Although small, but a new non-ferrous metals supplier to the international commodity markets appeared in the South Caucasus. After successfully starting the production and sale of gold, Anglo Asian Mining plc, the only company to developing gold fields in Azerbaijan, prepares to sell the first batch of copper concentrate in the 4th quarter of this year.
Revenues of the Anglo Asian Mining plc, named in the list of Alternative Investment Market of London Stock Exchange, amounted to $28.4 million in the first half of year as a result of sale of gold and silver developed from the Gedabey field in Azerbaijan. The company repays the loan taken from the International Bank of Azerbaijan at the expense of profits from the sale of gold.
In February the process of recovery and recycling of copper started, and by Sept. 30, the company has made copper concentrate containing approximately 140 tons of copper. The plant's capacity is 1,800 tons of copper concentrate per year.
Anglo Asian Mining Plc owns the rights to develop six fields in southwest Azerbaijan - Gedabek, Ordubad, Gosha Bulag, Gizil Bulag, Vejnali and Soyutlu. The concession is based on PSA agreements signed with the Azerbaijani government in August 1997.
Growth of production and copper prices make the trade with this metal, which assumes strategic importance for the global industry, one of the leading trends in world economic growth.
Dynamics of growth in copper prices from October 2008 to October 2010:
According to International Copper Study Group (ICSG), a copper production deficit made up 281,000 tons compared with a production deficit of around 125,000 t. The price for copper on Oct. 14 at the London Metal Exchange reached a peak over the last 27 months - $8,490 per ton. During the first half of 2010, world apparent usage grew by 7.3% (664,000 t) compared with that in the first half of 2009, the world refined production increased by 5.7% (508,000 t) compared with production in the same period of 2009.
China is leading in the imports of copper. According to experts of the Money Morning investment group, the insiders who monitor deals on China's acquisition of commodities received additional revenues in 2009: from the gold trade - 20%, silver - 50%, iron ore - 60%, coal - 90%, copper - 226%.
According to common opinion, China, with a huge reserve of foreign exchange reserves denominated in dollars, of which value in the last decade has decreased by 30-40%, has decided to invest not in bonds, securities and other financial instruments, but in real, tangible assets: oil, coal, ferrous and non-ferrous metals. In this way, China is strengthening its immunity to a possible new wave of global economic crisis and preparing for new rounds of competition on an international scale.
But there are other interpretations of the processes taking place today. The copper production in China continues to increase, but the country does not diminish, but continues to increase importing copper in quantities greater than required for commercial purposes, and this fact is very striking: in 2009, for example, China imported copper 70% more than the year before. Officially, China has announced that it has copper reserves in amount of a quarter million tons, worth $1.3 billion, but unofficial sources described the figure four times greater. Why has China such reserves?
According to experts from Money Morning, China seeks to achieve several goals, first to make commodities a sort of new global currency instead of dollars, a new computational tool in the conclusion of international transactions. And the primary role in this case will not be played by gold, namely the copper, the practical application of which is far higher. It is an ambitious goal, which is designed for long-term, and the main bonus of this game is a world leader.
Over the past few years, Chinese companies have acquired rights for exploration work, mining and production of copper and established joint ventures in several countries: Canada, Chile, Peru, Mexico, Australia, Laos, Cambodia, Zambia, Zimbabwe, Congo, Ethiopia, Botswana, Mongolia. If or when these companies operate at full capacity, then in this case, China in 2015 will be able to import from its overseas fields approximately one million tons of copper ore per year.
Copper, as an ideal conductor of electrical current, is a key product in the construction of electricity networks. According to IEA, the growth of world energy consumption by 2030 will increase by 2.5% annually, and generating capacity will amount to additional 4,800 GWh. Covering the growing worldwide demand for electricity will require thousands of kilometers of copper cable.
The second important factor that contributes to the demand for copper is the automobile industry. Currently, each car of the middle class contains 22.5 kg of copper. The cars of new generation (with electric or hybrid), of which production increases every year, the volume of copper is even more, up to forty kg. The high-speed trains of next generation contains 2 to 4 tons of copper, whereas in conventional electric locomotives - 1 to 2 tons.
Data on industrial use of copper is available on the Internet website of the London Metal Exchange:
ICSG forecasts copper production to increase by 5%, while consumption by 4.5% compared with 2010. The deficit on the commodity markets in 2011 will amount 400,000 tons, which forced the investment bank Goldman Sachs to increase forecasted prices for 3, 6 and 12 months periods respectively by $8,500, $8,800 and $11,000 per ton.
Azerbaijan also thinks about the future, beginning this year to accumulate its own reserves of gold, increasing volumes of gas in underground storage facilities, building refrigerated warehouses and granaries for food security. It would be worthwhile to think about creating a strategic stockpile of copper in the country at the expense of own resources.