The Financial Performance Of The Copper Industry: Some Comparisons

This paper describes the performance of the copper industry over a period of some two decades and examines the theme that improvements in operating efficiency have not been matched by improved returns on capital. The financial performance of the copper industry is analysed using CRU's MICA database. Regression analysis indicates a two percentage point increase in operating margins but no increase in returns on capital. The gain in operating efficiency appears to have been mainly achieved in the mid 1980s. The investment boom of recent years has resulted in a rapid increase in the industry's level of debt and gearing ratio (now some 47%). Data on 44 copper mine projects is used to show the linear relationship between scale and capital costs. Typically new capacity costs some US$5,000 /tpy. The relationship between cash costs and capital intensity of projects is also plotted. The greater attention now being focused on efficient use of capital means that capital intensity rankings will become increasingly important in determining which projects go ahead.