In the recent base metals slide, lead has earned the illustrious title “worst performer on the London Metal Exchange.”  Despite this moniker, analysts are confident that the metal will rebound by the end of the year.  This will be a welcome relief, considering the metal has recorded year to date losses of 29.5 percent, enough to have it beat out zinc, to win the title of worst performer on the LME.

At the same time, lead stockpiles have been on the steady increase. Lead stocks registered with the LME ended last week at 193,000 tonnes, up 46,225 tonnes or 31.5 percent on the start of the year, and the highest level seen since late 2002. LME cancelled tonnage currently stands at 19,025 tonnes, equivalent to almost 10 percent of total registered stocks.

According to analysts, lead market fundamentals are robust.  “We have strong demand being driven by China with a strong rise in industrial production and in motor vehicles and e-bike uses” Mr. Christopher Ecclestone of Hallgarten & Company. He believes that COMEX lead could be back above US $1 per lb by the end of the year, supported by opportunistic Chinese stockpiling and a desire by the Chinese to ensure that foreign miners stay in operation to provide them with fairly reliable supplies.

The refined lead market saw a 46,000-tonne surplus in the January-April period, down from a 77,000-tonne surplus in the same period last year, according to the International Lead and Zinc Study Group.

Company News

Teck Resources has decided to begin preparing the Aqqaluk zinc-lead-silver deposit for mining scheduled to begin late this year.  The Red Dog mine has been threatened with a shut-down by the EPA due to its environmental impact. After lengthy discussions with the U.S. Environmental Protection Agency and a comprehensive review of its operating plans for the zinc-lead mine, despite the fact that an unachievable dissolved solids limit is still in place, Teck decided to move ahead with Aqqaluk development in order to avoid shuttering the mine by the end of the year due to dwindling supplies of ore in the Main Pit, the deposit the company has been mining for the past two decades. Teck was never able to meet the 1998 limits set for total dissolved solids due to the calcium needed to precipitate the metals out of the water during the treatment process.

help from Assistant Editor Vivien Diniz

Lead futures declined sharply on Monday, as risk-averse investors abandoned the volatile base metals market and headed for safe haven investments such as gold. Global equity markets declined, and the Euro plummeted to a four year low against the greenback, over resurrecting concerns regarding Europe’s debt crisis.

Lead market fundamentals remain weak, at least over the near term.  Stockpiles are rising and there is no sign of decreasing output, or increasing demand.  Lead for three month delivery on the London Metal Exchange hit $1,981, just slightly above the current cash buyer price $1,951 per tonne. Analysts predict that if lead breaks through the $1,950 support, the metal will fall to $1,800 before tracking a rebound. Current LME stockpiles are around 185,100 tonnes.

The International Lead and Zinc Study Group predicts that the lead market will close the year with less than 100,000 tonnes of surplus. The ILZSG forecasts global refined lead production will rise 7.5 percent this year to touch 9.41 million tonnes. Demand growth will nearly match production growth.  The ILZSG is anticipating a 7.3 percent growth in demand, equivalent to 9.31 million tonnes of supply. The ILZSG’s monthly bulletin showed that the global lead market was in surplus by 10,000 tonnes in the first 2 months of the year. Global refined lead use was 1.377 million tonnes compared with 1.277 million in January to February 2009. World refined lead output was 1.387 million tonnes up from 1.338 million per year earlier.

China, the world’s second largest lead producer, produced 859,000 tonnes of refined lead in the first 3 months of the year up 12.4 percent from the same period last year. Mined lead output rose by 64.9 percent over the same period to 338,000 tonnes.

Company News

Glencore International AG, has begun the process to once again begin mining at Iscaycruz, Peru, at one of the largest zinc and lead mines in the world. The privately held, Swiss-based company suspended its mining projects in Iscaycruz, in March 2009 after a staggering drop in the price of the metal in international markets. According to an executive of the Glencore subsidiary in Peru, reinitiating the mine’s operations will take at least a couple of months, if following the standard process to restart the mines. Glencore’s Iscaycruz produced 175,184 tonnes of zinc and 13,710 tonnes of lead in 2008.

