Silver, lead and zinc Ore mining outlook

PLANNED and prospective increases in zinc mine capacity are expected to boost zinc output to about 1.73 million tonnes by 2012-13.

Planned and prospective increases in zinc mine capacity are expected to boost zinc output to about 1.73 million tonnes by 2012-13.

The growth in production primarily reflects increasing production at the Mount Isa mines, McArthur River and Century, as well as the reactivation of the Pillara mine and the start-up of some new operations, including the Jaguar base metals mine and the Angus zinc project.

A major zinc deposit under investigation is Zinifex’s Dugald River prospect. This deposit, near Mount Isa in Queensland, is estimated to contain 30.8 million tonnes of ore, grading 13.1% zinc, 2.1% lead and 39 grams per tonne of silver.

The resource is believed to be almost as rich as that at Broken Hill.

The status of this project, which has an estimated capital cost of about $250 million, is unclear.

A feasibility study to assess the potential development of the resource commenced in early 2007.

Assuming that the mine proceeds, start-up will not occur before 2011.

Exports of zinc in concentrate form are expected to mirror production growth over the outlook period, amounting to 1.3 million tonnes by 2012-13.

The demand for zinc is expected to continued expanding solidly, reflecting ongoing growth in Chinese construction activity. However, production worldwide is also expanding, taking the upward pressure off prices.

Zinc prices in US dollars are expected to decline through the entire outlook period, although an expected weakening in the Australian dollar will lead to smaller price falls in local currency.

The co-production of lead with zinc ensures that its output will also expand over the period to 2012-13. Australia’s mine output of lead is expected to amount to about 831,000 tonnes by 2012-13.

The recommencement of mining at the Pillara mine (owned by Teck Cominco and Falconbridge) will contribute to the increase, as will the re-start of the Magellan mine after a temporary shut down in 2007. Virtually all the increased mine production of lead will be available for export in ore or concentrate form, as the 90,000 tonne lead refinery planned as phase two of the Magellan lead project seems unlikely to eventuate during he outlook period.

As a result, exports of lead in concentrate form are expected to reach about 436,000 tonnes by 2012-13. Lead prices are expected to decline from the high levels prevailing in 2007-08, as demand growth eases and global supply expands.

As most zinc-lead deposits also contain silver, Australia’s production of this metal is expected to increase with that of zinc.

By the end of the outlook period, silver production will amount to about 2,100 tonnes. Silver prices are expected to ease during the outlook period.

The performance of the Silver Lead Zinc Ore Mining industry is expected to deteriorate during the outlook period, as the positive effects on revenue flowing from higher output and a generally weaker Australian dollar are offset by much lower US dollar zinc, lead and silver prices.

Performance will not be even, but is expected to fall during most years of the outlook period.

Overall, industry revenue is expected to fall at an average annual rate of about 6.7% over the outlook period with value added declining by 7.8%. However, this weak performance comes in the wake of extremely strong growth during the current performance period.

N IBISWorld

03 9655 3881

www.ibisworld.com.au

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