Sumitomo Metal Mining Settles Copper Ore Price for 2008-09

Sumitomo Metal Mining agreed with BHP Billiton to reduce the treatment charge and refining charge by 25% for 2008-09 shipment compared with previous year. The miner succeeded to increase the copper ore selling price under tight supply with strong demand from China and India. However, the impact is expected to be limited when Sumitomo Metal Mining secured ore from the captive mine in Peru at favorable condition. They agreed to reduce the treatment charge to US$ 45 per tonne and the refining charge to 4.5 US cents per pound, which represents 11.5 US cents of margin for smelter for copper concentrate with 30% copper. The smelter pays 288.5 US cents per pound for copper concentrate when the copper price is 300 US cents at London Metal Exchange. They agreed at US$ 60 per tonne of treatment charge and 6 US cents per pound of refining charge a year earlier, which represented 15.4 US cents per pound of margin. The new condition reduces 25% of the margin for smelter impacting the profitability. However, Sumitomo Metal Mining’s purchase weight from Escondida mine of BHP Billiton is lower than Japanese largest smelter of Pan Pacific Copper. Sumitomo Metal Mining purchases the largest volume of annual 90,000 tonnes from the captive mine of Cerro Verde of Peru.