Zinc mine closures will boost prices – Terramin (Wed, 20 Aug) Zinc prices are unsustainable at current low levels and will recover in the near future on the back of more mine closures and continuing strong demand from China, executive chairman of Australian miner Terramin, Kevin Moriarty, told MB. Prices will rebound as demand from China remains strong and an increasing number of mines come under pressure of closure. “It really just depends on when demand growth overtakes supply, [but] I’m not going to put my finger on it. The current situation is going to be shortlived…I don’t believe current prices are sustainable because what has changed since we started acquiring projects is that demand has grown hugely and China has managed to keep pace with its own demand,” Moriarty said on Wednesday. Further mine closures can be expected by the end of the year, with companies such as SRA, Blue Note and CBH Resources increasingly in trouble, Moriarty said, citing a recent Macquarie report. Moriarty said he is confident that Terramin will be able to ride out the current low zinc and lead prices thanks to its focus on low-cost projects. “[Miners] are going to run out of money -- mines like Blue Note, they’ve got a deficit, they’re operating at a loss, how can they keep going? There are others in a similar situation,” he said. A major zinc deficit is looming, Moriarty said, not only because of small mine closures, but also because of the detoriation of ore bodies in larger mines. “Every analyst is agreed that there is a major deficit looming. There’s going to be a serious crisis at the current rate, assuming China, India and Russia don’t stop growing…There’s mines that are going to have to close because they are running out of ore…things like Century, Brunswick and Broken Hill, so it seems to me that there is no factoring the longer view into the pricing in the market,” Moriarty said. “Every single mine that is in trouble is a re-opening of an old mine. [We] haven’t got legacy problems and there’s obviously a reason why these mines closed when prices were low. We invest in projects that aren’t going to have a lot of problems. We started acquiring projects when prices were a lot lower than they are now and we had a policy of getting projects that were profitable at much lower prices,” he said. Terramin has reduced its exposure to rising energy costs through a seven-year fixed electricity agreement at its Angas mine, and the cheaper cost of energy in Algeria at the company’s Oued Amizour project. A pre-feasibility study at the Oeud Amizour project will be completed by the end of the year and the feasibility study finished by the end of the first quarter next year. Moriarty’s comments came as the company announced it continues to ramp up production at its recently commissioned Angas Zinc mine despite the problems facing many miners. The stockpile of zinc concentrates at the mine in southern Australia is growing at 1,200 tonnes per week due to higher-than-expected grades of ore from the mine. Another 15% production can be expected at Angas in the near future as the plant is further tweaked and the development underground is completed, Moriarty said. Moriaty's upbeat assessment of future zinc prices comments come as concerns mount that an increasing number of mines are approaching the breakeven point, particularly when LME zinc prices fell to lows of below $1,650 per tonne earlier this month, down 23% since the start of the year, and after a number of mines have already shut operations or reduced staff to battle rising costs. CBH Resources has already announced it is making more redundancies and reducing ore production at its Endeavor mine to concentrate on higher grades of ore, while Teck Cominco and Xstrata have closed operations earlier than expected in July at the Lennard Shelf mine in Pilbara, Australia, as a result of cost pressures. AIM Resources has also stopped work on its Perkoa project in Burkina Faso on low zinc prices and funding problems.
