Quake sparks copper shortage fears

1 Mar 2010, 2:05 pm   -   Source: Reuters
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Copper prices surged in early trading on Monday due to supply worries caused by the earthquake in Chile, jumping 5.6 percent on the London Metal Exchange. (AP)

Copper prices surged in early trading on Monday due to supply worries caused by the earthquake in Chile, jumping 5.6 percent on the London Metal Exchange. (AP)

Chile's largest copper mines have resumed operations despite limited power supplies, which analysts fear could curtail exports from the world's No. 1 producer.

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Chile's largest copper mines have resumed operations despite limited power supplies, which analysts fear could curtail exports from the world's No. 1 producer.

Ricardo Alvarez, manager at Chile's fourth largest mine, El Teniente, which accounts for more than 7 percent of national output, told Reuters the recovery pace of output would depend on the supply of electricity, which was partial.

"As they (the regional grid) allow us to use more power we will resume other operations," he said, adding that those operations included the concentrator and Caletones smelter.

Alvarez said the mine could slow the extraction of minerals if power supply lags.

Copper prices surged in early trading on Monday due to supply worries caused by the earthquake in Chile, jumping 5.6 percent on the London Metal Exchange.

The quake killed more than 700 people and had forced Codelco to shut the El Teniente complex as well as its Andina copper mine.

Production resumed at the Anglo-American Los Bronces copper mine, union leader Eduardo Rocco told Reuters. He said he did not know whether the company's El Soldado mine had resumed operations.

An Anglo American spokesman said on Saturday there were no initial reports of major damage at the two mines, which together produce some 280,000 metric tons a year.

Alvarez said earlier facilities were undamaged in the 8.8 magnitude quake on Saturday and that roads to the exporting port of San Antonio were in good condition.

The century-old, 400,000 metric ton per year El Teniente is the world's biggest underground copper mine.

Another Codelco official said the nearby 210,000 metric ton Andina mine was likely to resume operations by day's end.

The biggest mines in Chile, which produces a third of the world's copper, are about 1,000 km (600 miles) to the north and were spared any damage, but analysts feared that supply disruptions from the mid-sized deposits nearer the capital, Santiago, would be enough to stoke prices.

For a graphic showing the location of the earthquake, click on: http://graphics.thomsonreuters.com/RNGS/2010/FEB/CHILE.jpg

"While it appears that a modest proportion of production has been halted, the major impact may come from the disruption on deliveries from the mines and from the disruption of power supplies to the mines," said Citi analyst David Thurtell.

A Codelco spokeswoman downplayed the impact on infrastructure, saying most of the road destruction was south of both mines and that she drove from a beach near the San Antonio port to near El Teniente.

Both of Chile's main oil refineries were shut after sustaining damage in the quake, state oil company ENAP said, adding that it would import diesel to meet demand. Prolonged power outages could significantly increase demand for liquid fuel to help keep the mines operating.

The central copper-exporting port of San Antonio was shut down, but the major northern ports of Antofagasta and Mejillones were unaffected.

Freeport McMoRan Copper & Gold Inc said the quake did not damage its two mines, but it is facing a power outage at its Candelaria mine, which will result in a temporary shutdown.

(Reporting by Alonso Soto; editing by Chris Wilson)

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