Output at World No. 1 Copper Mine Down 32%, BHP Says

By Jesse Riseborough

Oct. 22 (Bloomberg) -- Production from Escondida, the world's largest copper mine, slumped 32 percent in the September quarter because of declining ore grades and electrical failures at the mill, owner BHP Billiton Ltd. said.

Total mill output at the mine in Chile fell to 208,600 metric tons in the three months ended Sept. 30 from 305,200 tons a year earlier, Melbourne-based BHP said today in a statement. BHP's share of copper sales dropped 27 percent to 118,200 tons.

``Escondida's production was impacted by declining ore grade and poor reliability in the electrical motor of the Laguna Seca SAG mill,'' said BHP, which owns a 57.5 percent stake in the operation. ``Escondida has reduced throughput to minimize potential of further stoppages.''

Electrical faults at the mill may take as long as nine months to repair and total copper production will decline by 10 to 15 percent over the next two years, Chief Executive Officer Marius Kloppers said in an interview last month. The price of copper has slumped 34 percent this year, dropping below $2 a pound yesterday for the first time since December 2005, amid speculation a global recession will reduce demand.

BHP, the world's largest mining company, fell 5.6 percent to A$27.68 at 10:11 a.m. Sydney time on the Australian stock exchange.

Lower ore quality and equipment failures may help cut annual copper output in Chile, the biggest supplier of the metal, for the first time since 2005, Eduardo Titelman, executive vice president of the state-run Chilean Copper Commission, said yesterday in an interview.

Chile Output Falling

Chile will produce 5.45 million metric tons of copper this year, down 2 percent from 5.56 million tons in 2007, The group's July forecast for prices to average $3.40 a pound next year probably now reflects a ``best case'' scenario, Titelman said.

BHP declared force majeure at the mine on Oct. 13, allowing it to miss copper concentrate deliveries, because of the equipment failure.

Total material mined at Escondida rose 20 percent to 99.4 million tons in the quarter, from 83 million tons a year earlier, BHP said. The average copper grade declined to 1.32 percent from 1.63 percent, it said.

Rio Tinto, the target of a hostile $77 billion bid by BHP, owns 30 percent of Escondida. A group led by Mitsubishi Corp. holds 10 percent.

To contact the reporter on this story: Jesse Riseborough in Melbourne at jriseborough@bloomberg.net;