SHANGHAI – Chinese-owned MMG is seeking new zinc deposits in Peru, which has the world’s third-largest reserves, after a dearth of global exploration in past decades led to a supply crunch.
“We’re looking at places like Peru where there’s a lot of zinc,” and the company’s Las Bambas copper mine there gives a base to assess opportunities, CEO Andrew Michelmore said.
“The crunch has finally come,” he said on conference call Thursday. The South American country has the most reserves after Australia and China, US Geological Survey data show.
Zinc, used to rustproof steel, has surged more than 50% from its January low as production cuts at Glencore’s mines and closures at MMG’s Century and Vedanta Resources’s Lisheen operations reduced supplies. Goldman Sachs forecasts a widening global shortage with prices rising to $2 500 a metric ton in six months, compared with $2 181 on Thursday.
MMG, based in Melbourne and owned by China Minmetals, expects to produce 120 000 t to 135 000 t of zinc in 2016 from mines in Australia. The Las Bambas operation in Peru will probably produce 250 000 t to 300 000 t of copper in concentrate this year, the company estimates.
“There is so little zinc around,” Michelmore said. “Those people who are in zinc are also bullish about the zinc market so they don’t want to sell. That’s why we keep coming back to the focus we’ve got on finding zinc.”
Goldman says the global shortage will expand to 360 000 t in 2017 from 114 000 t this year. The metal is the best performer on the London Metal Exchange in 2016 as stores in warehouses monitored by the bourse have fallen about 30% from a September peak.
Edited by: Bloomberg
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