China's Minmetals singed a deal with Chile's Corporación del Cobre (Codelco) on 27 May under which it will inject "quasi equity" into a joint venture with the state-owned copper mining company in return for a guaranteed supply of copper. Codelco is the biggest producer of copper in the world.

Minmetals is injecting subordinated debt into Codelco. In return for the investment, Codelco will commit to providing Minmetals with 57,000t of copper cathodes a year for the next 15 years. The deal, signed by the Chilean finance minister, Nicolás Eyzaguirre, during a visit to Beijing, is clearly seen by both sides as a statement of intention. Eyzaguirre added that the deal gave Minmetals the first option to swap its guaranteed supply of copper for an equity stake of between 25% and 49% in Codelco's Gaby project. 

Gaby is due to come on stream in 2007. It is designed to produce 170,000t of fine copper a year. The mine will cost US$600m to set up.

China is likely to import 6m t of copper this year, up from 4m t in 2004. Chinese demand for copper has driven the price to the highest level since the London Metal Exchange began trading copper in its current contract in 1986. In April China imported 360,000t of copper, 80% more than in April 2004. Copper traders say that China needs copper to increase the capacity of its electricity transmission system: in 2004, 24 of China's 27 provinces were hit by power cuts.