China Signs with Codelco of Chile on a $2 Billion Joint Venture to Develop Chilean Copper Reserves

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Industrialinfo.com (Industrial Info Resources; Houston, Texas). China Minmetals Corporation (Beijing, China) along with the world’s largest copper producer, Corporación Nacional del Cobre de Chile (Santiago, Chile), also known as Codelco, have agreed to a $2 billion joint venture to develop Chilean copper reserves. According to Juan Villarzu, Codelco´s Chief Executive Officer, the agreement with Minmetals will help the company develop new sources of low cost production, as well as boost innovation and technology.

According to the agreement signed in Beijing in February 2006, Codelco will provide 835,250 tons of copper to China Minmetals Nonferrous Metals Corporation during the next fifteen years. These companies will establish a copper trading company that will be known as the Copper Partners Investment Company with an initial $550 million investment. The joint venture with the Chinese marks a departure for Codelco, which is not known to cooperate with foreign investors in copper exploration and development. At the same time, China currently known as the world's biggest copper importer, doesn’t have enough domestic copper resources to supply its industries, forcing it to import huge quantities from other countries. In 2004, it imported 1.38 million tons of copper and 2.88 million tons of copper ore. Due to amazing growth in the power generation and telecommunications sectors, China's copper demand in 2005 increased 6% more than the previous year. Currently, Chile is the world's biggest copper exporter and 20% of the copper produced there is exported to China. Codelco Asia, the Chinese branch of Codelco located in Shanghai, negotiates with China, Indonesia, Malaysia, Myanmar, Singapore, Thailand, Vietnam, and other countries in South East Asia.

Other Projects of Minmetals

In 2003, during Miao Genshu`s Minmetals chairmanship, the Chinese miner state company earned more than $11 billion. According to the newly joint venture agreement, by 2009, China Minmetals will have the option to buy a 25 to 49% stake in the GABY copper mine newly exploited by Codelco, located just south of Codelco's Chuquicamata mine in northern Chile, which holds proven mineral reserves of 541 million tones, and averaging a copper grade of 0.44%. Currently, this estimated $600 million project (GABY) is projected to have three stages of production. The first stage of production from 2005 to 2008 would treat 30.6 million tones of mineral per year, rising to 40.3 million tones in 2009-2011, and finally 51 million tones per year in 2012-2017.

China’s presence in Latin America

In November 2005, Chile signed a Free Trade Commercial Agreement with China to increase its commercial relationship in 2006 up to an estimated $6 billion. Apart from that, China has invested in copper mines in Peru, Brazilian steel mills, and has also signed agreements to aid in the development of Venezuelan oil fields (for details see related February 22, 2006 news article - Venezuela’s Oil Exports to China to Reach 300,000 Barrels of Oil per Day).

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