Mining companies are digging up record amounts of copper even as prices plumb new lows, a strategy that threatens to deepen a four-year bust.
Global copper production is on track to hit an all-time high of 18.7 million metric tons this year, according to BMO Capital Markets, and many analysts predict it will expand until at least 2019.
The reason: Companies such as Freeport McMoRan Inc., MMG Ltd. and Southern Copper Co. that have sunk billions of dollars into new projects are pushing them to completion in a bet that the larger, lower-cost ventures will help them weather the rout.
Once up and running, the new mines will be profitable even if copper prices drop below $2 a pound, a level last hit in May 2009. The cost of producing a pound of copper at Freeport’s Grasberg mine in Indonesia will drop to 61 cents next year, from an estimated $1.05 in 2015, according to BMO.
On Monday, copper prices hit a 6½-year low, with December futures down 1.7% at $2.0210 a pound in New York. Year to date, copper is off 28%.
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