Zijin seeks offtake of world’s newest copper mine Cobre Panama

China’s Zijin Mining is an interested party in Korea Resources’ offtake from the Cobre Panama copper mine, the only major greenfield project to hit the market this year and the next, four informed sources told Fastmarkets.

Korea Resources, South Korea’s state fund for developing natural resource projects, has appointed Australian investment bank Macquarie to sell its 10% stake and offtake in Cobre Panama, which is 75% owned by Canada’s First Quantum.

One source close to the company said that Zijin was not interested in taking a formal shareholding stake in the mine. But four other sources told Fastmarkets that Zijin was a key interested party in Korea Resources’ rights to a 10% offtake of copper concentrates, which would not necessarily be linked.

With a combined stake and offtake valuation of over a billion dollars, interest in the stake has been limited to Chinese funds and private equity rather than metal industry participants. These funds intend to option the offtake copper concentrates out to Zijin, the sources said.

The Cobre Panama offtake rights would be the latest in a series of overseas copper coups for Zijin, which has in the past year bought up the Bor smelter in Serbia, as well as the Timok and Bisha mines through its $1.4 billion acquisition of Canada-based Nevsun Resources.

It also comes amid an unprecedented expansion of Chinese copper smelting capacity and a need for the market there to find stable copper concentrate supply rather than purchasing at rapidly more expensive spot terms for the product.

Jinrui Futures, the brokerage arm of China’s top smelting company Jiangxi Copper, estimates that 600,000 tonnes of copper smelting capacity will come online this year in the country. This would create 2.3 million tonnes of additional copper concentrate demand at an average grade of 26%.

Fastmarkets’ copper concentrate Asia-Pacific treatment charges (TCs) index is down by 37.8% since the end of last year at $52.40 per tonne / 5.24 cents per lb on Friday June 28.

“It’s indicative of developments we may see in other operations,” a mining source who declined to be named told Fastmarkets.

“Chinese companies are still on the prowl for decent assets – there’s more activity to happen in the copper industry,” he said.

Zijin, Korea Resources and Macquarie declined to comment when contacted by Fastmarkets.

Cobre Panama began shipping commercially last week with the initial production heading to China, via spot sales. The mine will target 150,000 tonnes of copper metal in concentrate production this year rising to 350,000 tonnes per year in 2021.

Controversy in Korea

Initial bids on Korea Resources’ Cobre Panama stake have not been up to the level that the agency is looking for. Ideally, Korea Resources are looking for a South Korean outfit to take control of a project that has seen $660 million of public funds sunk into its development.

“[Korea Resources] is an arm of the government, it’s one of their missions to sell the offtake into Korea,” a second source said.

But domestic metals businesses, such as South Korea’s major copper smelter LS Nikko and chaebol-related traders Posco Daewoo, Samsung C&T and Hyundai Corporation have demurred on the tender.

Korea Resources have accordingly delayed the submission of binding offers for the stake and offtake until August 8, according to a notice on its website.

“[Korea Resources] doesn’t want to sell to the funds or capital that they see have no fundamental understanding of the company,” a third source with knowledge of the dealings said.

The new timeline gives Korea Resources more breathing room to hash out a deal with a potential buyer, but further on from that the time limit is soon after – Cobre Panama is expected to begin delivering contracted copper concentrates to offtake partners around September.

“They don’t have any experience in finding buyers for cargoes, but from the end of the third quarter they’ll have to,” the second source said.

Additional reporting by Anna Xu in Shanghai

What to read next
Brazil's aluminium industry is further enhancing its sustainability by boosting renewable energy use and recycling, while mitigating risk from high-carbon imports
German copper producer Aurubis is among the least likely to consider reducing capacity despite record low treatment charges (TCs), according to its chief executive officer
European copper demand, particularly for wire rod, remains strong and seems to be outpacing broader macro-economic growth in the region, the chief executive officer of German producer Aurubis has said.
The process to place the smaller and less efficient of the two processing plants at Los Bronces on care and maintenance is expected to be completed by mid-2024 and comes as the company pushes value over volume, the chief executive officer of Anglo American Chile said
The near-term prospects for Chinese copper smelting capacity amid near-zero treatment charges (TCs) will, to a certain extent, depend on plants’ exposure to spot TCs, the chief executive officer of Rio Tinto’s copper division said on Tuesday, April 16
It will be very difficult for many Chinese copper smelters to compete with treatment and refining charges (TC/RCs) at record lows, according to the chairman of Chile’s state-owned copper producer Codelco