Mid-year talks over copper treatment and refining charges between three Japanese smelters and a Western copper miner are slated to begin in the week starting June 26 in the Netherlands, sources close to the talks said Thursday.

Japanese copper smelters Pan Pacific Copper, Sumitomo Metal Mining and Mitsubishi Materials will be negotiating with Anglo-Australian resources giant BHP Billiton over TC/RC charges for the period from July 2006 to June 2007, sources said. The negotiations are expected to take place in the Hague.

A spokeswoman for BHP Billiton, however, declined to confirm any details about the talks.

A Japanese source who is expected to participate in the negotiations said BHP Billiton was likely to propose the elimination of a price participation scheme. "The talks may end [up being] inconclusive, as this proposal is unacceptable," the source said.

Under the current price participation arrangement, the copper smelters are refunded 10% of the copper cathode price when it exceeds 90 cents/lb. The monthly average price of copper cathode was over 300 cents/lb in May 2006.

The source said BHP Billiton has not made a formal proposal to remove the price participation arrangement. "We have been hearing from the miner that there are risks in the mine operations, the costs are higher," he said, adding that the price participation has protected the smelters from higher energy costs, inflation, and interest rates.

The BHP Billiton spokeswoman also declined to comment on whether her company planned to propose the removal of the price participation arrangement.

Japanese smelter sources also voiced concerns that TC/RC levels have fallen to $60-80/mt and 6-8 cents/lb this month, from levels above $100/mt and 10 cents/lb six months ago. They also said a recent tender involving a trader and a Chilean miner set the TC/RC at as low as $28/mt and 2.8 cents/lb.