Zinc

[Lone Clone]

Zinifex nine-month production slips 8%

April 26, 2007 - 4:35PM

http://news.brisbanetimes.com.au/zinifex-ninemonth-production-slips-8/20075926-9nq.html

Zinc and lead miner Zinifex Ltd has posted an eight per cent drop in nine-month production from last year, but expects the zinc price to stay high for some time to come.

During the three months to March, production sank to 368,326 tonnes from 379,372 tonnes in the corresponding period of last year, while year-to-date production of 1.09 million tonnes was down from 1.18 million tonnes in the first nine months of 2006.

Zinifex blamed its lower production on planned maintenance shutdowns at its Century mine in north-west Queensland, Port Pirie in South Australia and Clarksville in the US during the first half, and the impact of predicted lower lead grades at Century on lead concentrate production.

But outgoing chief executive Greig Gailey gave investors some good news, providing an upbeat view on zinc prices.

"Zinc demand remains strong and zinc stocks remain low," Mr Gailey said.

"These factors are expected to continue supporting a zinc price that is well above long term average levels for some time to come."

Record zinc prices last year boosted the Australian metal producer's earnings enough to help it join the $1 billion club, with a net profit of $1.1 billion for fiscal 2006.

Despite zinc prices correcting somewhat during the March quarter after an exceptional run upwards in 2006, they were still 113 per cent higher than for the corresponding period of 2006 at around $US3,673 a tonne.

Mr Gailey said there had been concerns in January that Chinese production had increased to the point where it exceeded domestic demand.

"This was supported by an increase in exports of zinc from China during the period from November through to February," he said.

"However, while zinc production in China is growing, the exports over this period appear to have primarily been driven by a price arbitrage that opened up between domestic and LME zinc prices.

"This arbitrage has now closed."

Lead prices also corrected in January, but reached new record levels after supply disruptions and falling London Metal Exchange stocks, with prices approaching $US2,000 per tonne.

So far this fiscal year lead prices have averaged $US1,533 per tonne, a rise of 45 per cent on last year.

This week Zinifex and Belgian metals group Umicore confirmed they will go ahead with a proposed spin-off and listing of their combined smelter assets, which could be worth up to $4 billion.

To be named Nyrstar, the new company will be the world's biggest zinc metal company, producing about 1.2 million tonnes of zinc and zinc alloys a year, or about 10 per cent of the world market.

The move will turn Zinifex into a pure-play miner, rather than combined mining and smelting operation, which has led to it bolstering its exploration portfolio and launching a $384 million offer for Canada's Wolfen Resources.

Zinifex shares closed up 38 cents at $16.53 on Thursday.