London (Platts)--9Oct2012/612 am EDT/1012 GMT

Diversified miner Rio Tinto said Tuesday it expects its copper output to start rising again in 2013 following three straight years of decline, thanks to improving ore grades and the start of its Mongolian mine.

"Rio Tinto's copper production is expected to increase from 2013 as a result of improving grades and investments at Kennecott [Utah] and Escondida [Chile] and by the start of production from the Oyu Tolgoi mine in Mongolia," it said ahead of an investor seminar.

In July, Rio acquired 133,571,192 common shares under Turquoise Hill's, previously called Ivanhoe, rights offering at a total cost of $934,998,344 or $7/share.

The purpose of Rio acquiring additional shares under Turquoise Hill's rights offering was to honor its contractual obligations and to provide additional funding to ensure the timely development the Oyu Tolgoi copper-gold mine in Mongolia.

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Overall, there is combined gas-fired capacity of 18,074 MW operating in Germany, according to the latest BNetzA data. That data lists 750 MW of gas plants in so-called cold reserve and another 495 MW as reserve plants.

Turquoise Hill part owns, with Rio Tinto and the government of Mongolia, Oyu Tolgoi -- the world's largest undeveloped copper-gold project -- with forecast average annual production of 450,000 mt of copper.

COPPER GROWTH RATE

"From 2011 to 2015, Rio Tinto expects to achieve a cumulative annual growth rate of 13% for copper," Rio said.

The Australian and UK-listed miner cut its copper production target for 2012 in July due to the decline in contribution from its 40% interest in the Freeport-operated Grasberg mine in Indonesia.

Rio Tinto forecast copper concentrate output to reach 580,000 mt in 2012 from a previous target of 600,000 mt, while its refined copper production forecast was cut to 300,000 mt from 320,000 mt.

Copper treatment and refining charges have been drifting higher in recent months, with spot deals reported to be settling around $70/mt and 7 cents/lb in Europe, up from $50/mt and 5 cents/lb early in the year, according to Natixis Commodities Markets in it Q4 metals review.

"In recent years, TC/RCs have been a potent indicator of future price trends, and rising TC/RCs would be a clear sign that copper prices are unlikely to push back up to recent highs even if global demand does improve in 2013," the French brokerage said recently.

A trader told Platts that he believe that from 2013 onwards the smelting business will become profitable, meaning more concentrate coming to market, correlating with Rio's forecast of increased output.

KEY TO GROWTH

The Oyu Tolgoi project is now 97% complete, Rio Tinto said, adding that negotiations with Chinese authorities on a power purchase agreement were "actively progressing."

"Once a final power agreement has been concluded, first ore is expected to be processed through the concentrator within six weeks. First concentrate production will follow within one month and the start of commercial production is expected three to five months thereafter," the miner said.

For the first six months of 2012, Rio Tinto reported a 5% decline in copper concentrate production to 252,900 mt and a 33% fall in refined copper to 123,400 mt.

SUCCESSIVE DECLINE

This year will be the third successive year that Rio's refined copper production has declined, with calendar 2011 output at 334,500 mt; 2010 output at 392,800 mt and 412,400 mt in 2009.

Copper concentrate this year will be up on the 519,700 mt produced in 2011, but below the 678,100 mt produced in 2010. Calendar 2009 concentrate output was 804,700 mt.

On Friday, Platts widened its weekly European physical assessment to $80-120/mt from $90-105/mt plus London Metal Exchange cash for Grade A in-warehouse Rotterdam.

--Ben Kilbey, ben_kilbey@platts.com
--Edited by Jeremy Lovell, jeremy_lovell@platts.com

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