(Updates with additional CEO comments; adds details)
By Andrea Hotter
Of DOW JONES NEWSWIRES
SANTIAGO -(Dow Jones)- Copper prices will remain above the $3-a-pound mark throughout 2008, although problems stemming from the U.S. subprime mortgage market crisis could affect demand for the metal in the short term, the chief executive of Chile's state-owned miner Codelco said Monday.
Copper is currently trading around $3.97/lb on the Comex division of the New York Mercantile Exchange, which is around $8,717 a metric ton on the London Metal Exchange.
Noting still-strong demand from China, driven by the country's urbanization, Codelco's Jose Pablo Arellano said copper supplies are still having problems keeping up with demand.
This is true of Codelco's own operations, he noted, with the Codelco Norte division expected to see falling output in 2008 due to lower ore grades. Ore grades fell by around 6% at the Codelco Norte division in 2007, and are set to drop by 8% in 2008, Arellano told reporters at a briefing.
Overall production at Codelco's operations should remain the same as in 2007, though there will be a rise in costs because of the expected fall in ore grades, he said. Output in 2007 was 1.8 million tons.
Codelco, meanwhile, is looking to neighboring South American countries for exploration opportunities, he Arellano, particularly Mexico and Brazil; and there may be possibilities in Peru, he added.
One outcome of the record high copper prices has been that talk of privatization of state-owned Codelco has more or less vanished, said Arellano.
Energy Supply Still A Major Problem
Energy remains a persistent problem for Chile's copper producers, partly due to a drop in supplies of natural gas from Argentina and partly due to drought conditions, he said.
Last week Codelco was part of a consortium of mining companies that reached a preliminary agreement for a $600 million bailout of financially troubled power generator and natural gas pipeline company GasAtacama.
The miners and GasAtacama, a joint venture between Empresa Nacional de Electricidad SA (NYSE:EOC) (EOC) and private equity firm Southern Cross, have agreed to split costs 74% and 26%, respectively.
It still isn't known what percentage of GasAtacama's costs Codelco will assume, but Arellano said this will be decided following discussions with the other members of the consortium this month.
Other companies in the bailout consortium include BHP Billiton Ltd. (NYSE:BHP) (BHP); miner Collahuasi, which is controlled by Anglo American PLC (NASDAQ-SMALL:AAUK) (AAUK); and Xstrata PLC (LSE:XTA) (XTA.LN).
