Freeport, Jiangxi Copper Said to Agree Higher Fees

Freeport-McMoRan Copper & Gold Inc., the world's second-largest copper producer, verbally agreed to pay higher processing fees to Jiangxi Copper Co., the first increase in three years, two company executives said.

Jiangxi Copper accepted fees of $75 a metric ton for smelting ore and 7.5 cents a pound for refining in 2009, said one executive, a jump of about 60 percent from this year. Both officials, who had direct knowledge of the talks, asked not to be identified as they are not authorized to speak to the media.

Copper has plunged by more than half from a record $8,940 a ton in July as a global recession curbed demand for the metal, used in power generators, wires and cables. Freeport-McMoRan has already agreed a fee increase with Mitsubishi Materials Corp.

``The almost 60 percent jump in fees implies copper concentrate supplies are ample, which is a bad sign for prices,'' Zhao Kai, an analyst at Jinrui Futures Co., said by phone from Shenzhen today. As $55 would be the break-even for Chinese smelters, higher fees would be an incentive to produce rather than cut back, he added. Freeport-McMoRan and Jiangxi Copper declined comment.

Mining companies, including Freeport and BHP Billiton Ltd., settled 2008 copper processing fees with Chinese smelters at $47.2 and 4.72 cents, down from $60 and 6 cents in 2007.

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