April 23, 2014 2:00 am JST

JX, Mitsui Mining to write down South American copper mines

TOKYO -- Japanese natural resource concerns JX Holdings Inc. and Mitsui Mining & Smelting Co. said Tuesday they will book impairment losses on jointly operated mining projects in South America, as copper prices have fallen sharply, and lowered their fiscal 2013 profit forecasts accordingly.

     JX Holdings now expects net profit for the year ended March 31 to fall 34% to 105 billion yen ($1.01 billion), down from the former forecast of 150 billion yen. Mitsui Mining had foreseen a 14.1 billion yen net profit, but now expects 3.6 billion yen, a year-on-year decline of 64%.

     The Caserones copper deposit in Chile is the main factor behind the impairment losses. Through a joint venture, JX Holdings and Mitsui Mining invest in the mine, in which they have respective stakes of roughly 50% and 25%.

     The mine is scheduled to commence operations this fiscal year, but a fall in copper prices has lowered the amount of profit the project can be expected to yield. Primarily for this reason, JX Holdings will book an extraordinary loss of about 35 billion yen, while Mitsui Mining will log a roughly 13.6 billion yen loss based on its equity-method investment. The figures include impairment losses related to a mine in Peru.

     The sharp drop in copper prices has been fueled by default concerns relating to the metal's use as collateral in China. At present, copper is trading on international markets at around $3 per pound, whereas JX Holdings and Mitsui Mining's projections presume $3.60 per pound for fiscal 2014.

     The Caserones mining project is expected to start operating at full tilt from August. Development costs have ballooned to around $4.2 billion from the originally anticipated $2 billion or so. If copper prices stay low, it may take longer than hoped to recover the investment.