Jiangxi Copper Agrees on 31% Increase in Fees With Freeport

Jiangxi Copper Co., China’s largest smelter of the metal, said it agreed with Freeport-McMoRan Copper & Gold Inc. to a 31 percent increase in fees to process the metal next year.

The companies settled on $92 a metric ton to treat concentrate and 9.2 cents a pound to refine the metal, Huang Dongfeng, the board secretary of the Jiangxi-based company, said by telephone today. Huang said the agreement was reached on Nov. 15, without disclosing more information. The rates this year were $70 a ton and 7 cents a pound, according to Jiangxi.

Higher treatment fees shore up earnings at smelters and add support to copper futures that tumbled into a bear market in April and have fallen 12 percent this year in London. Tongling Nonferrous Metals Group Co., China’s second largest copper producer, will probably use Jiangxi’s agreement as a benchmark in its own talks with miners, said board secretary Wu Heping.

The agreement may also weigh on spot treatment fees in China, which rose above $100 a ton in late September and have remained above that level since then, said Zhu Wenjun, an analyst at SMM Information & Technology Co. in Shanghai.

“The increase will help Jiangxi’s profit next year,” Zhu said. “The agreement is in line with expectations in the market, which were for about $90 to $95 per ton.”

The fees are deducted from the price paid by smelters to mining companies for the raw material.

Futures Prices

Copper for delivery in three months on the London Metal Exchange fell 0.3 percent to $6,991.25 a ton at 4:53 p.m. in Shanghai. The February contract on the Shanghai Futures Exchange closed 0.7 percent higher at 50,290 yuan ($8,255) a ton.

Jiangxi Copper shares climbed 2 percent to 15.08 yuan today in Shanghai while Tongling Nonferrous Metals advanced 2.4 percent to 10.69 yuan in Shenzhen.

Mining companies including Melbourne-based BHP Billiton Ltd. and Phoenix, Arizona-based Freeport, are negotiating with smelters around the world to set fees for 2014.

Atsushige Higashimori, a spokesman at Tokyo-based Pan Pacific Copper Co., Masashi Takahashi, a spokesman at Sumitomo Metal Mining Co. and Takuya Kitamura, a spokesman at Mitsubishi Materials Corp., declined to comment on their negotiations for annual processing fees with mining companies. Lee Joon, a spokesman at South Korea’s LS-Nikko Copper Inc., also declined to comment.

World supply of mined copper will expand no less than 4 percent annually in the 2012-16 period, Standard Bank Plc said in a report in October, compared with less than 1 percent in four of the six years before 2012.

— With assistance by Alfred Cang

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