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= INTERVIEW:Australia CBH Says Zinc Proj Go-Ahead Imminent
577 words
19 October 2006
17:35
Dow Jones Commodities Service
English
Copyright 2006, Comtex News Network. All Rights Reserved.

SYDNEY, Oct 19, 2006 (DJCS via Comtex) --


By James Attwood
Of DOW JONES NEWSWIRES

Australia's CBH Resources Ltd. (CBH.AU) said Thursday it has completed a draft feasibility study into an estimated US$100 million zinc-copper project, with a formal go-ahead decision imminent.

"From our perspective, it's going to happen," said CBH Chairman James Wall.

The Sulphur Springs project in Western Australia's Pilbara region is expected to produce at least 75,000 tons a year of zinc concentrates and 65,000 tons of copper concentrates from 2008.

The company has already placed an around A$9 million order for sag and ball mills with Finnish supplier Outokumpu Oyj, considered long lead time items in the tight global mining materials market.

"We're doing that because the project economics, without finalizing the feasibility study process, looked very attractive," Wall said.

He said CBH continues to look at financing options including debt raising and arrangements with off-takers, such as the company's 24.8% shareholder Toho Zinc Co. Ltd. (5707.TO) of Japan.

But Wall said debt financing is unlikely to entail hedging given the company's bullish outlook for metal prices.

London Metal Exchange traded lead prices have surged nearly 70% since late June to a series of all-time highs, while zinc, used to galvanize steel, has risen by a third to a record US$4,020 a ton this week.

"I think zinc is going to go a lot higher than US$4,000," he said, describing lead at around US$1,500 currently as "a beautiful market."

Wall's confidence is driven by low and still shrinking global stock levels as years of exploration underinvestment and structural expansion barriers constrain the supply side's ability to react to still strong China-led global demand.

Meanwhile production at the company's flagship Endeavour zinc and lead mine in central New South Wales state is back on track after a lengthy recovery from a "self mining" incident last year, he said.

"We had a good month in September of about 10,400 tons zinc concentrates and about half that lead and this month looks good as well," he said. The zinc output rate compares with traditional levels of 11,600 tons a month.

CBH expects to make a development decision next year on its Broken Hill brownfield underground project in NSW.

In total, the company is looking to reach 300,000 tons annual production to become Australia's third largest zinc miner after Zinifex Ltd. and Xstrata PLC.

Wall said Toho's nearly 25% stake in CBH Resources affords the company some protection from the recent flurry of merger and acquisition activity in the mining industry and broader Australian equities market.

He said other mid-sized zinc and lead producers in Australia, Kagara Zinc Ltd and Perilya Ltd, are similarly shielded by Korea Zinc Co Ltd's presence on their share register.

"To some extent, if someone wants to takes us over they have to do a deal with those companies, which isn't easy."

Neither is a merger likely between CBH and either Kagara or Perilya, he said.

"Although the Japanese and Koreans like each other they don't like to get into bed together."