Glencore to slash zinc jobs

Glencore has announced it will slash it zinc output, suspending operations at Lady Loretta and reducing output at Macarthur River and George Fisher, as well as cutting more than 500 jobs.

The miner today announced a half million tonne reduction in its output globally, with much of the reduction to come in Australia, as well as South America and Kazakhstan.

This comes as the metal experiences a sharp decline following its steady growth since April last year on the back of a weakening US dollar.

The metal grew from $2180 per tonne in April 2014 to a height of $2890 per tonne in May this year, before sharply dropping to $2480 per tonne as of August, recoding an 8.15 per cent delcine compared to July.

 Zinc itself lost 1.2 per cent earlier this week, with more weakness predicted ahead, however Glencore believes this is an undervaluation for the metal, and uses the current price as a basis for its decision.

"Glencore believes that current prices do not correctly value the scarcity of our zinc resources; our finite resources are valuable and reducing production, in response to current prices, preserves value," it said in a company statement.

According to a source close to the company, it believes it is more valuable to reduce production and keep the asset in the ground until prices rise, and sees the lack of a strong zinc pipeline ahead as a welcoming omen for potentially raising output in the future.

Australia's largest open pit zinc operation, MMG's Century mine, ended mining earlier this month, although the company is still forging ahead with its plans at its $1.4 billion Dugald River underground zinc mine.

Glencore's latest decision will reduce zinc production by around a third, and reduce the fourth quarter production by around 100,000 tonnes.

The majority of this is coming from Glencore’s Mt Isa operations at Lady Loretta and George Fisher where 245,000 tonnes will be removed from production, with Macarthur River dropping its annual output by 135,000 tonnes annually

Glencore did not state how long operations would be suspended or how many jobs will be affected, only saying the situation was temporary.

The decision will result in the loss of around 535 Australian jobs, approximately a fifth of its entire Australian zinc workforce.

Of this 335 will be Glencore employees, while the remaining 200 will be contractors. 

Globally Glencore will cut 1600 positions.

The move is little surprise for the market, as Glencore seeks to dramatically reduce its debt levels in the wake of its recent market slaughter and subsequent volatile share price.

In terms of the action taken on its base metals front, the miner is looking to focus more on its copper assets – which make up nearly a third of its earnings – as opposed to its smaller zinc and other base metals assets.

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