Ann: Details of Company Address-TGS.AX, page-5

All, read the exert of 2 articles below. Key points are that DRC copper and cobalt production has fallen by 13-14% in the first half. My take is that it is unlikely to get better given that the govt has slashed investment (needed to maintain or increase production) by 22%.

This is interesting given that the DRC is ranked the 5th largest producer of copper (5% of world production) and largest producer of cobalt (55-60% of world production).

No doubt this will aid to support spot prices.

Adding to this Antofagasta Chief Executive Officer Ivan Arriagada said their company is focused on profit rather than maximizing production. That’s after announcing that output will be at the lower end of its 710,000 to 740,000 metric-ton target. Antofagasta is ranked as the 9th largest world producer approx. 4-5% of world production of copper.

This is echoed now by the worlds Largest producer Codelco ranked as the largest world producer approx. 18-20% of world production of copper. In the extract provided below, they too have sounded out production cuts as a result of lower revenues applying pressure to their ability to invest in future output. A state owned company, they are a major source of their county's revenues. They most recently have reduced future investment by a further 2.5 billion: "The figure, though significant, is minor when taken in the context of Codelco’s ambitious investment plan, originally pegged at $25 billion (now sitting at $18bn), aimed at upgrading its aging mines and dealing with dwindling ore grades." Whose betting that the cash strapped Chilean govt will spend anything near $18Billion when it is approaching a presidential election in early 2018.......

The above production shortfalls counter balance the addition production expected on line from 2016 onwards, eg Freeport McMorans (worlds 2nd largest producer with approx 15% of world production of copper) Cerro Verde expansion of 455kt/pa.

World production though was bolstered when Indonesia renewed an export license allowing Freeport-McMoRan Inc. to ship 1.4 million metric tons of concentrate from its Grasberg copper and gold mine through Jan. 11 2017, Marthin Simanungkalit, a director at the Trade Ministry, said in a text message Thursday.
The period is less than the usual six months because Indonesia is set to halt shipments of semi-processed metals including concentrates from Jan. 12. That ban may be postponed in a revision to the 2009 Mining Law, because the collapse in commodity prices has delayed the construction of smelters to refine the materials. Parliament will review the bill later this year.

Glencore, the worlds third largest producer (12% of world production) announced in May that it had reduced output of copper by four percent during the first three months of the year to 335,000 tonnes, reflecting planned suspensions and reductions in activity at its African mines.

BHP, the worlds 4ths largest producer with 12% of world production is struggling with lower grades at its joint venture Escondida mine (the worlds largest copper mine) with Rio (ranked 7th with 5-6% of world production). Production has fallen in the first qtr by 4% this on top of production falls in 2015. BHP's production falls in Escondida were offset by production gains at their Olympic Dam mine. Notwithstanding BHP has recorded a FY-16 loss of just under $9Billion.

Rios First production from the underground Oyu Tolgoi mine, which has an average copper grade of 1.66 per cent, more than three times higher than the open pit, is expected to come on line in 2020.

My take outs from the above:
1. Most copper producers have stressed balance sheets
2. As a result planned investment is being slashed (ala Kipoi) in favour of modest debottlenecking projects.
3. In the main most of the big producers are seeing that supply coming on line is being counter-balanced by production decreases in their existing aging mines (lower ore grades)
4. Cobalt prices (now at $12/lb) will be underpinned at the very least when the largest country producing the commodity is seeing a 13% decrease. Followers of TGS will remember the fiasco played out with DRC's state owned Gecamines which saw production reduced becuase the govt failed to pay its electrical bills. Remember we have been the recipients of this with the Central bank suspending VAT refunds.
5. The above quick summary of the largest world producers of copper with approx. 60% of world copper production btw them is seeing their output stressed in the 1stH-2016.
Cerro Verde expansion project reached full production capacity in first-quarter 2016, and Cerro Verde is on track to produce over 1 billion pounds of copper for the year 2016. - See more at: http://investors.fcx.com/investor-c...016-Results/default.aspx#sthash.g1uXXYjW.dpuf
Cerro Verde expansion project reached full production capacity in first-quarter 2016, and Cerro Verde is on track to produce over 1 billion pounds of copper for the year 2016 - See more at: http://investors.fcx.com/investor-c...016-Results/default.aspx#sthash.g1uXXYjW.dpuf

Who will be right, the doomsayers at Goldman Sachs or the ICSG predicting a deficit for this year into the next....


Extract 1: Kinshasa - Copper output in Democratic Republic of Congo, Africa's top producer, fell 14 percent in the first half of 2016 to 466 250 tonnes as a global price slump led some mines to suspend production, the central bank said on Tuesday.
The decline is hammering the economy of the country, which derives about 95 percent of its export earnings from extractive industries.

In June, the government slashed its budget by 22 percent in response to low commodity revenues.
Congo, among the world's top copper producers, produced 990,000 tonnes of the metal in 2015, down from 1.03 million tonnes the year before.
In a weekly report, the central bank also said production of cobalt, the metal used in lithium-ion batteries and of which Congo is the world's leading producer, slid by 13 percent to 35,267 tonnes over the same period.

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Benchmark copper on the London Metal Exchange lost 25 percent of its value in 2015 and has recovered only slightly this year, while cobalt prices are also down about 14 percent from this time last year.
Glencore's Katanga unit, one of the country's largest copper and cobalt producers, announced an 18-month suspension of operations last September and thousands of jobs have been lost in the sector since then as companies cut costs.

Extract 2:
Output impacts
Further slashing investment will severely impact Codelco’s production targets, once tallied at 2.5 million tonnes by 2025, but reduced last year to 2 million tonnes by 2020.
According to MINING.com’s sources, the company may just decide to keep its current production of 1.7 million tonnes as target, though “scaling down to 1.5 million or lower has not been ruled out just yet.”
What is clear is that Codelco plans to cut a minimum of $500 million a year, to save a total of $2 billion by 2020. It also expects to increase productivity by 18% at the end of 2018 and 20% by the end of the decade.