Targhetta, a Freeport senior vice president of marketing and sales, said in a March interview.

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