London 24/08/2016 - Miner-trader Glencore was coy in an earnings call this morning about when it will resume zinc mining at its mothballed projects while delaying the restart of the bulk of its African mining copper operations.
Responding to questions about the timing of restarts at Glencore's zinc mines, CEO Ivan Glasenberg said the company would only do so when it felt the time was right.
"We don't want to be the ones who bring supply into the market when it doesn't require it - we will only bring it back when it makes sense to dig it out of the ground," Glasenberg said while rebuffing questions about the company's target price for zinc.
Towards the end of last year, the company cut 500,000 tonnes per year of mined zinc output and 455,000 tonnes per year of copper in response to weakening prices for base metals.
Since then, treatment charges (TCs) - fees paid to smelters for the costs of processing concentrate into metal - are down 42 percent at $105-115 per tonne. Smelters have been squeezed by the removal of concentrate supply.
But premiums for the metal are low at $90-110 per tonne on a cost, insurance and freight (CIF) basis to the port of Shanghai, with the Chinese market sluggish and arbitrage opportunities limited throughout this year.
Still, the shuttered Glencore capacity hangs over the marketplace, with many speculating over when and at what price the company would bring it back online, especially in light of recent price gains.
At $2,305 per tonne, zinc prices on the London Metal Exchange are up 60 percent on lows of $1,444 from January this year.
"We don't believe in that production coming to the market and seriously affecting the pricing - we are monitoring supply and demand and being cautious," Glasenberg said. "We're making good margins and we don't want to kill those margins by bringing on more production."
RETURN OF KATANGA, MOPANI DELAYED
Meanwhile, Glencore will also bring back copper mine production at the Katanga Mining complex in the Democratic Republic of Congo and at Mopani Copper Mines in Zambia later than previously anticipated.
Glencore had been expected to resume production at both complexes early in 2017 after considerable capital investment - three shafts are under development at MCM while a leaching facility is under construction at Katanga. But the latter will now come back online in the first half of 2018 and Mopani in the third quarter of 2018.
"We delayed the capex as this was when we are comfortable bringing the copper into the market… looking at the situation, there was no rush," Glasenberg said.
The markets for refined copper and copper concentrates are currently well supplied, with prices and premiums still low while TC/RCs are stable at high levels. But the copper market is expected to tighten in the coming years, with ore grades deteriorating globally.
After the investment in Glencore's African copper sites, the costs of production will drop to $1.20 per ounce at Katanga and $1.35 at MCM, the company said.
(Editing by Mark Shaw)