Correction: Kennecott Utah Copper earned more than $1 billion in 2005. A headline in Monday's edition of The Salt Lake Tribune misstated the company's earnings.

Copper is glittering like gold on the world's metal markets, and for Kennecott Utah Copper, the rising demand and record high prices for the metal are putting a new shine on its bottom line.

Kennecott operates the world's largest open-pit copper mine on the eastern slope of the Oquirrh Mountains in Salt Lake County. And in 2005, thanks mainly to the high price of copper, it produced more than $1 billion in profit for its parent company, the London-based Rio Tinto PLC.

In 2004, Kennecott reported a profit of $311 million.

"Last year we generated nearly 20 percent of our parent company's $5.2 billion in profits, which isn't bad since we're seeing a significant portion of that income reinvested in our operations here," Kennecott spokesman Louis Cononelos said.

Three years ago, things didn't look so great.

Copper was trading for approximately 70 cents a pound, which made it tough for even the most efficient operators such as Kennecott to turn a healthy profit. Since then, though, the going price per pound has steadily increased and sits above $2.20.

"We've gone from near depression to prosperity in only a few years," Cononelos said.

During past rallies in the price of copper, producers worldwide responded by ramping up their mining and smelting operations. The resulting production increase eventually pushed the price of the metal down as inventories rose.

Worldwide, copper production is expected to increase 9.9 percent this year, to 18 million tons, Citigroup Inc. analyst John H. Hill said in a report earlier this week. And that mean production will outpace demand by 457,000 tons, reversing a three-year deficit.

Although strong economic growth in China is expected to continue to drive demand for a while, another analyst suggests the days of the record-high prices may be numbered.

"There is this belief out there that China has this insatiable demand for copper," said Keith Debus, chief market strategist for Drexel Financial Group in Salt Lake City. "But they're producing more and more of the metal themselves, and we're beginning to see China's imports slowing down a little."

Eventually, the price of copper will go down, Debus said. "And like most commodities that see a sharp run-up in price, when copper falls it is going to fall hard."

Kennecott produces approximately 300,000 tons of copper a year, but rather than concentrating on expanding ore removal at its Bingham Canyon open-pit mine, the company typically focuses on increasing the efficiency of its mining and smelting operations.

Bill Champion, Kennecott's chief executive, in a recent statement said the company expects some softening of metal prices beginning this year that will impact future profits and require the company to continue to work at reducing its production costs.

Kennecott is getting ready.

In 2005, Kennecott received approval from Rio Tinto to invest more than $200 million to expand the Bingham Canyon Mine's open pit and build a crushing facility at its Copperton Concentrator. The expansion will extend the life of the Bingham Canyon Mine from 2012 to 2018, Cononelos said.

And later this year, Kennecott will spend tens of millions more for a major overhaul of its smelting facilities, which the mining company already touts as the cleanest and most efficient operation of its kind in the world.

Champion said the company will also continue to evaluate options for further expansions, either though open pit or underground mining methods.

Kennecott employs approximately 1,500 Utahns, with most of those workers represented by the United Steelworkers union.

"Under our current collective-bargaining contract there is an incentive program that our members are sharing in," said Wayne Holland, spokesman for the United Steelworkers. "Given the obscene level of profits the company is now enjoying, though, it should probably be more."

Union negotiators are expected to enter talks later this year with the company on their pension plan. Given Kennecott profits, union leaders are hopeful that plan can be strengthened, Holland added.

steve@sltrib.com