Showing posts with label Los Azules. Show all posts
Showing posts with label Los Azules. Show all posts

TNR Gold Corp.: Los Azules Copper Project Court Date Set for Summer 2011 tnr.v, abx, ng.to, czx.v, ngq.to, mai.to, bhp, rio, tck, bvn, gg, fcx, nem, auy, bwr.to, cs.to, imn.to, ncu.to, tko.to, wrn.to, qux.to, bls.to

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"Los Azules emerges in this light as a very important Copper deposit with a lot of upside in its valuation among the leaders in this particular quality, relatively high CAPEX requirements, but in the solid middle or to the higher band in a lot of different investment metrics compare to the other juniors in the analysis provided by CIBC."

It is very important that, according to CIBC report page 42, legal claims of TNR Gold are communicated properly within the industry now. Junior can fully rely on its litigation strategy, court decision or potential out-of-the-court settlement, should Minera Andes decide to clean the house before calling the real estate agents. 
We will always leave it to the lawyers and court to decide - who owns what in this case in its proper time.
Copper is going up and the deposit is growing - we guess that nobody is in a hurry here. Argentina will become more fluent in Mandarin and the value of every lb of Copper in the ground will go up - to reflect fundamental picture described in the CIBC report."

Please, do not forget, that we own stocks we are writing about and have position in these companies. We are not providing any investment advise on this blog and there is no solicitation to buy or sell any particular company here. Always consult with your qualified financial adviser before making any investment decisions.






StockWatch:





2010-11-04 18:05 ET - News Release

Mr. Gary Schellenberg reports


TNR GOLD CORP.: LOS AZULES COPPER PROJECT COURT DATE SET FOR SUMMER 2011


TNR Gold Corp.'s litigation in the Supreme Court of British Columbia related to the Los Azules project in Argentina, involving TNR, Minera Andes Inc., MIM Argentina Exploraciones S.A. (Xstrata) and related entities, has been joined for hearing and scheduled for a new trial date of June 20 to July 15, 2011. The trial will be held in Vancouver.





As disclosed by TNR in Stockwatch on May 17, 2010, the subject of the legal actions is TNR's right to back-in to 25 per cent of certain properties constituting the Los Azules project. The Los Azules project is an advanced exploration project currently reporting a National Instrument 43-101-compliant inferred resource. MAI and Xstrata are contesting TNR's ability to exercise its back-in right. TNR is vigorously pursuing its claim and opposing MAI's efforts to deny the back-in right.
The company encourages interested parties to review the amended statement of defence and counterclaim in their entirety on its website for a better understating of TNR's position.
It should be noted that the statement of defence and counterclaim are not intended to be, and should not be interpreted as, sources of factual, business or operational information about TNR or any of its affiliates. The statement of defence and counterclaim contain assertions that have been prepared solely for use in connection with the legal dispute with MAI and Xstrata, have not been proven and should, therefore, not be relied upon.
We seek Safe Harbor."





We are checking the new presentations and Los Azules Maps on Minera Andes website - it looks like, according to Rob Mcewen on page 22, stepping out hole with 1.12% Cu over 62.5m and four best holes:
#46 1.08% Cu over 145 m;
#48 1.01% Cu over 216 m;
#49 1.05% Cu over 236 m and
#61 1.04% Cu over 168 m
 are all based on the Northern Part of the property, which is under this litigation. 







We have now another followers from Metal Augmentor:

