Codelco's reign as the number one copper producer appears to be coming to an end.
U.S. based mining company Freeport-McMoRan, which currently owns the largest gold mine in the world, is forging ahead with plans to ramp up production with a $4.6 billion expansion at the Cerro Verde mine in Peru next year.
According to Bloomberg, the move will solidify Freeport in closing the gap with current world number one Codelco as well as place the company in a position for future dominance.
“They are making the right bet,” said Christopher LaFemina, an analyst at Jefferies LLC, who recommends buying Freeport stock. “If you are going to be leveraged to a commodity price, this is the right one. If you compare to iron ore or coal, copper is better.”
The timing of the expansion is rather surprising.
Anglo American and Teck Resources have postponed future investments as prices for copper continue to decline and Codelco is in the midst of executing its own expansion project, a $25 billion investment to expand its aging mines and search for new high-grade deposits.
The timing for the Chilean company may be a little too late. Freeport is expected to sell roughly 1.95 million tons of copper next year, compared to Codelco’s output of about 1.85 million. Even with Codelco’s record planned investment, the company’s production will only rise 10 percent as most of the spending will replace lost output, reports Bloomberg.
Freeport shares have lost 40 percent in the past six months and the company is one of the worst performing global mining companies tracked by Bloomberg.