The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
After reporting a fourth-quarter loss due to weak metals prices, Teck calls for a ramp-up of production at the zinc-lead mine in 2009
The Red Dog Mine, the largest zinc producer in North America, posted a loss of US$71 million (after depreciation and pricing adjustment) for the fourth quarter, down dramatically from the US$174 million profit (after depreciation and pricing adjustments) that it reported for the final period of 2007.
But mine operator Teck Cominco Ltd. appears to be making the best of a bad situation by planning to ramp up production at the Northwest Alaska lead-zinc mine in 2009 even as it scaled back, closed or sold mines around the planet and reduced its worldwide work force by about 14,000 people.
Lower prices, production wallop mine
Teck blamed the dismal results on significantly lower zinc and lead prices. Zinc sold for an average of US54 cents a pound in the fourth quarter, less than half its average price of US$1.19 a pound during the same three months of 2007. Likewise, average lead prices tumbled 62 percent in the fourth quarter to US$0.56 a pound from US$1.46 a pound a year earlier. As a result, a negative pricing adjustment of $92 million during the fourth quarter, compared with $49 million for the same period in 2007, took a big chunk out of any potential profits at the mine.
Teck also said the mine incurred a 14 percent decrease in zinc production during the fourth quarter of 2008, compared with the same period a year earlier, which also contributed to the loss. The lower production resulted from processing of lower grade ore as well as maintenance and mechanical issues.
Production to climb in 2009
Teck said zinc production at Red Dog should rebound in 2009 by 58,000 metric tons to exceed the 515,000 metric tons produced in 2008. Teck said this anticipated boost in output will more than offset a 50,000-metric-ton zinc output deficit it expects to result from closure of the Lennard Shelf and Pend Oreille mines.
The increased volume of zinc and lead from Red Dog is not anticipated to be available to the market until the latter half of the year. Due to sea ice conditions at Red Dog's Arctic location zinc and lead laden ships are not expected to leave the mine until July; the ships have about five months to transport Red Dog's annual production of concentrates to market before the ice closes in again for winter.
Thus, sales and operating profits at Red Dog follow a seasonal pattern, with higher sales volumes of zinc and most of the lead sales occurring in the final five months of the year following the start of the shipping season in July.
Teck said it had depleted its stockpiles of lead concentrates at the beginning of 2009, and had about 221,000 metric tons of zinc concentrate available for sale. The company anticipates selling 85,000 metric tons of zinc in the first quarter, another 80,000 metric tons of zinc in the second quarter and whatever is left in the third quarter. By then, new production will have begun replenishing Red Dog's stockpiles.
Teck said refined zinc production from its Trail metallurgical complex in British Columbia is expected to remain at 270,000 metric tons in 2009, a similar level to 2008 output.
Aqquluk SEIS pending
Teck is continuing its efforts to get approval of a Supplemental Environmental Impact Statement to mine the Aqqaluk deposit, which lies adjacent to the Main pit currently being mined at Red Dog.
The public comment period for the SEIS ends in February and Teck anticipates a permitting decision by the U.S. Environmental Protection Agency in the third quarter. The company said parties that commented on the SEIS during the public comment period have the right to file an appeal. If the EPA decision is appealed, it could delay the permit being issued.
According to Teck and NANA Regional Native Corp., Teck's partner at Red Dog, mining within the Main Deposit will end between 2010 and 2012. The Aqqaluk deposit is expected to extend the mine life by 20 years.
The Aqqaluk Deposit contains 51.6 million metric tons of reserves, containing 16.7 percent zinc and 4.4 percent lead. To avoid an interruption in operations, mining of the Aqqaluk pit needs to start in 2010.
Over his more than 16 years of covering mining and mineral exploration, Shane has become renowned for his ability to report on the sector in a way that is technically sound enough to inform industry insiders while being easy to understand by a wider audience.
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