fox to start mining

Boom puts zinc in the pink
Robin Bromby
January 11, 2006
RESOURCES companies are rushing to open new mines and restart dormant operations to catch the peak of the commodities boom as metal prices surge to long-term highs.

On a day when both zinc and copper reached record highs, Kagara Zinc said it was planning to buy a second-hand treatment plant to get its Balcooma copper project in Queensland producing - and, at present copper prices, that would add another $58 million of cash margin to the company.

Kagara is already riding the commodities boom with its 50,000 tonnes a year of zinc output.

Nickel producer Fox Resources is another wanting to get on the copper and zinc bandwagon.

The company, which released further promising drilling results from its West Whundo project near Karratha yesterday, is planning to start mining high-grade ore as soon as possible.

And iron ore demand shows no sign of easing, with Aztec Resources announcing yesterday it had buyers for all its planned production at Koolan Island, Western Australia, over the nine-year mine life.

Zinc rose on Monday night to $US1998/tonne in intraday trade, topping the record set in March 1989.

The metal, already in short supply, has been made more valuable in speculators' eyes by further toxic spills in China.

Lingnan Nonfemet shut down its zinc and lead smelter just before Christmas due to a spill into a nearby river.

Now China's largest producer, Zhuzhou Smelter Group, is facing the same prospect after highly poisonous cadmium got into the Xiangjiang River in recent days.

Three-month copper prices continued to soar, reaching $US4598/tonne.

But the market was more interested in taking profits yesterday after Monday's gains.

Kagara fell 5c to $2.45 - but still a long way above the $1.55 to which the stock sagged in November.

The company stands to make good money from its copper play north of Charters Towers. It said that at present prices it would have a cash margin of more than $US1 a pound.

At present prices, and with production from Balcooma starting by September at the rate of 20,000 tonnes, that would yield a cash margin of about $US44 million ($58.7 million), in a full year.

Far East Capital's Warwick Grigor said the fast start-up of copper was a good development for the company.

"This will make them a lot of money," he said.

He said Kagara was heading down the path of the very successful Consolidated Minerals, where its diversification would lead to a rerating in the market.

Kagara plans to pay $2 million for the recently mothballed Thalanga copper treatment plant.

The company said this low price would help keep production costs at Balcooma below $US1/lb - less than half the present price for the red metal.

Kagara's operating Mt Garnet mine inland from Cairns already produces 9000 tonnes a year of copper on top of its main zinc output - and there is also lead from that mine, adding a third booming commodity to the company's mix.

Last month Kagara bought 18 per cent of Metallica Minerals, which holds a large block of tenements near Mt Garnet prospective for copper, lead, zinc, nickel, uranium and scandium.