Major miner Vedanta Resources (LSE:VED) is looking to expand zinc production at its African operations with support from higher prices, the company’s international zinc head said on Monday (February 19).
Zinc prices have been on an uptrend since last year, rising more than 27 percent year-on-year. Declining mine supply and stockpiles, together with a strong demand outlook, have pushed prices to a decade high.
“Some of the aged mines are starting to close, demand is growing. The market is in deficit for both zinc concentrate and metal,” Deshnee Naidoo, CEO of Zinc International, which is made up of Vedanta’s assets in Africa and Ireland, told Reuters.
Vedanta is expecting to bring on new production from its Gamsberg asset in the Northern Cape region of South Africa by the middle of 2018, ramping up to full production of 250,00 tonnes annually in 2019.
In view of strengthened zinc prices, Naidoo said a second phase to bring production to around 400,000 tonnes per year could be accelerated. She said a decision would be taken “over the coming months.”
In Namibia, Vedanta operates Skorpion Zinc, which is expected to produce 90,000 tonnes of zinc this year, reaching 130,000 tonnes by 2020. After resources are exhausted at Skorpion, the company is looking to mine underground or convert the Skorpion refinery to treat different ores.
“We really do not want to leave Namibia,” Naidoo said. The company also has projects in India and has licenses for assets in Ireland, where is discussing possible joint ventures to develop them, she added.
Looking ahead, Naidoo continues to be bullish on zinc, which was trading at $3,550 per tonne in London on Tuesday (February 20).
Similarly, analysts at FocusEconomics expect prices to remain elevated during the first half of the year. Analysts surveyed by the firm see prices averaging $3,242 in Q1 and $3,232 in Q2.
The most bullish forecast for the quarter comes from Citigroup Global Markets, which is calling for a price of $3,500; meanwhile, Oxford Economics is the most bearish with a forecast of $2,920.
On Tuesday, shares of Vedanta closed almost neutral in London at GBP 744.80. The company’s share price has been on a downtrend since the start of the year, falling 7.37 percent year-to-date.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.