The press release is quoted as saying:

The Elsa Tailings are located approximately 400 meters northwest of the Elsa town site and the former United Keno Hill Mines (“UKHM”) mill. The historical impounded tailings extend over an area of approximately 100 hectares and are contained behind a series of low level dam structures. Historical milling operations at Elsa, which started in the 1930’s and operated almost continuously until 1988, produced a lead concentrate, and periodically a zinc concentrate. The tailings consist of unconsolidated
fine sand to silty grained material, with sieve analyses indicating that the material is all finer than 250 microns with as much as 40 percent being less than 74 microns (200 mesh). The dominant minerals making up the tailings fragments are quartz and siderite (80 percent), with the balance composed of muscovite, other silicate minerals and pyrite.

Click here to access the entire Press

By Leia Michele Toovey- Exclusive to Lead Investing News

Lead and zinc prices have been on board for the base metal rally, zinc on the LME is currently trading for $1,633.50 per tonne, up 30 per cent so far this year.  The metal used to galvanize steel touched a four-year low of $1,038 on Dec.12, after reaching $2,900 earlier last year. LME zinc stocks have declined, falling to about 10 days’ worth of consumption. Much of the LME stock has been going to China as part of the SRB’s restocking program, which in turn have opened a strong arbitrage trade between the higher Shanghai prices than that of the LME, encouraging further imports. LME three-month lead has skyrocketed up to $1,786.00 as of June 11.  Stockpiles are at approximately 81,000 tonnes- roughly three days worth of consumption.  Lead has been moving upward in unison with copper, and the metal has received extra benefit by the normally recession-resistant replacement battery sector, which accounts for about 40 per cent of lead off-take, as an unusually cold winter in the northern hemisphere has forced many car owners into replacing their batteries Company news

Australian miner Oz Minerals Ltd. said Thursday its shareholders have approved a plan to sell most of its assets to a Chinese buyer. More than 90 per cent of Oz Minerals shareholders who cast ballots were in favor of the 1.7 billion Australian dollar ($1.2 billion) sale to China Minmetals Nonferrous Metals Co., Oz Minerals said in a letter to the Australian Securities Exchange. The deal includes mining operations in five areas that produce zinc, copper, lead and silver. Oz Minerals will retain its Prominent Hill gold and copper mine, which Minmetals was barred from purchasing because it lies in a military area. Oz Minerals also has agreed to sell a gold and silver mine in Indonesia to another Chinese buyer, China Sci-Tech Holdings Ltd., for $211 million. 

Japan’s third-largest trading company, Sumitomo metals, will increase production at its zinc mine in Bolivia this year after the project turned profitable in the past quarter on reduced costs and rising metal prices. Output will exceed an original plan to produce 225,000 metric tons of zinc in concentrate after ore processing reached 44,000 tons a day in April, 10 per cent more than planned. Production was 204,000 tons last year and 69,000 tons in the past quarter.  Tokyo-based Sumitomo expects to gain 260 million yen in profits from the mine, located about 500 kilometers (311 miles) south of the Bolivian capital La Paz, in the year to March 31, 2010. The company booked a loss of about 6 billion yen from the project last fiscal year.

Doe Run Peru has been forced to shut all its smelter operations after failing to reach an agreement with banks and mining suppliers, a union official said today. The company, a unit of New York Renco Group Inc., is unable to pay its 3,700 workers and has no cash for metal supplies for its La Oroya zinc and lead smelter, Mining Federation General Secretary Luis Castillo said today. “The smelter is closed,” Castillo said by phone from Lima. “The company and the government don’t want to solve this problem, which will cost workers their jobs.” The smelter was operating at 30 per cent of capacity until last week. Banks froze Doe Run’s accounts on Feb. 24 after metal prices collapsed. Doe Run says it needs more time to settle its debts and invest in an environmental cleanup, which has cost the company $300 million since it took over a smelter in Peru in 1997.

