MercoPress. South Atlantic News Agency

Chilean government copper related income estimated to double this year

The production of Chilean mines this year is expected to reach 5.7 million tons

The Chilean government could see its copper-related income nearly double this year, according to Gustavo Lagos, of the Mining Centre at Universidad Catolica.

Lagos estimated that based on the increase in international copper prices, the state’s profits (from the state-owned Codelco and from taxes on private sector companies) could near 11 billion US dollars.

So far this year, the average price for copper is USD 3.24 per pound, which is 40% higher than the average in 2009. With an average of 2.34 per pound in 2009, the treasury reaped income totalling 6.6 billion USD. Lagos said that for every cent the price of copper increases, industry profits go up 118 million USD. Of this profit, the government receives 54%.

These conclusions are based on the assumption that Chilean copper companies will produce 5.7 million tons of copper this year. The current decline in copper inventories indicates consumption will remain high, according to Lagos.

In February of this year, the London Metal Exchange boasted a stock of 555,000 tons of copper, but as of Wednesday the stock was down 32% to 375,000 tons.

The anticipated income increase comes after copper prices hit a record high for the past two years, closing at USD 3.64 per pound Wednesday. This was a trading price increase of 1.91%. It is topped only by a 2008 daily high of USD 3.67 per pound. According to Celfin Capital researcher Cesar Perez, a recent report from the Chinese government may have attributed to the record high.

“But as for the value recorded Wednesday, this is explained by the announcement of China's manufacturing report, which said that industrial production will continue growing,” Perez told El Mercurio.

Currently, China accounts for 40 percent of global copper consumption.

By Kayla Ruble – Santiago Times