London, 6 October 2011: Reuters

Chinese buyers are close to coming back into the market for copper re-stocking if prices stay at or below current levels, Antofagasta Chief Executive Marcelo Awad said. "I think we are getting close. They (Chinese buyers) are opportunistic and the copper price now is good ... if you compare with all the forecasting for the coming months, years," Awad said, adding he expected the price to rise in the short term as a result, up from current levels of around $6,900.

"I think we will see $8,000 in coming weeks. (Next year) will really depend on the overall economy." Awad, speaking at the Chilean miner's London headquarters, said the company had seen no order  cancellations and no requests for delayed shipments.

"I can't say yet what will happen with the annual contracts for copper cathode, because we are just starting (negotiations)... but the good news is that we haven't received any requests for cancellations for the remaining months of the year," he told Reuters in an interview.

Awad, a copper veteran who has been at the helm of Antofagasta since 2004, said copper fundamentals were strong, with supply continuing to come in below forecasts. The International Copper Study Group said this week it sees a deficit of 200,000 tonnes this year globally and 250,000 next year.

Antofagasta, which has been listed on the London stock exchange since 1888, has a string of projects in its $20 billion pipeline from now until the end of the decade, including $1.35 billion Antucoya, which will be put to the board with the aim of beginning construction this year, once sulphuric acid supply has been resolved. But the group will consider its spending cautiously in an environment of weaker prices and escalating costs. Antucoya, for example, will cost more than the market initially expected.

"We need to analyse very carefully what we will do for the existing portfolio of projects, especially the one which is first on the list, Antucoya," he said. "We are approaching a crucial decision for the project in the middle of this uncertainty -- but I am confident we will launch the project."

He said Antucoya was a clear example of rising costs in the industry. It is the same size and uses the same technology as its producing El Tesoro mine and is also in the Atacama region, but will cost over a billion dollars more, just a decade later.

"There is market pressure on all the new projects, even brownfield projects, which is unbelievable," Awad said. The miner's main asset is the Los Pelambres open pit mine, but it also controls El Tesoro and Michilla. It is currently ramping up production at its flagship greenfield site Esperanza, where Awad said output was on target.

The group was forced to cut its 2011 production target in June due to slower-than-expected progress at Esperanza. Awad said it was on target to produce 620,000 to 640,000 tonnes.

OPTIMISTIC ON PAKISTAN

Historically rooted in Chile, Antofagasta has been looking further afield for high quality growth, in Minnesota through its Twin Metals venture with Duluth Metals and in Pakistan, with the $3.4 billion Reko Diq copper-gold project it is hoping to build with partner Barrick Gold .

Reko Diq, seen as an example of how miners' appetite for risk is changing in the search for quality assets, has suffered delays and setbacks, most recently objections raised by local authorities to the granting of a mining licence and fresh demands, including a smelter and refinery.

Awad said almost half of the requirements listed in a letter last month to Tethyan -- the joint venture which controls the project -- were not included in the original agreement, including demands for a smelter and refinery, which remain outside the scope of the project.

Baluchistan, where there has been growing anger about outsiders exploiting natural resources, has said it wants to export a more value-added product, but Tethyan has long indicated it has no plans to build a refinery or smelter.

"They are raising that we should have on the feasibility study a smelter and a refinery. We have told them many times... we were not planning to build a smelter and a refinery, (though) we are prepared to support, with a copper concentrate supply, anyone that wants to build," Awad told Reuters.

"We are confident we will go ahead with the project, perhaps not with the timeline we have in place, but it is a world class deposit and a massive geological resource."

Ends --

Reuters market analysis– for Commodities Now with permission.