zinifex looking for production growth

Zinifex casts an eye overseas for growth
Email Print Normal font Large font Jamie Freed
November 9, 2006

AFTER breaking the $1 billion annual profit mark in August, Zinifex is looking overseas for production growth.

Chief executive Greig Gailey said his company expected to announce joint venture deals with junior explorers in areas such as Mexico and South America this year to help it increase production in the longer term.

Although zinc prices hit a record this week due to a steep fall in stocks on the London Metal Exchange, Zinifex and other producers are unable to increase production to capitalise on the high prices because of capacity constraints.

At the current rate, LME stocks will be exhausted completely by early next year. "That raises the question of what price will the zinc price rise to to kill off demand," Mr Gailey said. "I don't have an answer to that."

The only globally significant zinc mine expected to begin production next year is Apex Silver's San Cristobal mine in Bolivia.

But the Bolivian Government has threatened to nationalise mines, which has added uncertainty to the already tight zinc market.

Mr Gailey said it was becoming more difficult to develop new mines due to political risk in unstable countries or the high cost of building projects in areas of the US and Canadian Arctic.

But by the end of the decade the supply shortage could ease somewhat, due to projects like Zinifex's Dugald River venture in Queensland.

The potential $500 million project is in the pre-feasibility stage and a bankable feasibility study could be approved early next year. Dugald River would add about 200,000 tonnes, or one-third, to Zinifex's annual production.

Zinifex, which was reborn from the ashes of failed miner Pasminco, plans to spend $27 million on exploration in the 2007 financial year, up from $12 million in 2006 and $4 million in 2005.

Zinifex is also keeping an eye out for potential acquisitions. Although Zinifex mainly produces zinc and lead, Mr Gailey said in the longer term it would make sense to diversify into other LME traded metals or specialty metals such as tantalum.