Doe Run Resources Inc.’s Chief Executive Officer Bruce Neil and Doe Run Peru’s president Juan Carlos Huyhua will meet with government and mining company officials in a bid to wrap up a $175 million bailout this week, said Vladimir Huaroc, president of the Junin region, where the smelter is located. Both companies are units of Renco Group Inc. Doe Run’s La Oroya smelter, 140 kilometers (87 miles) east of Lima, last year refined 114,259 metric tons of lead; 43,440 tons of zinc; 53,831 tons of copper and 1.1 million kilograms of silver, according to the Energy & Mines Ministry. Doe Run, which posted $1.45 billion in sales in 2007, buys $1 billion of concentrates a year, according to its website. The shutdown of most of its operations forced about 30 mining companies in the Peruvian central highlands, the country’s main zinc and lead-producing region, to seek other buyers.

As the global economy arguably trots down the path to a recovery, the metals are diverging in prices due to differences in their fundamental dynamics.  Lead was the second-best performer of the LME metals last quarter, coming in a few percentage points behind copper. Lead gained 27 per cent in Q1, just short of copper’s 31.6 per cent.  A large oversupply in the zinc market meant miners were ruthless with output cuts.  Supply-side curtailments even before the worst of the price slump in Q4 left the market relatively well poised in terms of underlying supply-demand balance.

Copper and zinc are the base metals best positioned for a price retreat as demand rebounds, according to a report by Barclays Capital. In the latest edition of their Commodity Refiner report, analysts at the London-based bank write: “We expect copper and zinc prices to be the first and the fastest to rebound once demand improves.” 

Chinese re-stocking has been the major story so far this year. No other country has stepped up to the table to issue comparable commercial restocking plans; if China stops buying, a rapid price retreat will ensue.  On the other hand, if the rest of the world starts buying in concert with China, than we can expect a rapid price escalation. What will the second-quarter bring? With all the volatility in the market place, few commentators are willing to issue long range projections.   

In China, refined lead import volumes rose year on year to 20,944 tonnes, more than seven times the 2,824 tonnes imported in February 2008. The domestic price premium in recent weeks to London Metal Exchange prices reached $446 a tonne.  Zinc imports were up 743 per cent to 77,205 tonnes, driven by a $371/tonne arbitrage gap in favor of imports.

China’s 15 key lead and zinc producers witnessed a 91.05 per cent profit slump in 2008, according to the China Nonferrous Metals Industry Association (CNIA). The association said that the 15 key lead and zinc enterprises’ annual profit was merely 840 million Yuan last year, attributable mainly to the collapsing prices of lead and zinc since the end of 2007. In spite of the gloomy profit results, China launched construction of 480 lead and zinc mining projects, with total investment of 13.17 billion Yuan made in fixed asset investment, up 15.98 per cent on year. According to CNIA, the country is estimated to increase zinc and lead production capacity 400,000-500,000 tonnes last year, adding the total to more than 4.6 million tonnes.

Company news

GoldQuest Mining Corp. (TSX .V: GQC) has acquired all of the outstanding shares of Lundin Mining Exploration S.L. from its parent company Lundin Mining Corporation. Lundin SL holds a 100 per cent interest in the Toral Lead-Zinc-Silver Project located in northwest Spain and a second poly metallic project currently under application.