TNR Gold (TSX-V: TNR; Pink Sheets: TRRXF)
Minera Andes (TSX: MAI; OTCBB: MNEAF)
TNR Gold Corp.: Los Azules Copper Project Court Date Set for Summer 2011 - November 4, 2010
There is probably very little that will happen with the Los Azules project while TNR Gold’s claim to a 25% back-in right to a portion of the Los Azules project is litigated over the next year or so. That isn’t necessarily a big deal since neither the present valuation of TNR Gold nor Minera Andes relies much if at all on Los Azules. On the other hand, Los Azules could start looking more and more attractive to mining companies as other large South American copper projects are developed in the next few years, leaving fewer major properties in the pipeline. As mentioned previously, we do consider Los Azules as a likely development prospect, despite its remote, high altitude location, because the “layout” of the mineralization is favorable in comparis0n to many other large porphyry copper deposits. Thus, we do expect that Los Azules will command a substantial valuation at some point in the future, making the outcome of the TNR Gold dispute a relevant matter for investors with patience.
With respect to that dispute, Minera Andes appears to have an obvious legal edge based on a literal reading of the option agreement and this will be difficult for TNR Gold to overcome. By no means, however, does Minera Andes have a cakewalk on its hands given that it is unusual (even suspicious) for an optionee’s back-in right to be for a minority non-operating interest conditioned on performance by the optioner. Since the 36 month condition was a modification of the original letter of understanding, which had an open-ended back-in right, the legal merit of the case could very well come down to determining what if any new value was received by TNR Gold in exchange for allowing the 36 month condition (which clearly works against TNR Gold’s benefit). As the hearing nears and assuming we think there is some speculative money to be made, we’ll try to find and read through the agreements to see if TNR Gold did indeed appear to receive something in exchange for the loss of benefit due to the 36 month restriction. [Silverax]'

It is important to remember, that now, according to this NR, all litigation around Los Azules between TNR Gold, Minera Andes and Xstrata is joined in one trial and TNR Gold will seek, according to the Statement of Defence above, not only rectification of the option agreement to reflect its true intentions - without 36 months condition, but that "production of a feasibility study, whether produced within 36 months or some other time, was a condition solely for the benefit of Solitario (TNR Gold sub - S.), and as such, could be waived".


Also at stake is Escorpio IV property: 
"We did not understand why Minera Andes did not accepted the back in right by TNR Gold and lost opportunity to consolidate the project and secure a very important Escorpio IV property, where according to Minera Andes mining plan part of mining facilities supposed to be located, but Rob McEwen must has his own strategy. With this kind of presentation it will be not cheap any more to settle out of the court, but it is always better then drag such a project in litigation for years to come."
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TNR Gold: Los Azules: New benchmark for valuation: First Quantum to buy Antares Minerals for C$460 mln TNR.v, MAI.to, CUU.v, SGC.v, NGQ.v, ANT.v, FCX, RTP, BHP, RIO, BVN, AUY, TCK, BWR.to, CS.to, IMN.to, NCU.to, TKO.to, WRN.to

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"We are wholeheartedly agree with CIBC: Be Long What China's Short. M&A will drive this sector activity and we have just a few quality juniors with large copper deposits to go after. In this report, we found particularly very interesting the different valuations in the takeover scenarios, presented overall picture of Supply and Demand and qualities, which Chinese buyers are seeking in the potential partners.

Los Azules emerges in this light as a very important Copper deposit with a lot of upside in its valuation among the leaders in this particular quality, relatively high CAPEX requirements, but in the solid middle or to the higher band in a lot of different investment metrics compare to the other juniors in the analysis provided by CIBC."



It is very important that, according to CIBC report page 42, legal claims of TNR Gold are communicated properly within the industry now. Junior can fully rely on its litigation strategy, court decision or potential out-of-the-court settlement, should Minera Andes decide to clean the house before calling the real estate agents.
We will always leave it to the lawyers and court to decide - who owns what in this case in its proper time.
Copper is going up and the deposit is growing - we guess that nobody is in a hurry here. Argentina will become more fluent in Mandarin and the value of every lb of Copper in the ground will go up - to reflect fundamental picture described in the CIBC report."

The first company is gone from CIBC M&A list - who will be next? First Quantum buys Antares Minerals for 460 mil and provides a new benchmark for valuation of other copper projects. As you remember, we like from CIBC list Copper Fox Metals, NGeX resources and Los Azules project, particularly, where Minera Andes is an operator and TNR Gold is claiming its "back-in right in certain parts of the properties" according to ongoing litigation.





We will refer you to:


Minera Andes presentation


Antares Minerals presentation


and will compare valuations of Rob McEwen for Los Azules and actual buy out valuation for Haquira copper deposit in Peru - the main asset of Antares Minerals.


