Aurubis Melts Old Computers for Copper, Gold as Smelters Battle for Supply

 Molten copper is poured into molds at the Tongling Nonferrous Metals Group Holdings Co. smelter in Tongling, China, March 29, 2008. Photographer: Natalie Behring/Bloomberg News

 A file photograph of workers standing near stacks of copper plates produced at Erdenet Mining Corp.'s copper processing plant in Erdenet, Mongolia, 360km northwest of Ulaanbaatar. Photographer: Danfung Dennis/Bloomberg

Aurubis AG, Europe’s biggest copper smelter, is turning to unwanted computers for its raw material as the world’s mining companies struggle to dig up enough ore.

While copper prices more than doubled since the end of 2008, the fees that smelters charge mining companies to extract metal weakened, falling in some cases to zero, according to researcher CRU. In those accords, smelters rely on byproducts, such as the sulfuric acid created through processing, to make money. The industry is running at 67 percent of capacity, the lowest level in at least 25 years, CRU estimates.

Overcapacity and dwindling returns mean some smelters have already shut. HudBay Minerals Inc. and Xstrata Plc both closed operations in Canada since May. At Lunen in northwest Germany, Aurubis is instead spending 62.5 million euros （$79.6 million） to almost double its plant’s capacity for handling electronic scrap and the copper, gold and other metals it yields.

“Electronic scrap is the most visible aspect of the changes that are taking place here at Aurubis,” said Gerd Hoffmann, vice president of commercial recycling. Printed circuit boards, the “cream in the coffee” of the scrap, can consist of as much as 18 percent copper, he said.

Aurubis has risen 9.6 percent so far this year in Frankfurt trading, beating the 2.4 percent decline in the 102-member Bloomberg World Mining Index. Aurubis will report adjusted earnings per share of 3.48 euros in its fiscal year ending Sept. 30, compared with 1.28 euros the previous year, according to the mean of 14 analyst estimates compiled by Bloomberg.

Smelting Capacity

Global copper smelting capacity will expand 14 percent to 20.68 million metric tons in 2014 from 18.17 million tons last year, according to the International Copper Study Group. While the capacity of mines to supply raw materials will expand even faster, rising 25 percent over the period, it will only reach 18.98 million tons, the Lisbon-based industry group estimates.

Copper mining companies including Codelco and Freeport- McMoRan Copper & Gold Inc. have warned that the industry will struggle to keep pace with demand because the most metal-rich deposits have been depleted and discoveries are harder to make. Average ore grades fell about 28 percent in the last two decades, according to Deutsche Bank AG. Supply of refined copper has fallen short of demand in three of the last six years, the ICSG estimates.

The lower-grade rock and declining discovery rate has created a shortage of so-called concentrate, crushed ore that’s concentrated to a purity of 20 percent to 40 percent copper. The concentrate is then smelted to a purity of as much as 70 percent, processed in a converter and finally refined into cathodes that are 99.99 percent copper, according to the ICSG.

Global Exports

Chile and Peru account for more than half of all global exports of copper ores and concentrates, while China and Japan account for the same proportion of imports, ICSG data show.

Mid-year processing contracts were negotiated at more than 15 percent below agreements signed at the end of 2009, with mining companies paying $39 a metric ton for smelting and 3.9 cents a pound for refining, London-based Antofagasta Plc, which mines copper in Chile, said Aug. 24. Fees are typically negotiated twice a year. Rates for one-off processing deals in the spot market were $10 a ton, Antofagasta said last month.

“It is impossible to survive if your smelter is dependent on the spot market,” said Svante Nilsson, president of business area smelters at Stockholm-based Boliden AB, Scandinavia’s only copper producer.

Smelters are instead relying more on scrap metal from manufacturing or obsolete products, generating 16 percent of copper supply from recycling in 2005 and an estimated 18 percent this year, according to JPMorgan Securities Ltd.

Refined Copper

Aurubis, based in Hamburg, last year overtook Freeport- McMoRan Copper & Gold as the second-largest producer of refined copper, behind Codelco of Santiago, according to CRU. It will process 100,000 tons of electronic and electric scrap annually once the expansion at Lunen is completed in the second half of 2011. The plant covers an area equal to 42 football fields.

In scrap derived from products such as computers and printers, about 40 percent of the value comes from gold, 10 percent to 15 percent from copper and about 4 percent to 8 percent from aluminum, Hoffmann said.

Including items such as irons and wiring, Aurubis will turn about 600,000 tons of junk into refined copper and other metals this year, up from about 520,000 tons last year, Hoffmann said. It buys scrap from 550 different sources across 60 countries.

“With China buying more raw materials we had to look at the opportunities around us and the recycling of old computers and other gadgets was definitely one of them,” said Stefan Fuchs, head of electronic scrap procurement at Aurubis.

China’s monthly imports of copper ore and concentrate averaged almost 513,000 tons last year, compared with 205,000 tons five years earlier, according to Chinese customs data.