Give copper its due, miners urge

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    Give copper its due, miners urge

    Kevin Andrusiak | April 11, 2008

    THE leading players behind Australian-listed copper miners Tamaya Resources and Oxiana have criticised the investment community for failing to understand the windfalls that can be delivered from rising copper prices.

    Speaking at the World Copper Conference in Chile, Tamaya chairman Hugh Callaghan said many copper miners on the Australian share market were desperately undervalued and that analysts, when evaluating projects, needed to upgrade their copper price predictions from $US1.50 to $US2.00 a pound.

    "We need a long-term price of $US2 a pound as a floor to cover banking ratios," Mr Callaghan said.

    Rio Tinto Copper chief executive Bret Clayton said the global mining giant's internal forecast suggested copper consumption would double over the next two decades.

    "When you put that in mind of some of the issues that we are facing in the industry with bringing new production online, that is a very sobering thought," Mr Clayton said.

    Mr Callaghan said the copper industry was going to require greater amounts of capital but brokers were factoring prices of only $US1.50 a pound. "Many projects are not going to get financing going forward. Juniors with niche projects will survive and thrive," he said.

    "Mid-tier and junior projects with lower-grade orebodies in remote locations will stall, and a number will fall by the wayside."

    Mr Callaghan predicted the copper price would average $US3 a pound for at least the next five years.

    Tamaya's share price has suffered in the wake of the the slide in the share market and a disappointing December quarter for its flagship Punataqui mine in Chile, where mined grades were weaker than expected.

    Oxiana chief executive Owen Hegarty backed up Mr Callaghan, saying copper prices were up about 28 per cent this year to all-time highs, and that copper miners were being unfairly punished by investors who did not understand the impact on earnings potential.

    "It is a situation unlike that in the iron ore industry where rising prices have washed through to the share price of nearly every iron ore miner and explorer on the bourse," Mr Hegarty said. "There is no doubt about it, we are in for a generation of growth led by China and followed by India.

    "Only one thing can happen to prices: even analysts are starting to revise upwards.

    "We must take a long-term view: we don't want to be deflected by short-term financial markets. The sands of time will wash over and the fundamentals will prevail. At what price does copper drop off? I don't know. All copper equities are tragically undervalued."

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