OREANDA-NEWS. Brazilian copper refiner and products maker Paranapanema (Bovespa: PMAM3) kicked off the first stage of its electrolytic refining mill upgrade at the company’s metallic copper production complex in Bahia state’s Dias D’Avila municipality, which is part of its expansion plan.

In addition, Paranapanema is set to start operations at its new Utinga seamless tube mill at the company’s headquarters in Sao Paulo state’s Santo Andre.

BNamericas spok e with Paranapanema’s interim president Edson Monteiro about how the company’s 1.2bn-real (USD 461mn) expansion plan is expected to increase copper production capacity to 280,000t/y in September.

BNamericas: Last week, Paranapanema kicked off the first stage of its electrolytic refining mill upgrade at the company’s metallic copper production complex in Bahia state’s Dias D’Avila municipality. How does the improved plant fit in with the company’s strategy in the years to come?

Monteiro: The Dias D’Avila mill upgrade has been designed to raise our technology and productivity levels at the copper production chain by offering higher added value and high quality products. After improvements, our mill reached a quality level comparable to that of most modern copper refineries in the world. This way, the expansion of copper production capacity also contributed to reducing our costs and increasing Paranapanema’s revenues.

BNamericas: How much did the company invest in the mill upgrade? Was the figure earmarked in Paranapanema’s expansion plan?

Monteiro: The plant’s investment so far amounts to 330mn reais. And yes, the initiative is part of Paranapanema’s expansion plan, which totals 1.2bn reais and is forecast to be completed by 2015. With the investment, we aim to reach an electrolytic copper production of 280,000t/y from September 2013.

BNamericas: Paranapanema had a maximum capacity of 220,000t/y at the Dias D’Avila plant before its upgrade. Has production increased as a result of the overhaul?

Monteiro: We’ve had a gradual production increase since November last year, and the company is trying to reach new volumes immediately. We expect to close 2013 with an average production of 265,000t of electrolytic copper. In H1, the gradual production increase helped to boost Paranapanema’s net revenues by 38% compared to January-June 2012, to something close to 2.6bn reais. The Dias D’Avila plant upgrade has improved our product quality. The plant in Bahia is unique in the red metal segment and produces 50% of the copper consumed locally. The copper market is growing in Brazil and we need to be attentive to meet the domestic demand.

BNamericas: Paranapanema announced the opening of another copper plant, this time in Sao Paulo state’s municipality of Santo Andre, which is located in the so-called ABC industrial belt. What production figures do you expect to reach with the new plant?

Monteiro: In September, we will open our new plant in Utinga, Santo Andre, which will produce 30,000t/y of seamless copper tubes, and we forecast production to reach full capacity within a year. The new facility replaces our tube production at the Capuava unit, in the same city, where production volume was 12,000t/y.

BNamericas: Has Paranapanema been impacted in any way by the current US dollar appreciation in Brazil?

Monteiro: A higher exchange rate helps to raise the company’s earnings, no doubt about it. The dollar is being traded at 2.50 reais, which generates heftier revenues. Besides that, copper prices are denominated in dollars and the company exports about 35 % of its production.

Also, the real devaluation has a positive effect by reducing the competitiveness of competing imported products in the domestic market, thereby helping to increase the level of sales for several local industries, strategically linked to the copper chain.

However, it generates a momentary imbalance in some of the company’s debt denominated in reais and contracted in US dollars. But this can be offset by higher operating earnings in subsequent periods.