Japan's JX to develop its mines, eyes stake buys in upstream copper push

* JX open to buying interests in mines from other firms - senior exec

* Desirable mine size for investment is 50,000-200,000 T of annual copper output

* Sees Australia and Canada as attractive places to spread its interests

By Yuka Obayashi

TOKYO, Sept 19 (Reuters) - JX Nippon Mining & Metals Corp will focus on development of its own copper mines in South America but may also look at buying stakes in other projects as Japan's top smelter aims to cut its dependency on major miners for ore, a senior executive said.

Japanese copper smelters are stepping up acquisitions of upstream metal assets and development of copper mines to hedge against any increase in ore prices as their profit margins on smelting declines.

JX Nippon Mining is aiming to raise the volume of copper content coming from its own mine interests for refining to an annual 250,000 tonnes in 2015 and then to 350,000 tonnes by around 2020, its parent JX Holdings Inc (Other OTC: JXHLY - news) had said in March. Around 100,000 tonnes of in-house copper content in concentrate was used to refine metal in 2012.

"We want to achieve our 350,000 tonnes goal first, then move further into upstream where we expect higher profit return," Keiichi Goto, deputy chief executive officer of JX Nippon Mining, told Reuters in an interview earlier this week.

JX's rival Sumitomo Metal Mining Co Ltd also plans to boost annual volume of copper content procured from its own mining interests to 300,000 tonnes by the 2021 business year from 120,000 tonnes now.

Last September, JX Nippon Mining's 66 percent owned smelting unit Pan Pacific Copper (PPC) bought a 40 percent interest in a large South American copper exploration project in Frontera from the Japanese government.

PPC, the world's No.3 copper smelter, is set to start producing copper concentrate at its 75 percent-owned Caserones mine in Chile late this year after spending nearly $3 billion in development.

Caserones, slated to produce 150,000 tonnes copper annually, will boost its metal self-sufficiency rate to 50 percent of its total output in 2015, making it less dependent on big miners such as Freeport McMoRan Copper & Gold Inc and BHP Billiton.

Investors are keen to hear about JX's post-Caserones plans.

"As post-Caserones work, our priority is to pursue our own two development projects which we know the most," Goto said. "But if any good acquisition deals come up, we may buy interests in mines from other companies," he said.

PERU PROJECT REVIVAL?

A scoping study, the first step of feasibility work, is underway at Frontera which extends over Chile and Argentina, and an early test suggested there are about 2 billion tonnes of the resource, potentially similar to what Caserones has, Goto said.

The firm is also considering resuming the Quechua copper project in Peru which it had put on hold in 2011 after the feasibility study showed less reserves than its initial estimate.

"We'll look into the results of Frontera study and renewed study of Quechua as well as other deals and conditions including output from competing mines, then we'll decide which path we will take...probably before the current three-year business plan ends (in March 2016)," Goto said.

Due to a series of portfolio realignments by major resource firms and regulatory pressure, some copper assets are up for sale, such as Glencore Xstrata PLC (Other OTC: GLCNF - news) 's Las Bambas project in Peru.

Goto declined to say whether JX is interested in such deals, but he said the desirable mine size would be somewhere between 50,000 tonnes and 200,000 tonnes in annual copper output.

The company also wants to diversify its resource base as its holdings in copper mines depend heavily on Chile, he said, pointing to Australia and Canada as attractive target areas, and it is working on 10-20 early-stage exploration projects in various areas including Australia.