IBG Ready to surge, page-12

THE AUSTRALIAN APRIL 20, 2015 12:00AM
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Barry FitzGerald
Resources Editor
Melbourne
MMG remains keen on development prospects for its Dugald River zinc project in Queensland despite the size of its $US1.5 billion ($2bn) project being scaled down.
The Chinese-owned, Australian-managed MMG is working on a revised development plan, likely to include lower annual throughput but over a longer mine life.
A decision regarding the revised project — it was originally meant to be in production when the group’s Century zinc mine, also in Queensland, stops production later this year — is expected during the September quarter.
MMG chief executive Andrew Michelmore told The Australian that Dugald River remained one of the world’s best undeveloped zinc deposits.
“Its value becomes even clearer when you consider the number of zinc mines ending production over the next few years (including Century) and the lack of replacement projects,’’ he said. “We take a long-term view. By taking a little extra time, we’re making sure we get the development pathway for Dugald River right.”
Zinc has one of the brightest price outlooks due to the closure of several big mines, including Century, a 500,000 tonne-a-year producer, which stops production in the September quarter after being mined out.
The price of the galvanising metal has risen 12 per cent since mid-March to $US2213 a tonne. The looming closure of Century feeds in to expectations that industry-wide zinc mine closures will remove about 1.5 million tonnes a year of zinc metal production from the 11mtpa-12mtpa global market in the next four to five years.
Dugald River’s forecast annual output was originally put at of 200,000 tonnes of zinc. MMG is yet to say what the scale the revised project plan envisages. Mr Michelmore said MMG’s enthusiasm for zinc’s outlook had not changed.
“There has been no change in underlying market fundaments: the Chinese economy is continuing to grow, the US is in recovery and we’re continuing to see development across Asia.
“Our view is that zinc is currently undervalued and we’re positive about the metal in the medium to long-term,’’ Mr Michelmore said.
MMG has spent more than $US625 million on early project development work at Dugald River getting it ready for a full-blown go-ahead decision. In that early work Dugald River produced 450,000 tonnes of ore with an average grade of 13.3 per cent zinc (60,000 tonnes contained). The ore will be trucked in coming months for processing at the Century processing plant. Using the Century plant is not part of Dugald River’s long-term plan because of the distance involved.