From Antares Minerals:


                                           Los Azules        Haquira


Cu Eq Resource (B lbs)                14              13
Mine Life (Yrs)                             24              20
Annual Cu Production (MM lbs)  375            425
Cu Grade (%)                             0.55%        0.55%
Development Capex (US$ B)       2.7             2.1
Development Capex / Ann. Prod $7.33      $4.85




Valuation by Antarex in September of Haquira was 400 mil (Cu 3.0 USD/lb - 1%) - bought out at 460 mil in October with premium of 15%
 

Valuation of Los Azules as per Antares metrix: 14 * 3.00 *1%=420 mil with premium 15% buy out should be at 483 mil.

Rob McEwen's valuation of Los Azules at 375 mil is not so stretched after all, keeping in mind the upcoming exploration season on this property.



We do not see the room in illiquid TNR Gold market for outright hostile takeover offer suggested by some blogs following the unusual pattern in the recent trading of TNR Gold, but it will be interesting to see what kind of premium any potential bid could bring if the friendly one in case of Antares was at 41%.




  Above is the Los Azules deposit map with Xstrata property above grid line 65559000, this property is subject to TNR Gold back-in right of 25% according to Statement of Defence by TNR Gold below. Below is map of Los Azules ore body presented by Minera Andes - the largest part of the mineralisation and high grade core is above grid line 6559000 on the Xstrata property, which is subject to litigation between Minera Andes and TNR Gold now.



We expect that the parties will be engaged soon in out-of-the-court settlement and cleared titled will allow Minera Andes to appreciate further reflecting its fundamental value - recent Canaccord note suggested a target price of 3.15 CAD compared even to Rob McEwem 2.83 CASD valuation at 750 mil market cap.


"We hope that fair settlement with TNR Gold will confirm Rob McEwen's "shareholder friendly" status and this deal will allow Minera Andes to enjoy the proper valuation of its assets.
It is important to note, that not a lot of people are reading documents these days: according to the Statement of Defence by TNR Gold, company claims that it has the back in right into the Northern Half of Los Azules (not all deposit) of 25%, which could represent more than 12.5% of total deposit as a "metal in the ground" - with the bigger part of high grade core on its claimed grounds. Every lawsuit has an inherited legal risks for all parties, please read Minera Andes latest MD&A and TNR Gold Statement of Defence NR legal disclaimer - but it is exactly why we think that Robert McEwen is not going to "focus his interests on the companies he runs, U.S. Gold Corporation and Minera Andes." and just sit in the courts with other companies and he will be able to resolve the situation in out-of-the-court settlement and move forward using this unique opportunity."


Please, do not forget, that we own stocks we are writing about and have position in these companies. We are not providing any investment advise on this blog and there is no solicitation to buy or sell any particular company here. Always consult with your qualified financial adviser before making any investment decisions.


Reuters: 


Mon Oct 18, 2010 1:57pm EDT

* Antares owns major undeveloped copper deposit in Peru
* First Quantum looks to cooperate with Xstrata on project

* First Quantum shrs down slightly at C$82.60

* Antares up 45.88 pct at C$6.55 (Adds details, share prices, First Quantum comment. In U.S dollars unless noted)



By Julie Crust and Julie Gordon


LONDON/TORONTO, Oct 18 (Reuters) - First Quantum Minerals (FM.TO) plans to buy Antares Minerals (ANM.V), owner of a major undeveloped copper deposit in Peru, moving into Latin America at a time when license issues have halted its operations in the Democratic Republic of Congo.

First Quantum said it agreed to buy Antares in a cash and share deal worth about C$460 million ($456 million). Both First Quantum and Antares are headquartered in Canada.

Antares' main asset is the wholly owned Haquira project in southern Peru adjacent to Xstrata's (XTA.L) Las Bambas copper-gold project. Haquira contains an estimated 3.7 million tonnes of copper on a measured and indicated basis.

The deal values each share of Antares at C$6.35, a 41 percent premium over its closing price of C$4.49 on Friday on the TSX Venture Exchange."



