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Highlights

The recent growth in global copper output is unsustainable now that most of the new projects have been completed and copper prices have remained low, Freeport-McMoRan President and CEO Richard Adkerson said Tuesday.

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Speaking to investors and analysts in a third-quarter conference call, Adkerson acknowledged that copper supply had risen substantially in recent years, mainly due to new production projects at mines and mills.

"We were a big part of that; we had three big projects we started in the 2010 timeframe that have been completed now," he said, referring to expanded production at the Tenke Fungurume mine in the Democratic Republic of Congo, the development of sulfide ore reserves at the company's El Abra mine in Chile, and the development of underground ore bodies at the Grasberg mining complex in Indonesia.

"But with the current projects being finished, the recent supply growth is not sustainable" in the current pricing environment, Adkerson said.

Article Continues below...



"These long periods of low prices will impact future supply," he added, referring to a recent report from UK commodity research firm Wood MacKenzie forecasting a 4 million mt decline in output over next several years. Adkerson noted that current output from the top 10 global copper mines totals about 5.5 million mt. "To replace 4 million mt would be a significant challenge for the industry," he said.

Moreover, developing new mine supply will require copper prices to average about $3.30/lb, Adkerson said, citing figures from the Wood MacKenzie report.

COMEX copper for December delivery closed 4.55 cents/lb higher Tuesday at $2.13/lb. COMEX prices last reached the $3.30/lb level in early 2014 and tested the $2/lb level early this year.

And while the new production projects have increased global output, the large surpluses predicted this year by many analysts have been smaller than anticipated, raising the possibility of a production deficit should a serious supply disruption or demand pick-up occur, Adkerson said.

Freeport-McMoRan expects to produce 4.8 billion lb of copper, 1.26 million oz of gold and 73 million lb of molybdenum in 2016.

The company is working to sell its stake in the Tenke Fungurume mine to China Molybdenum, and expects copper production to fall to 4.3 billion lb in 2017 as a result.

--Nick Jonson, nick.jonson@spglobal.com

--Edited by Lisa Miller, lisa.miller@spglobal.com