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CAP to boost iron ore output, eyes energy.

Chilean steel and iron ore producer CAP could invest at least $3.5 billion to $4 billion from 2015 to 2018 as it mulls plans to propel iron ore production to 30 million tonnes and diversify into energy generation, CEO Jaime Charles said.

CAP is upbeat about brisk Chinese demand and sees less new global production coming on line than estimated, forecasting iron ore prices will hold in a $100 to $120 per tonne range in the next four years. "We haven't seen a slowdown (in China) ... We're fairly confident that this year will again be a good one for the company," Charles told the Reuters Latin America Investment Summit. "Today the market is very tight. There's going to be a downward trend in iron ore prices, but not a very pronounced one." Benchmark iron ore is currently trading around $134.80 a tonne, down from highs of over $190 early last year, as fears of a slowdown in top consumer China pummel prices for steel's key raw material. Booming India has trimmed its exports of iron ore to China as its own domestic needs grows, allowing CAP and other producers to gain market share in China, Charles added. Supplies of iron ore in China from top exporters Australia and Brazil are bouncing back after disruptions due to bad weather in the first quarter. But the increased supply is coming at a time when Chinese demand is slowing along with the overall economy.

CAP, Chile's third-largest industrial group, aims to add 6 million tonnes of iron ore to its current production of around 12 million by 2015. It is also pondering plans to buoy output to 30 million tonnes, he said. "As of 2015 ... the total of projects we're evaluating cost at least $3.5 billion to $4 billion," Charles said. "The draft is fairly advanced. If all goes well, the decision will be taken at some point in the second half of next year."

This year, the steelmaker will invest up to $350 million in its Cerro Negro Norte iron ore deposit, $350 million in the expansion of Los Colorados mine, $200 million in a desalinization plant and $50 million in a transmission line.

The company is interested in launching steel-processing operations in Brazil and Colombia and expanding its operations in Peru, Charles said. CAP has sufficient capital to finance current investment plans but cannot rule out future bond issues or capital increases, he added.

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Publication:Oil & Gas News
Geographic Code:9CHIN
Date:Jun 18, 2012
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