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Nippon Mining & Metals Co. and Mitsui Mining & Smelting Co. said Friday they will soon begin talks to fully integrate their copper operations by expanding their ongoing alliance to cover production.

The two companies are expected to set up a joint controlling company to integrate and oversee production, distribution, sales and all other copper operations, company sources said.

The integration will create the world’s second-largest copper producer, with a combined annual smelting capacity of 1.1 million tons, including the two companies’ joint venture in South Korea.

The new company will outsource production to Nippon Mining’s two smelting plants, in Oita and Ibaraki prefectures, and Mitsui Mining’s smelting subsidiary in Okayama Prefecture, they said.

In a statement, the companies said they have already established cooperative ties in copper operations through their Tokyo-based joint sales venture Pan Pacific Copper Co. and other joint firms created under an alliance announced in 1999.

Such cooperative efforts have yielded results in a wide range of fields, including sales, materials procurement, market cultivation and technology development, they said, adding they now also need to look at a production tieup.

An economic daily reported Friday that Nippon Mining will take a majority stake in the new firm but the two companies have yet to decide on its capitalization.

The new company will evolve from Pan Pacific Copper, in which Nippon Mining holds a 62 percent stake and Mitsui Mining 34 percent, according to the daily.

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