FCX Freeport McMoRan Inc

Copper output at Corporacion Nacional del Cobre de Chile's wholly owned mines grew 3.2% in the first quarter to 383,000 metric tons from 371,000 tons in the year-earlier period, Codelco Chief Executive Diego Hernandez said Thursday.

Codelco's total January-March production, which includes output from the El Abra mine in which it holds a 49% stake, rose to 402,000 tons from 390,000 tons in the year-ago period. El Abra is operated by 51% shareholder Freeport-McMoRan Copper & Gold Inc. (FCX).

The production increase was due to higher ore grades, or the amount of copper contained in the mined material, and improved copper recovery, especially at its Norte division.

With copper averaging $3.29 a pound in the first three months of the year, Codelco's pretax profit surged to $1.48 billion from $275 million the same quarter a year ago, when copper averaged $1.56/lb.

If Codelco earnings were reported using the same tax requirements as private companies, it would have posted a net profit of $1.18 billion, compared with $219 million in the first quarter of 2009. The mining company began using International Financial Reporting Standards, or IFRS, this year.

Hernandez, in his first press conference as chief executive, said the world's largest copper mining company has a 2010 production target of "slightly over 1.7 million tons of copper," similar to last year's output.

In the 2010-2012 period, output will likely hold steady before several of Codelco's expansion projects come on line.

To finance expansions at most of its divisions, Codelco has an ambitious capital expenditure program that includes a record $2.3 billion investment program for 2010.

The company has the means to finance this year's capex budget and isn't planning to tap markets in the immediate future, Hernandez said.

"The investment plan shouldn't be difficult to finance with the resources we have on hand; we aren't in a tight spot this year," he said.

In recent years, in addition to financing its investments through its own resources and debt issues, the government has allowed the state mining company to retain part of its profits.

This year, however, due to the government's needs to finance the $8.4 billion post-earthquake reconstruction, Codelco might not be allowed to reinvest any part of its profits.

"The Finance and Mining ministers have to decide if there will be profit reinvestment this year, but we of course understand that the country has other, more pressing needs," Hernandez told reporters.

A powerful earthquake hit Chile in late February, causing destruction and damages totaling $30 billion.

Codelco estimates it lost 11,300 tons of copper on the quake-related work stoppages, especially at its Andina and El Teniente divisions, which shut down on a lack of power supply following the temblor.

Most the output lost following the earthquake will be recovered during the year, so Codelco doesn't expect an overall loss from the disaster.

With regards to the recent swings in copper prices, Hernandez said it was very difficult to predict when the volatility would subside, but that he was confident that, in the mid and long term, copper demand would remain stable.

Hernandez, a former executive at BHP Billiton Ltd. (BHP), took office May 19.

-By Carolina Pica, Dow Jones Newswires; 56-2-715-8919; carolina.pica@dowjones.com

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