ozl fortunes could change, page-27

Ive just tried it again and it works, its an interview with michelmore re current downturn, but, @21.10.08

Heres a type copy.



The bad news coming from the resources sector is becoming more frequent, but metals miner Oz Minerals says it has more to do with sentiment than fact.

PHILLIP LASKER, PRESENTER: The bad news coming from the resources sector is becoming more frequent, but metals miner Oz Minerals says it has more to do with sentiment than fact.

But the fact is, plunging metals prices may see the company cutting output at its giant Century Zinc mine. Chief executive officer Andrew Michelmore joined me earlier this evening. Well Andrew Michelmore, thanks for joining Lateline Business.

ANDREW MICHELMORE, CEO, OZ MINERALS: It's a pleasure.

PHILLIP LASKER: How much pressure are you under because of plunging commodity prices?

ANDREW MICHELMORE: Certainly the plunging commodity prices put a lot of pressure on the market. I think what a lot of people haven't seen though is the exchange rate has actually dropped 30 per cent in the last month as well.

So while the metal prices have come off in Aussie dollar terms, it is not as bad. But I think the issue has an enormous effect on sentiment in the market, and that's driving a lot of the reactions at the moment.

PHILLIP LASKER: So what are you actually feeling at the moment?

ANDREW MICHELMORE: Certainly we, our customers, are absolutely fine, there's no backing off in terms of demand for our products, there is certainly pressure around the costs in the operations.

Will these US dollar prices stay at this level, will the exchange rate stay at the level? If the prices stay at this level and the exchange rate picks up then that'll put more pressure on.

So I think we're just watching what's happening in the market. We believe it's overshot in terms of the prices and the reactions, and I think as confidence comes back we'll start to see much better prices.

PHILLIP LASKER: But you're thinking of at least scaling back your operations at the Century Zinc mine?

ANDREW MICHELMORE: It's something we always have to consider, it's our highest cost operation in zinc, it's an extremely good mine, it's very efficient; it's the second largest in the world.

But it doesn't have the benefit of the by-products of copper and gold and silver that the other mines have, so net, net, it end up being our highest cost mine.

So when we look at the demand in the market, where the prices are, we certainly say if the prices stay where they are at the moment we'd rather leave the zinc in the ground and supply it into a market later which we believe is actually going to get quite tight.

PHILLIP LASKER: So are you saying that it's likely you'll shut that mine?

ANDREW MICHELMORE: No, not at all. We are saying at the moment with the prices where they are, we will continue to review what should be our reaction to the market, we have made no decisions on that front, we continue to model what, what are the scenarios going forward.

PHILLIP LASKER: To what extent is your predicament caused by a softening in demand from China?

ANDREW MICHELMORE: I don't think much at all. Directly, on fundamentals, very little. The demand in China is still very good, demand for galvanising of steel, 15 per cent of all steel is galvanised with zinc, that represents about 55 per cent of the prime demand for zinc.

China is continuing to consume the metals we produce, and particularly in urbanising the, the, the rural areas, 700 million people in inland China living on under $500 a year, the Government is committed to getting their standard of living improved, putting them in apartments, getting them jobs. That's where the demand is going.

So on the fundamentals, not being impacted. Where it's being impacted is sentiment in the market. You have a lot of people who don't know the facts in China, they don't look at the overall balance of supply and demand, how tight the demand, sorry how tight the supply is and the stocks.

None of that's looked at. At the moment there's just a sentiment just dump, sell, get out, get your hands on the cash, trust no one. That's the biggest impact in the market. So confidence in the market is absolutely key.

PHILLIP LASKER: OK Andrew Michelmore, thanks very much for your time.

ANDREW MICHELMORE: That's a pleasure, thank you.