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China Will Tap Copper Reserves In Eastern Tibet

Wall Street Journal
December 6, 2006

BEIJING -- As China's demand for copper soars, it is preparing to tap reserves in a remote area of Tibet previously considered too inaccessible to develop.

Deposits in the Tibet Autonomous Region, close to the Himalayas, contain more than one-tenth of China's reserves of the metal, a crucial ingredient in the country's development and industrialization.

The opening of the Qinghai-Tibet railway this past summer will lower the cost of transportation and assist in the development of the reserves, including the Yulong project, projected to be China's biggest copper mine and the second-largest in Asia after Freeport McMoRan Copper & Gold Inc.'s Grasberg mine in Indonesia.

"The Yulong copper mine will be an important supply source for China if it can get up and running," said Wan Ling, a senior analyst at China state-owned research firm Antaike. "And it won't necessarily stop there -- technology has improved, investment in mining exploration is increasing, and it's likely we'll see more copper operations developed in Tibet."

Since 2000, China has accounted for about 65% of the world's growth in copper consumption, using the metal to produce cable, wire and electrical products for its electrical and building industries, as well as pipes for plumbing, heating and ventilating. But domestic ore reserves are in short supply and global inventories are dwindling.

The copper reserves, in the eastern Tibetan village of Chunyido, Jomda county, in an area traditionally known as Kham, were discovered not long after the dispute over the area's sovereignty began in the 1950s. But shortly afterward, mineral exploration in China was cut, as developing the country's mining sector wasn't a government priority.

The high altitude -- the average in Tibet is about 4,000 meters -- also prevented China from mining the copper. The reserves are located in an area of dense forest that has attracted the attention of Chinese environmentalists concerned about the potential damage from mining.

As a result, a project to develop a copper mine there has been debated for several years, before finally getting the go-ahead from China's State Environmental Protection Administration in June. Tibetan reserves are estimated at 6.5 million metric tons, and the country's total copper reserves are 62.7 million metric tons.

The reserves will be developed by Yulong Copper Industry Joint-Stock Co., a grouping of five Chinese entities. They are Zijin Mining Group Co., a gold company; privately owned Western Mining Co. and Tibet Mining Development Corp.; the Xizang Geology and Mining Survey Bureau; and the Xizang Changdu State-Owned Assets Administration.

Western Mining, the largest shareholder in the consortium, estimates production could reach between 150,000 and 200,000 metric tons of electrolytic copper a year. Electrolytic copper is the purest form of copper production.

Infrastructure, including water, housing, electricity and communications, has been largely completed, Western Mining said, including a power station on the Mekong River.

"It's become a small city," said Liu Xing, general manager of Western Mining's local subsidiary in Tibet, Western Mining Tibet Resources Investment Co.

Mr. Liu said the company is exploring the region for further copper deposits. "We're certain we can find another Yulong in the area, and we've been working with foreign companies to attract investment," he said.

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