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CIBC: Los Azules, Minera Andes and TNR Gold in the report: The Next Leg of Growth In The Copper Supply Chain TNR.v, MAI.to, NG.to, CZX.v, ABX, FCX, BHP, TCK, BVN, AUY, RTP, LUN.to, BAJ.to, BWR.to, CS.to, EQN.to, IMN.to, NCU.to, IVN.to, WRN.to, TKO.to, QUX.to

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  We are wholeheartedly agree with CIBC: Be Long What China's Short. M&A will drive this sector activity and we have just a few quality juniors with large copper deposits to go after. In this report, we found particularly very interesting the different valuations in the takeover scenarios, presented overall picture of Supply and Demand and qualities, which Chinese buyers are seeking in the potential partners.
  Los Azules emerges in this light as a very important Copper deposit with a lot of upside in its valuation among the leaders in this particular quality, relatively high CAPEX requirements, but in the solid middle or to the higher band in a lot of different investment metrics compare to the other juniors in the analysis provided by CIBC.





  It is very important that, according to CIBC report page 42, legal claims of TNR Gold are communicated properly within the industry now.  Junior can fully rely on its litigation strategy, court decision or potential out-of-the-court settlement, should Minera Andes decide to clean the house before calling the real estate agents.
  We will always leave it to the lawyers and court to decide - who owns what in this case in its proper time.

  Copper is going up and the deposit is growing - we guess that nobody is in a hurry here. Argentina will become more fluent in Mandarin and the value of every lb of Copper in the ground will go up - to reflect fundamental picture described in the CIBC report.
  It will never be easy and there could be a lot of legal and market tricks along the way, but we are looking forward to the new exploration season on Los Azules and with every new printed dollar and every new drill hole on this property the value of Los Azules will be going up.

  With our publishing interest in markets, companies and global trends, we can never miss the opportunity to study the distortions in the market place - they can create arbitrage opportunities, when the real value of the asset is not reflected in its market price.

  For some people investment world is a business with legal rules to follow, personal dignity and responsibility, for others - it must be a pure fun. In case of TNR Gold we can hardly hold our smile - the market cap and liquidity in this junior micro cap does not, normally, suppose involvement of hedge funds and market makers. We will not talk today about any market manipulations, but we found it is very interesting, that this company now has a devoted market maker from Scotia, which is carefully closing every trading day at the bid with the last minute sale of 500 shares.

  We guess that for every seller there must be a buyer.

Recent Trades - Last 10 of 39


Time ET Ex Price Change Volume Buyer Seller Markers

15:33:52 V 0.215 -0.025 500 1 Anonymous 85 Scotia K

15:15:38 V 0.22 -0.02 8,000 79 CIBC 79 CIBC K

15:12:18 V 0.215 -0.025 2,000 79 CIBC 7 TD Sec K

15:09:34 V 0.215 -0.025 500 85 Scotia 85 Scotia K

15:09:34 V 0.215 -0.025 4,500 85 Scotia 7 TD Sec K

15:04:20 V 0.21 -0.03 500 14 ITG 85 Scotia K

14:57:35 V 0.21 -0.03 10,500 14 ITG 59 PI K

14:57:35 V 0.21 -0.03 21,500 33 Canaccord 59 PI K

14:37:19 V 0.21 -0.03 500 33 Canaccord 85 Scotia K

14:09:26 V 0.21 -0.03 500 33 Canaccord 85 Scotia K




Please, do not forget, that we own stocks we are writing about and have position in these companies. We are not providing any investment advise on this blog and there is no solicitation to buy or sell any particular company here. Always consult with your qualified financial adviser before making any investment decisions.







"We have a very interesting news from London this morning: apparently Minera Andes has settled the lawsuit with Hochschild over the loan arrangements for financing the San Jose Gold and Silver mine in Argentina. We do not have details yet and do not know about "who won and who lost" in the settlement - it is not so important - the important fact is that Rob McEwen has made out-of-the-court settlement, we were talking about here, and we hope that the next one, this time with TNR Gold regarding the Los Azules and Escorpio IV will be done as well soon. We have a feeling that it is the first news to come from what seems to be called by investment banks as packaging the assets. With cleared legal overhead the stock could easily revisit CAD2.0 with recent Gold, Silver and Copper prices. Drills will be turning on Los Azules soon as well, providing more food for imagination about potential bid for the Los Azules or maybe even for the whole company. We hope that fair settlement with TNR Gold will confirm Rob McEwen's "shareholder friendly" status and this deal will allow Minera Andes to enjoy the proper valuation of its assets.

