China`s MMG cuts its 2014 zinc output forecast on rising prices
Source: www.chinamining.org Citation: Reuters Date: July 21, 2014
China`s MMG Ltd cut its 2014 zinc output target and said mounting supply concerns, heightened by the pending closure of its key Century mine in Australia, were driving world prices of the rust-inhibiting material higher.
The mine, one of the world`s biggest sources of zinc, is set to run dry next year, removing close to a half-million tons of the metal from the 13 million ton global market.
That has helped spark a rush among firms such as Glencore and Nyrstar to find new zinc deposits to feed rising demand from China which is buying the metal to rust-proof new cars and coat steel.
London Metal Exchange three-month zinc traded at its highest price in almost three years this week.
Prices have climbed 20 percent since late March.
MMG, the Hong Kong-listed offshore arm of China`s State-owned Minmetals Corp, cut on Thursday its 2014 output target to between 575,000 and 600,000 tons of zinc in concentrate from 600,000-625,000 tons, following an underperforming second quarter at the Century mine.
The Century mine`s second-quarter output was down 13 percent year-on-year to 110,891 tons. Nyrstar`s refineries in Europe are the main buyers of zinc mined by MMG.
"What we are seeing now is a recognition that not only Century but a number of other mines are coming to an end," Andrew Michelmore, managing director of MMG, said in a conference call with media and analysts.
"Concentrate is going to get tighter and tighter."
MMG`s Dugald River deposit in Australia is being assessed for future development, but at best will only partially replace lost output from the Century mine.
Canada`s big Brunswick and Perseverance mines closed last year, eliminating a combined 335,000 tons of zinc, while aging mines in Europe and Africa are also close to depletion.
Zinc is primarily used as an anti-corrosive in the galvanizing process.
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