Through the acquisition of Lundin SL, GoldQuest has acquired a 100 per cent interest in the Toral Project which has a historical resource estimate of 5.4 million tonnes grading 9 per cent Zinc, 6 per cent% Lead and 45 g/t Silver.  These measures are not yet in accordance with National Instrument 43-101. GoldQuest plans to fast-track the Toral Project by initially converting the historic resource calculation to be NI-43-101 compliant  

GoldQuest has acquired access to a large exploration database covering northwest Spain – a region with excellent potential for various styles of both precious and base-metal mineralization. On the recent acquisition, Alistair Waddell, President & CEO of GoldQuest, commented, “The Toral Project is an exciting low-cost acquisition in a mining and investment friendly jurisdiction which has potential to become a significant long-term asset for GoldQuest.  We will also undertake low cost exploration to explore the project for further tonnage. ”

Following years of exploration efforts, China’s largest lead-zinc mine was recently discovered in Lanping Bai and Pumi Autonomous County of Nujiang Lisu Autonomous Prefecture in Yunnan Province.  Its lead and zinc metal reserves are over 15 million tonnes with a potential value expected to surpass 200 billion Yuan. Based on the current extraction speed, it can be mined for 100 years.  The lead-zinc mine is located 18 kilometers northwest of the county seat of Lanping Bai and Pumi Autonomous County, with a confirmed reserve of 15.4761 million tonnes of lead and zinc metal, and a combined grade of lead and zinc reaching 9.44 per cent.  Lead-zinc mines mainly adopt surface mining techniques therefore the extraction cost is low. Currently in Lanping, the surface mining capacity of oxidized ore is 1,500 to 2,000 tonnes a day, and that of sulfide ore is around 2,000 tonnes a day.

By Leia Michele Toovey- Exclusive to Lead Investing News

The Fed’s announcement to purchase treasuries sent lead and zinc on their largest ascent in two months. Fed officials voted on March 18 to buy Treasury and mortgage bonds in an effort to revive America’s economy, lifting stocks as well as commodities. Copper, zinc and aluminum all rose more than 6 per cent in London.

“The Fed’s surprise decision to announce quantitative easing, the subsequent dramatic weakening of the dollar and the move up in equity markets all point to a recovery in risk appetite,” Barclays Capital announced in a report. “The inflationary effect of the Fed’s decision will support commodities,” the bank added

The fed’s announcement was negative for the greenback, sending the US dollar Index on track for its worst week since September 1985. The dollar fell an additional 0.4 per cent, and has dropped every day since March 9, sliding a cumulative 6.4 per cent. Declines by the greenback reduce the cost of dollar- denominated commodities for holders of other currencies.

Metals are unlikely to sustain their gains, according to Barclays, because “an awful lot of this rally has been driven by factors including consumer restocking, Chinese buying and hedge fund short-covering.” Zinc added 0.9 per cent to $1,275 a tonne, paring a gain as far as $1,308, the highest intraday price since Jan 14. Lead fell 0.5 per cent to $1,318 a tonne  

The consensus forecast is that short-term zinc prices will remain weak. Continued production is creating a surplus of 210,000 metric tonnes of metal overhanging the market. Analysts at Abare (the Australian Bureau of Agricultural and Resource Economics) also suggest that zinc demand will recover in 2010 in line with the global economy and come close to metal supply. Importantly, they say “growth in supply is expected to be relatively weak because of mine closures, project delays and project abandonment’s in late 2008 and 2009.”  They forecast that the 2010 zinc price could rise to  $0.70 per lb. 

The lead market is in the same situation, with production exceeding demand. Lead prices have averaged  $0.52 per lb so far this quarter, as compared with $0.56 in the fourth quarter of 2008, according to International Lead and Zinc Study Group data. Despite refined lead metal output falling in Europe, Canada, Japan and the U.S., global production ramped up by 6.1 per cent as a consequence of higher Chinese production. In a separate report, the World Bureau of Metal Statistics says lead stockpiles in London Metal Exchange warehouses increased again in January. The WBMS report says “planned output reductions haven’t yet affected world output” of smelted metal.

China’s Shaanxi province is stepping in to help out four local smelters by buying 77,000 tonnes of refined lead and zinc. Shaanxi Nonferrous Metals Company, owned by the Shaanxi government, has agreed to pay 11,200 Yuan per tonne to buy refined zinc and 12,900 Yuan a tonne for refined lead, higher than 10,750 Yuan and 12,600 Yuan, respectively, traded in Shanghai last Thursday. Purchases will be from smelters suffering from weak demand. The State Reserves Bureau, Beijing’s commodity buyer, bought 159,000 tonnes of zinc from Chinese smelters this year.