"We have today fireworks with another junior: Minera Andes surges 18% on volume to 1.11CAD. Globe has run an article about potential takeover targets in Copper space recently:

"Globe says Minera, others could be takeover targets Minera Andes with its huge Los Azules copper deposit in Argentina is primed for M&A play with rising Copper price and Chinese appetite for commodities, will be interesting to see what will happen with TNR Gold's legal claims on part of the deposit and whether Rob McEwen will be ready to make a deal with this junior in order to consolidate the project and appreciate full upside of the valuation in any potential deal. He values Los Azules up to 375 Mil in his "imprecise estimate of value"

And yesterday Rob McEwen has announced:

"Rubicon Announces Secondary Offering of its Common Shares

Press Release Source: Rubicon Minerals Corporation On Thursday September 16, 2010, 7:20 pm EDT

VANCOUVER, Sept. 16 /PRNewswire-FirstCall/ - Rubicon Minerals Corporation ("Rubicon" or the "Company") (TSX:RMX.to - News) announced today that it has filed a preliminary short form prospectus in all the provinces of Canada except Quebec in connection with an overnight-marketed secondary offering (the "Offering") by Evanachan Limited and McEwen Trading LP (the "Selling Shareholders"), entities owned or controlled by Robert R. McEwen, of 45,714,357 common shares of Rubicon owned by the Selling Shareholders.

The Offering will be priced in the context of the market with the final terms of the offering to be determined at the time of pricing. It is intended that upon completion of the offering, the Selling Shareholders will own no common shares of the Company. Rubicon will not receive any proceeds from this Offering. Closing of the Offering is expected to occur on or about October 5, 2010 and is subject to certain conditions, including the approval of the Canadian securities regulatory authorities.

Mr. McEwen has expressed his continued confidence with the Company but advised the Company that it has grown to represent a disproportionate share of his portfolio for an investment where he is not actively involved in management, and he noted that this step is designed to focus his interests on the companies he runs, U.S. Gold Corporation and Minera Andes."

We can only guess whether the share price spike today is due to the Rob McEwen already buying or he will finance the next round of exploration in the company. Stretched between two lawsuits with both major company assets: with TNR Gold on Los Azules and with Hochschild Mining on San Jose mine, it will be difficult for the company to achieve a proper valuation for its assets, but now we have a hope that company will not miss this exploration season and Los Azules will continue to grow. With every new drill hole expectations about the value in the ground will be rising with the size of the deposit, high grade core will provide a much better return of CAPEX - we are surprised that Minera Andes has not attempted to settle the legal cases and clear the titles of its properties before this run in Copper, Gold and Silver.

We will refer you to Minera Andes presentation.


Above is the Los Azules deposit map with Xstrata property above grid line 65559000, this property is subject to TNR Gold back-in right of 25% according to Statement of Defence by TNR Gold below. Below is map of Los Azules ore body presented by Minera Andes - the largest part of the mineralisation and high grade core is above grid line 6559000 on the Xstrata property, which is subject to litigation between Minera Andes and TNR Gold now.





It is important to note, that not a lot of people are reading documents these days: according to the Statement of Defence by TNR Gold, company claims that it has the back in right into the Northern Half of Los Azules (not all deposit) of 25%, which could represent more than 12.5% of total deposit as a "metal in the ground" - with the bigger part of high grade core on its claimed grounds. Every lawsuit has an inherited legal risks for all parties, please read Minera Andes latest MD&A and TNR Gold Statement of Defence NR legal disclaimer - but it is exactly why we think that Robert McEwen is not going to "focus his interests on the companies he runs, U.S. Gold Corporation and Minera Andes." and just sit in the courts with other companies and he will be able to resolve the situation in out-of-the-court settlement and move forward using this unique opportunity.


We will throw another wild card here, maybe with all that chunk of cash Robert McEwen can pursue a radical move like buying out Hochschild Mining interest in San Jose mine or even all TNR Gold's Argentina portfolio with all its Gold and Copper properties - among them are strategic interest in Los Azules and Escorpio IV. Minera Andes can easily revisit its CAD2.0 price tag with cleared titles on its properties and record prices for Gold and Silver with Copper learning Mandarin day by day.


We have a position in these companies, please, do not consider anything as an investment advise, as usual, on this blog.

