Antofagasta sees forecast global copper surplus disappearing in 2015

By Anthony Esposito and Fabian Cambero

SANTIAGO, April 14 (Reuters) - London-listed Antofagasta (LSE: ANTO.L - news) Minerals' newly installed chief executive sees the global copper market surplus practically disappearing this year due to kinks in output.

Analysts had anticipated seeing the first surplus in years in 2015, to the tune of 500,000 to 600,000 tonnes copper, but production stoppages, such as those caused by recent heavy rains and mudslides in northern Chile, have curtailed those estimates.

"What we've seen is that the surplus has been disappearing and we're probably talking about a market that is virtually in balance," Ivan Arriagada told Reuters in one of his first media interviews since assuming as CEO in February.

Antofagasta (Other OTC: ANFGF - news) 's flagship Los Pelambres mine in central Chile lost 8,500 tonnes of refined copper production earlier this year after protests by local villagers blocked access to the mining complex.

In light of the production loss, Antofagasta is in the process of refining its initial guidance of 710,000 tonnes of copper production for 2015 "depending on how much of that can be recovered," he said.

Arriagada sees the global copper market in a slight surplus of 100,000 to 150,000 tonnes this year, and remaining balanced in 2016 before returning to a deficit in 2017, "at which time there will be upward pressure on prices."

For this year, copper prices should fluctuate between $2.70 and $3.00 per pound, in line with market expectations, according to Arriagada.

NO TALKS WITH TECK

Prices, a sticking point at the CRU Copper conference in Santiago this week, have been recovering from a five-year low in late January, but have lost momentum as sluggish demand during a normally strong seasonal period offsets an erosion of mine supply.

Asked if the lull in copper prices had created merger and acquisition opportunities, Arriagada said "there could be attractive opportunities ... there could be space in this context for new opportunities."

"We want to develop and grow ... so in that sense obviously we're always monitoring the market and eventual opportunities that may arise."

However, Arriagada denied that Antofagasta had ever been in talks with Vancouver-based Teck Resources Ltd about a business tie-up.

Late last month, Antofagasta and Teck denied that they were in talks about a merger after Bloomberg news reported that the two mining companies were in early stage discussions.

EXPANDING OPERATIONS

Antofagasta is hoping to counter falling copper grades, an issue for the Chilean mining sector, with new projects such as Antucoya and Encuentro Oxide, the expansion of Los Pelambres mine, and the construction of a second concentrator at Centinela.

With capital expenditures of around $1.3 billion in 2015, Antofagasta said it will look for between $500 million and $600 million in financing.

The 85,000 tonne Antucoya project is slated to start producing this year and running at capacity in 2016, Arriagada said.

A two-stage construction process at Centinela, which includes the development of a second concentrator, will require an investment of $2.7 billion and double production there to 400,000 tonnes copper per year by 2024, Antofagasta said.

The expansion at Centinela will use sea water, said Arriagada, as a prolonged drought forces producers in Chile to find innovative sources for water. (Writing by Anthony Esposito; Editing by Michael Perry)