Severe winter weather slows Red Dog output

Teck Resources Ltd. March 24 reported that mill throughput at the Red Dog zinc mine in Northwest Alaska was impacted by extreme winter weather that closed the Delong Mountain Transportation System road connecting the mine to the concentrate storage facility at the port for more than two weeks. This inability to haul concentrates forced numerous slowdowns and shutdowns of milling operations due to limited storage capacity at the mine site.

"Red Dog production was negatively affected by severe winter weather in Q1 (first quarter) – plans are in place to recover the shortfall in the remainder of the year," said Teck President and CEO Don Lindsay

Despite the weather difficulties, Red Dog produced roughly 121,500 metric tons (276.9 million pounds) of zinc during the first quarter, which is about 14 percent lower than the previous quarter but similar to the same period last year.

Teck said the lower mill throughput was offset by higher grades and recoveries.

The 19,700 metric tons (43.4 million lb) of lead produced at Red Dog during the first quarter is 9,200 metric tons (20.3 million lb) less than a year ago due to lower grades and recoveries.

Though Red Dog production was down, zinc prices remain strong, which is bolstering the profits of Teck's zinc unit.

Gross profit from Teck's zinc business unit was C$251 million, a 57 percent increase compared to the $164 million during the first three months of 2017.

London Metal Exchange zinc prices averaged US$1.55/lb in the first quarter of 2018, 5.7 percent higher than the previous quarter and up 23 percent more than the same quarter last year.

Zinc prices hit US$1.64/lb in February, the highest price for the metal since July 2007.

Wood Mackenzie is forecasting an increase in global zinc production to 14.1 million metric tons in 2018. This 3.8 percent rise in production, however will not catch up with demand, which is expected to be 14.6 million metric tons of the galvanizing metal.

This continued supply deficit is expected to keep zinc prices strong this year.

Teck said the increased profits from higher zinc prices is partially offset by the royalty it pays to NANA Regional Corp. on the net proceeds of production at Red Dog, which increased to 35 percent during the fourth quarter.

In accordance with the operating agreement between Teck and NANA, this royalty increases by 5 percent every five years to a maximum of 50 percent. The next royalty increase is slated for Oct. 1, 2022.

Teck anticipates Red Dog will produce 525,000 to 545,000 metric tons (roughly 1.16 billion to 1.2 billion lb) of zinc and 95,000 to 100,000 metric tons (roughly 209 million to 220 million lb) of lead during 2018.

–SHANE LASLEY