In any case Argentina is going to have a hot summer this season. We will continue to monitor the situation."



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Rob McEwen: Los Azules is a "Huge Copper deposit in Argentina" MAI.to, TNR.v, CZX.v, FCX, AUY, BVN, LUN.to, BWR.to, CS.to, QUX.to, EQN.to, CHD.to, BHP

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Great news for all Minera Andes shareholders: according to Rob McEwen company is undervalued and Los Azules represents "a huge copper deposit in Argentina". Maybe it is time to clear the property title of the project from legal claims by TNR Gold and move forward? 25% back-in right of TNR Gold relates to Xstrata property on the map below with the larger part of high grade core of the ore body.



With looming copper shortage according to some sources, this Copper/Inflation play could become a company builder in the markets when printing presses will provide upside for all commodity plays. We did not understand why Minera Andes did not accepted the back in right by TNR Gold and lost opportunity to consolidate the project and secure a very important Escorpio IV property, where according to Minera Andes mining plan part of mining facilities supposed to be located, but Rob McEwen must has his own strategy. With this kind of presentation it will be not cheap any more to settle out of the court, but it is always better then drag such a project in litigation for years to come.




Minera Andes AGM Presentation





Bloomberg:
Copper Shortage Looms as Codelco Sees Limits on MinesJuly 06, 2010, 2:41 PM EDT


By Anna Stablum and Millie Munshi

July 6 (Bloomberg) -- The world’s biggest copper producers are warning of looming supply limits at the same time that growing concerns about the global economy leave investors with the largest losses in nine years.

While London Metal Exchange futures anticipate prices no higher than $6,652 a metric ton through the end of 2011, or 1.1 percent more than for delivery now, 13 of 14 analysts surveyed by Bloomberg expect a shortage next year. Traders are being too bearish because lower prices may curb spending on mines and exacerbate future shortages, said Goldman Sachs Group Inc., which forecasts a price of $8,050 in 12 months.

“In the short-term, we’re looking at slowing growth and oversupply, but longer-term, things look good,” said Michael Pento, the chief economist at Delta Global Advisors Inc. in Holmdel, New Jersey who correctly predicted January’s slump that began this year’s 10 percent decline. “The smart move is to buy copper for a few quarters down the road.”

Codelco Chief Executive Officer Diego Hernandez said last month that higher costs and lower ore grades mean new global supply “is coming very slowly.” Freeport-McMoRan Copper & Gold Inc. Chief Financial Officer Kathleen Quirk said new finds are “extremely rare” and “it is a very constrained market from a supply standpoint.”

Metal for delivery in three months, the benchmark contract, slumped 18 percent since April to $6,605 in London on concern the economic recovery would slow in the second half. Manufacturing growth weakened last month in China, Europe and the U.S., which account for as much as two-thirds of global demand.

Lower-Quality Ore

Copper for delivery in August is next year’s most expensive contract on the LME, trading at $6,652. Metal for immediate delivery costs $6,578. The first-half drop of 12 percent was the worst since 2001. The highest prediction for next year’s average in Bloomberg’s survey of analysts was $8,157 from Bart Melek, a commodity strategist at BMO Capital Markets in Toronto. That’s 24 percent more than now.

Mining companies are already missing analysts’ output forecasts because of lower-quality ore, providing “a bullish pricing signal,” Credit Suisse Group AG analysts led by Liam Fitzpatrick in London said in a report June 30.

For now, traders are focused on demand. China’s growth will slow to 9.25 percent next year, from 10.1 percent in 2010, according to as many as 27 economists surveyed by Bloomberg. The country’s refined-copper imports fell 8.1 percent in April and 9.7 percent in May.

U.S. President Barack Obama said June 29 that the world’s biggest economy is facing “headwinds” from the sovereign-debt crisis in Europe, where governments are cutting budgets. U.S. growth will slow to 2.9 percent in 2011 from 3.2 percent this year, while the euro zone will accelerate to 1.3 percent from 1.05 percent, according to surveys of as many as 66 economists.

Global Equities

More than $7.5 trillion was wiped off the value of global equities since mid-April because of concern slowing growth will sap demand. Energy and commodities companies led this year’s 10 percent decline in the MSCI World Index of developed markets. The S&P GSCI Total Return Index of 24 raw materials fell 14 percent.

