Hindustan Copper lines up $300 mn expansion plan

Hindustan Copper, the biggest state-owned copper producer in the country, may spend as much as $300 million in expanding a mine to take advantage of a threefold increase in copper prices in the past five years.

The open pit at Malanjkhand in Madhya Pradesh will run out in five years without expansion, said Satish Gupta, chairman of Hindustan Copper, in an interview yesterday. The company has appointed a UK consulting company to conduct a study, he said, without giving details.

``We may raise finances and get somebody to construct the mine,'' said Gupta at a mining conference in Perth, Australia. The existing mine produced 20,000 tons of copper last year, almost two-thirds of the Kolkata-based company's output, he said.

Demand for copper in India and China, the two fastest- growing major economies, helped push cash prices to a record $8,800 a metric tonne in London last May. Prices may average between $5,500 and $6,000 a tonne this year as supplies increase, said Gupta. Prices of copper for immediate delivery averaged $6,739.80 a ton last year.

Long term copper prices may stay above $4,000 a ton, Gupta said.

Shares in Hindustan Copper, which have risen by 63 per cent over the past year, fell .3 per cent to Rs 91 at 10:34 a.m. in Mumbai today.

Hindustan may sell debt or raise bank borrowings to fund the expansion that will cost $200 million to $300 million, or find a partner to form a venture to build it, Gupta said. It plans to operate the mine, he said.

The company mines 33,000 metric tonne of copper a year from three mines and can refine 47,500 tonne annually. Credit Suisse Group expects India's share of world copper consumption to rise to 10 percent by 2010 from 4 per cent now.

India has the processing capacity to refine 900,000 tons of copper a year, and only produces 30,000 tons of the metal itself, Gupta said. The plan is to try and increase more domestic production and import less ore for processing, he said.