smelter treatment charges/offtake deals

Zinc market focuses on 2006 TC negotiations
American Metal Market, Dec 29, 2005

by Matthew Lerner


NEW YORK -- Negotiations on 2006 zinc treatment charges (TCs) might get a jump start if Teck Cominco Ltd. executives travel east just after the New Year, but could stretch all the way until the American Zinc Association annual conference in mid-February, according to one concentrate trader.

"Teck Cominco is supposed to travel overseas in the beginning of January to settle (treatment charge) contracts," the trader said. "Otherwise, talks could spill over to the annual conference."

The zinc market has been beset by severe concentrate shortages that have led to negative spot treatment charges in Asia and zero charges in Europe. Most observers said they expect TC numbers for 2006 will be well below $100 per tonne and a recalibration of the basis from $1,000 to reflect the surge in zinc prices.

Last year's TCs settled around $126 per tonne, basis $1,000, with the escalator at 16 cents and deescalator at 14 cents.

Meanwhile, the latest in a series of offtake agreements is getting attention. AIM Resources Ltd., Sydney, Australia, said its managing director is in Europe negotiating offtake agreements for metal from its Perkoa zinc project in Burkina Faso, where commercial production is expected to start by 2007.

Recently, PGM Ventures Corp., Toronto, and Hellas Gold SA, a subsidiary of European Goldfields Ltd., Whitehorse, Yukon, both sealed offtake agreements, PGM for its Aguas Tenidas Mine and Hellas for its Stratoni project. One prominent concentrate player, Trafigura BV, Netherlands, participated in both agreements.

Trafigura is said to be involved in the AIM talks, if only preliminarily. "Some discussions have taken place," one zinc trading source said.

Matthew Lerner