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HomeAfricaNamibian zinc miners will not cut production despite economic woes

Namibian zinc miners will not cut production despite economic woes

Namibian zinc and lead miners said Wednesday that the fall in the prices of zinc on the international market amid a slowdown in globa l economic growth would seriously hurt their revenues but assured the market they

would continue digging.

Major international mining companies have announced cutbacks in production and r etrenchments as they move to slash overheads amid a sharp fall in the prices of b ase metals and other commodities.

A financial crisis triggered in the US and European economies has led to global economic recession amid a slowdown in industrial output and consequently sharp f a lls in prices of most commodities.

Mining executives Wednesday said that if the price of commodities remained subdu ed, they might be forced to take a hard look at their operations and slash overh e ads in a bid to balance their books.

Whilst it is not yet ground zero for economies such as Namibia’s, the reckoning is likely to come in 2009.

“All operations are affected by the reductions in the price of the metal (zinc) and it’s going to affect us in terms of revenue but there won’t be any cutbacks o r lay-offs, not under the current conditions,” said Dave Bentley, Skorpion Zinc a nd Refinery General Manager.

The price of zinc has fallen by 59 per cent to trade around US$ 1,200 a tonne on the London Metals Exchange (LME). Zinc mines are currently said to have a cost o f production above the prevailing market price.

Bentley, who runs Namibia’s largest producer of special high grade zinc (SPH), S korpion Zinc mine, said that the company could still sell its product even under

the prevailing market conditions.

Bentley said that Skorpion had contracts to sell its produce though the price if determined by the LME. He ruled out any chances of cutting back on production.

“We have contracts to sell all our produce,” Bentley said.

Executives at Rosh Pinah Zinc, Namibia’s second largest zinc and lead miner, adm itted that mining companies were going through tough times.

Trevor Arran, GM corporate affairs of the South Africa-based resources group Exx aro, parent company to Rosh Pinah, said that there were no plans to reduce outpu t at the Namibian operation.

“Rosh Pinah is very important for us and we are going to keep it going as much a s we can. We are investing significant amounts of money into plant and equipment

at the moment,” Arran said.

“The (fall in) price will obviously affect the overall profitability of the enti re operation, it will have an effect on the business but management and our empl o yees are aware of the tough times ahead,” Arran said.

Rosh Pinah zinc, which mid this year inked a mega empowerment deal with Namibian investors, produced 101,000 tonnes of zinc metal in 2007.

Arran said they would continue to dig ‘even at these low prices’ adding that dem and was still strong enough.

Rosh Pinah has also hedged its future production at a fixed price. Hedging in si mple terms means forward selling of future produce. It is usually done to guard a gainst abnormal price fluctuations.

“”We are not comfortable with the (current) price—if it remains depressed, it wi ll put us under a lot of pressure,” Arran said.

“The hedging does provide us with a little bit of comfort but if the price remai ns subdued, we might be forced to take a hard look not only at Rosh Pinah but at

all our operations,” Arran said.

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