Australia's Perilya cuts zinc yield on price drop
reuters.com
Wed Aug 20, 2008 8:53pm EDT
SYDNEY, Aug 21 (Reuters) - Australia's Perilya Ltd (PEM.AX: Quote, Profile, Research, Stock Buzz) will cut its zinc production by almost half in the face of low metals prices and will wait for a rebound in the commodities cycle before resuming full operations, it said on Thursday.
Perilya joins a growing number of miners feeling the sting of of a dramatic drop in metals prices.
"Zinc miners are among the group feeling the most pressure from weaker metals prices," said Eagle Mining Reseach analyst Keith Goode.
London Metal Exchange-traded zinc MZN3 has tumbled around 30 percent and lead by 50 percent this year on concerns of global supply gluts.
Mining of ore this year by Perilya from its Broken Hill deposit will almost halve to 950,000 tonnes from 1.8 million tonnes last year, a level forecast to yield 55,000 tonnes of zinc and 50,000 tonnes of lead, the company said.
Last year, the company produced 91,000 tonnes of zinc and 52,000 tonnes of lead contained in concentrate.
Reducing activities at the mine now would place the company in a good position to benefit if and when the commodities cycle turns up, Perilya's executive chairman, Patrick O'Connor, said in a statement.
A proposal to merge Perilya with neighbouring miner CBH Resources Ltd (CBH.AX: Quote, Profile, Research, Stock Buzz) in hopes of uniting both company's ageing mines in eastern Australia and better weather the downturn in metals prices collapsed in June.
CBH had already laid off more than a third of its workers to combat the weak market.
Around the same time, plans to dig West Africa's first zinc mine in impoverished Burkina Faso were scrapped by Aim Resources (AIM.AX: Quote, Profile, Research, Stock Buzz) of Australia due to funding problems linked to depressed zinc prices. The mine was set to produce about 45,000 tonnes of zinc in its first year.
Canada's Teck Cominco Ltd (TCKb.TO: Quote, Profile, Research, Stock Buzz) is closing its Lennard Shelf zinc and lead mine in Australia because of erosion in the zinc price. The mine produced 42,100 tonnes of zinc 12,400 tonnes of lead in 2007.
"Right now, precious metals, energy and commodities are experiencing a sharp and nasty correction," said Gavin Wendt, head of mining resarch for Fat Prophets in Sydney.
"While this could continue for a few more months, as happened during the second half of 2006, we maintain that we're in a correction, not a long-term bear market," he said.
The global zinc market was in surplus by 72,000 tonnes in the first six months of 2008, while lead showed a 41,000-tonnes surplus, according to data compiled by the International Lead and Zinc Study Group in Lisbon. [ID:nLK216024] ($1=A$1.15) (Reporting by James Regan)
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