Rio's Kennecott copper smelter mulls tolling next year -sources

Thu Nov 13, 2014 11:11am EST
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By Josephine Mason

PALM BEACH, Fla. Nov 13 (Reuters) - Rio Tinto's Kennecott copper smelter may toll third-party concentrate on a large scale for the first time next year, as the second-biggest U.S. copper producer tackles falling output due to low ore grades from its mine, five sources said.

The Utah plant has bought external concentrate, an intermediate product that smelters use to make refined metals, on occasion in the past, but this would be the first formal effort to treat third-party concentrate that many traders can remember.

The move would be a big shift for Rio's biggest smelter, which turns ore from its nearby century-old Bingham Canyon mine into refined metal. The reasons for the low-grade ore at Bingham, the world's biggest open-pit, are not known.

The Kennecott marketing team discussed the proposal with traders and market participants at the American Copper Council annual gathering on Wednesday, sounding out their interest. Traders said they would be keen to supply the concentrate.

"It makes sense as the North American market is long concentrates and the smelter is operating under capacity," said one U.S. trader who had met with the company.

Tolling would take place for about six months early next year, according to a source familiar with the plan.

Spokespeople for Rio and Kennecott declined to comment.

Last year, the company was forced to buy in the spot market for about six months to replace lost internal feed after a devastating landslide shut Bingham.   Continued...