The noise from the resources boom continues to get fainter as another high cost Australian base metal mine is to be shut, the third decision to curtail production and/or development work in a week because of weakening world metal prices.
Teck Cominco of Canada and Xstrata Zinc (part of the Anglo-Swiss Xstrata mining house) yesterday said they were shutting their joint venture Lennard Shelf, Pilbara mine in Western Australia because it has become uneconomic to operate at current prices. Operations are expected to cease by early August.
The announcement to shut the high cost Lennard Shelf mine comes after Fox Resources revealed plans to wind down its Radio Hill underground and nickel mine and defer development of the Shoal B2 nickel project in WA, while Australian Mines said it was deferring spending to continue its decline development at Blair nickel mine also in WA.
Australian Mines said last week: “Due to the recent fall in the nickel price to below US$22,000/tonne, the company has decided to defer its capital decline development program at the Blair Mine. Blair’s excellent production result has been partially offset by our decision to defer the capital development program. However, the decision enables the company to reduce operating costs at a time of lower nickel demand, with a view of recommencing the program down the track. Given the increased number of high grade stopes now in production, we are well positioned to maintain production levels for at least the next 12 months,” Mr Young added.
Yesterday Teck and Xstrata said in a statement: “The Pillara mine has become uneconomic, primarily due to the sharp decline in zinc and lead prices compounded by the appreciation in the Australian dollar.”
Falling lead and zinc prices have forced 29 Chinese processors of both metals to reveal a 10% production cut for the current quarter to try and reduce oversupply and boost prices. Up until last week zinc prices had fallen 15% this year so far and lead by 23%, thanks to excess supply and weakening demand. Zinc fell another 7% last night while lead prices were steady in London.
The decision to start Lennard Shelf was made in 2006 and production commenced in early 2007. By the end of 2007, the operation had produced 42,100 tonnes of zinc and 12,400 tonnes of lead. The two companies said mine development and exploration work has been suspended and existing contracts will be terminated.