Zinifex Says SecondQuarter Zinc Lead Output Gains (Update3)
Zinifex Says Second-Quarter Zinc, Lead Output Gains (Update3)
By Jesse Riseborough
Jan. 24 (Bloomberg) — Zinifex Ltd., seeking to buy nickel
company Allegiance Mining NL for A$775 million ($677 million),
said second-quarter output of zinc gained 2.9 percent amid
continuing demand from China.
Zinc output was 147,288 metric tons in the three-months ended
Dec. 31, up from 143,116 tons a year earlier, Melbourne-based
Zinifex, said today in a statement. It rose 8 percent for the half.
Lead production rose to 18,863 tons, from 14,565 tons, it said.
Zinifex, the world;s third-largest zinc mining company, has
more than A$2 billion ($1.7 billion) in cash after selling its
smelters in October and needs new output to replace dwindling
reserves in Australia. Chief Executive Officer Andrew Michelmore
is seeking output of other metals such as nickel and copper to
offset declining prices for zinc, used to galvanize steel.
“Zinc production was about 4 percent ahead of our
expectations for the group and lead was pretty much in line,;;
Glyn Lawcock, a Sydney-based analyst with UBS AG, said today by
phone. “Allegiance is probably only the first step in an
expansion plan for the company.;;
Zinifex rose 94 cents, or 11 percent, to A$9.88 at the 4:10
p.m. Sydney time close on the Australian Stock Exchange. It has
fallen 20 percent this year.
The average price of zinc fell 19 percent to $2,623 a metric
ton in the quarter compared with the previous quarter, Zinifex
said today. That;s down 37 percent from the same period a year
earlier when the price for the metal averaged $4,142 a ton and
traded at a record.
Zinc Price
The cash price of zinc on the London Metal Exchange will
average $2,535 a ton this year, analysts from Macquarie Group Ltd.
led by Sydney-based Brendan Harris said in a Jan. 14 report.
“Markets appear to be taking their pricing cues from a
combination of the expectation that new zinc supply will enter the
market in 2008 returning it to surplus and the growing uncertainty
surrounding the state of the U.S. economy,;; the company said in
the statement. “Notwithstanding these issues, demand remains
healthy, especially from China.;;
Zinc supplies may gain 11 percent this year as 15 new
projects, including the $800 million San Cristobal mine in Bolivia,
help to create a surplus of 600,000 tons, UBS analysts led by
Lawcock said in a Nov. 30 report. Any surplus will be “modest;;
and the market has already priced in an appropriate correction,
Zinifex said today.
Positive Outlook
The price of lead, used in auto batteries, was almost double
its price from the same quarter a year earlier as declining
supplies boosted prices, the company said. Zinifex remains
“positive on the near term outlook for lead where supply issues
continue to hold the market;s attention,;; it said.
Zinifex last month bid for Sydney-based Allegiance to gain
control of its Avebury nickel mine in Tasmania where output is due
to start in March. Zinifex has a team studying a portfolio of
potential acquisition targets and will continue to study large
takeovers, Michelmore said Dec. 17.
The purchasing power of the company;s A$2 billion war chest
is becoming more valuable in the current volatile market
conditions, the company said today.
The company may consider bidding for Rio Tinto Group assets
including the Northparkes copper and gold mine in New South Wales
state, Michelmore said in an interview yesterday. The mine may be
worth as much as $1.25 billion, analysts from JPMorgan Chase %26amp; Co.
said in November.
To contact the reporter on this story:
Jesse Riseborough in Melbourne at
