Base Metals

The absence of MMG’s Century mine will exacerbate the current zinc deficit. With that deficit will come a higher zinc price and more opportunities for junior and mid-tier miners to grab a piece of the zinc pie.

Century Mine Closure to Leave a Hole for New Zinc Producers

Back in December, Stefan Ioannou, mining analyst at Haywood Securities, advised zinc market watchers to keep an eye out for updates on MMG’s (HKEX:MMG) Century mine. 

Though the company said back in October that it will stop producing this year, the timeline has bounced around, causing some confusion. Thursday, however, MMG Managing Director Andrew Michelmore confirmed during the release of the company’s Q4 operations report that Century will indeed close in 2015.

“As we prepare for the end of open pit zinc production at Century this year, we continue to study future options to use the operation’s infrastructure as part of the wider Queensland operations strategy,” Reuters quotes him as saying.

He also relayed some information about exactly how low the mine’s output will get in the lead up to its closure, noting that production from Century will sink by up to 31 percent in 2015. Overall, the company expects to put out 320,000 to 370,000 tonnes of zinc this year, down significantly from the 465,696 tonnes it produced in 2014.

As mentioned, MMG wants to reuse the infrastructure at Century, hopefully for further zinc mining in Queensland. Its Dugald River deposit is reportedly being assessed for future development, but it won’t be able to replace the huge amount of zinc produced by Century.

That’s too bad for MMG, but for the rest of the zinc market, it’s good news. That’s because the absence of Century will exacerbate the zinc deficit, which according to Reuters came to 309,000 tonnes for refined zinc in the first nine months of 2014 — that’s a whopping five times bigger than the deficit seen in 2013.

And of course, with that deficit will come a higher zinc price and more opportunities for junior and mid-tier miners to grab a piece of the zinc pie. Ioannou’s favorites include analyst darling Trevali Mining (TSX:TV), Foran Mining (TSXV:FOM) and Nevsun Resources (TSX:NSU,NYSEMKT:NSU), as well as HudBay Minerals (TSX:HBM,NYSE:HBM), Teck Resources (TSX:TCK.B,NYSE:TCK) and Lundin Mining (TSX:LUN) on the larger end of the spectrum.

It will be interesting to watch how they and other zinc companies fare as Century’s closure draws ever closer.

 

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. 

Related reading: 

Zinc Outlook 2015: ‘Crunch Time’ is Coming

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