BHP and Rio bet on copper with mine expansion

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The FTSE 100 companies are betting that the copper price is in for a prolonged flight and aim to expand the output of the Escondida mine in Chile by about three quarters to 1.3 million tonnes a year by June 2015.

BHP also said it would invest $195 million to reopen its Pinto Valley copper mine in Arizona, which was mothballed in 2009 as the financial crisis hit demand.

The price of copper is seen as a barometer for industrial demand, since it is used in everything from power transmission to plumbing. Although it has tumbled from its record high of more than $10,000 a tonne a year ago, it is still more than double its price in the thick of the financial crisis. It has risen 10% so far this year, to $8525 a tonne, as economic confidence improves, and the price is expected to keep on rising.

"The market wants more copper," said UBS analyst Glyn Lawcock, adding that he expected other companies to follow BHP in reopening mothballed mines.

Credit Suisse has forecast that the copper price could hit $9500 a tonne by the end of the year because of supply "tightness", while consultant Wood Mackenzie predicts that the global market for refined copper will go from a 718,000-tonne surplus in 2015 to a 316,000-tonne deficit by the end of the decade.