Output from Australia's Century zinc mine could drop this year

Output from Australia's Century zinc mine, the world's third biggest, could drop 5% this year as it nears the end of its operating life, exacerbating an emerging global supply pinch.

Chinese owner MMG Ltd said that the mine will yield between 465,000 tonnes and 480,000 tonnes of zinc in concentrate in 2014 against 2013 output of 488,233 tonnes. The decline comes amid a supply deficit driven by rising galvanised steel production. Zinc is primarily used as a rust inhibitor in the galvanising process.

MMG's nearby Dugald River mine is under development and was supposed to start yielding zinc in late 2015, partially replacing lost output from the Century mine, which MMG forecasts will run dry in mid-2015. But MMG last month warned Dugald River would miss its start date due to poor ground conditions.

An additional AUD 57 million has been allocated to study problems at the project, according to MMG. A global hunt is on to find new deposits of zinc as China buys more of the metal to rust-proof new cars and coat steel used to build bridges and skyscrapers. Multinationals such as Glencore Xstrata and Belgium's Nyrstar, along with MMG are funding new mines from Africa to the Yukon in search of more metal.

London Metal Exchange zinc prices have tumbled as much as 19 percent in the last year, but the outlook is turning. In the last two weeks, the price has gone up by as much as 5 percent and was standing at AUD 2,071.75 a tonne at 0514 GMT.

Morgan Stanley said that the Q4of 2013 appears to have marked the beginning of a new cycle in zinc characterized by undersupply. The combination of steady demand growth, declining mined and refined production and falling exchange inventories brought our estimation of the stock-to-usage ratio to its lowest since 2010.

Source - Reuters