Copper producers will have to develop new supplies even if demand stagnates, Quirk of Phoenix-based Freeport, the world’s second-biggest copper miner, said at a conference in New York on June 4. Average ore grades fell about 26 percent in the last two decades, according to Deutsche Bank AG. Next year’s shortage may be the biggest since 2004, Macquarie Bank estimates.

Deeper Discoveries

A greater proportion of discoveries in the last 10 years were more likely to need deeper mining methods than in the previous two decades, according to a presentation in May by London-based Rio Tinto Group. It cost about 95 cents to extract a pound of copper from an open pit mine in 2008, compared with $1.33 from an underground mine, according to data from Addlestone, England-based researcher Brook Hunt, a Wood Mackenzie company.

Prices may exceed the record $8,940 reached in July 2008 as early as the first quarter, according to Leon Westgate, an analyst at Standard Bank Plc in London who forecast this year’s plunge. Copper will average $7,708 next year, the highest ever, according to the median in the Bloomberg survey of 14 analysts.

Demand will expand 6.4 percent to 19.98 million tons next year, the biggest gain since 2007, Morgan Stanley predicts. Refined copper from mines and scrap recycling will reach 19.95 million tons, the bank estimates. That production is worth about $142 billion at this year’s average price on the London Metal Exchange.

‘Declining Ore Grades’

The surplus will shrink next year because of “declining ore grades in mines, infrastructure problems and postponing planned mine projects due to problems with project financing,” Herbert Wirth, chief executive officer of Lubin, Poland-based copper miner KGHM Polska Miedz SA, said in an e-mail.

“The portfolio left to be developed has a lower quality than we have been used to for many years,” Hernandez of Santiago-based Codelco, the world’s biggest producer, said in an interview in New York last month. “For these new projects to be developed we need a higher copper price.”

Anglo American Plc, based in London, reported in April that first-quarter output dropped 14 percent from the previous three months because of lower ore grades. BHP Billiton Ltd. and Rio Tinto, the world’s biggest and third-largest mining companies, said the same month that year-on-year production in the period declined for the same reason.

Stockpiles monitored by the London Metal Exchange fell 20 percent to 441,700 tons since mid-February, equal to about 8 days of global demand. Canceled warrants, or metal earmarked for delivery from warehouses, totaled 35,425 tons on July 1, the highest since March, data from the bourse show.

‘Decline Again’

“Copper supplies have started to decline again,” said Andrew Karsh, who helps manage $4.8 billion for the Credit Suisse Total Commodity Return Strategy team in New York. “What we see is a continual benefit in terms of the demand for copper.”

Stock analysts are already anticipating higher profit for mining companies. Freeport will report earnings per share of $8.22 this year and $9.16 next year, compared with $5.86 last year, according to the mean estimate of eight analyst estimates compiled by Bloomberg. Shares of the company fell 26 percent in New York trading this year.

Aurubis AG, the world’s largest copper smelter, gained 19 percent in Frankfurt trading. A shortage probably began in March and continued through the second quarter, CEO Bernd Drouven said in an e-mail. The company will report earnings per share of 3.59 euros ($4.53) this year, compared with a loss of 1.15 euros in 2009, according to the mean of eight analyst estimates.

BHP Billiton

BHP Billiton, based in Melbourne, fell 11 percent in London this year and Rio Tinto declined 10 percent. KGHM fell 12 percent in Warsaw. Codelco, the world’s largest copper producer, is not publicly traded.

“The industry as a whole is facing significant challenges,” said Greg Waller, vice president of investor relations at Vancouver-based Teck Resources Ltd., which mines copper in North and South America and expects to increase output by 40 percent in two years. “In 2011, we are expecting that growth will be back on track and consumption of copper will be strong while the supplies are tight.”

--With assistance from Rishaad Salamat in Hong Kong and Matthew Craze in Santiago. Editors: Stuart Wallace, Claudia Carpenter

To contact the reporter on this story: Anna Stablum in London at astablum@bloomberg.net; Millie Munshi in New York at mmunshi@bloomberg.net.

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net; Steve Stroth at sstroth@bloomberg.net."

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