Company News

According to  media reports, Peter R. Jones, is vying  to get his old job as CEO of Hudbay Minerals back; contingent on top shareholder SRM Global Master Fund succeeding in replacing the company’s board.  Mr. Jones was replaced by Allen Palmiere in January 2008. Mr. Palmiere stepped down after a botched attempt to take over Canadian rival Lundin Mining. The deal fell apart after the Ontario Securities Commission decided HudBay would need shareholder approval to issue the stock it was using to buy Lundin. The bid was against stockholder’ wishes, and led to SRM claiming their preference in getting the old leader back. “The stockholders have lost faith and there’s been a revolt,” Mr. Jones said. “They want the board 100 percent replaced.”

Acadian Mining Corporation (TSX: ADA) announced  that it has reached agreement with Golden River Resources Corporation to complete a private placement of up to 338,111,334 common shares for gross proceeds to Acadian of up to Cdn $10 million. The Offering will likely close in two or more tranches. Acadian will seek approval from its shareholders at its next annual meeting.  The proceeds of the Offering are to be used by Acadian for operational overheads, the advancement of Acadian’s gold properties and the discharge of the creditor’s of Acadian’s wholly-owned subsidiary, ScoZinc Limited, all in accordance with a plan and budget to be approved by Golden River.

By Leia Michele Toovey- Exclusive to Lead Investing News

Chinese lead and zinc refineries are interested in integration and expansion, but not mergers or acquisitions.  The Chinese government showed its support by providing a plan to encourage the non-ferrous industries to restructure and integrate.  The government has also mentioned that it wants to support the industry’s larger companies, even if it is at the expense of smaller ones.  Steps are being taken to wash out lead and zinc enterprises with less than 400,000 tonnes of annual production.

The good news is that these small companies may not be forced into bankruptcy.  For them, being acquired by one of the main producers is likely. The fierce competition between large smelters is pushing rival enterprises to move ahead in planning to expand production; despite the market slow down.  Each of the big players wants to rise out of the economic crisis with their fair share of the pie.

The International Zinc Association executive director Stephen Wilkinson is confident in the zinc market’s potential.  Mr. Wilkinson believes that emerging markets will experience a great deal of growth in the future; skyrocketing demand for the metal.  Asian markets are key;  zinc consumption by China has  increased to 30 per cent of global supply, while other Asian countries consumed about 19 per cent of the world’s zinc .In total, emerging markets now consume about 44 per cent of the 11-million tonnes a year global supply, said Wilkinson. He added that about 50 per cent of zinc was now being used to protect steel from rust and corrosion, leading to higher growth in the galvanizing industry.

Growth in the galvanizing industry alone has the potential for China to consume an additional 300 000-tonnes per year of zinc, said Wilkinson, adding that the International Zinc Association’s goal was to ensure that the country increased its domestic consumption. The Chinese stimulus plan has the potential to increase the demand for galvanized steel, as galvanized steel is a key component of infrastructure.  Other key areas where Mr. Wilkinson sees  great potential include the Middle East, where corrosion is an issue; in Russia and Brazil where sporting venue construction and upgrades for FIFA world cup and the 2014 Olympics may use galvanized steel.  Furthermore, there is an opportunity to used galvanized steel in housing projects in earthquake prone areas.

The world zinc market showed a 134,000 metric tonne surplus at the end of November 2008, compared to an 11,000 metric tonne deficit in the same 11 month period of 2007.  Refined lead was in surplus of 8,000 metric tonnes, compared to a 72,000 metric tonne deficit in the same 2007 period.

Global production of refined zinc metal rose by 3.8 per cent to 10.76 million metric tonnes in the 11-month period from 10.36 million in January-November 2007.  The world demand for refined zinc increased by 2.4 per cent in 2007; fuelled increasing demand from China.  Global production of refined lead metal rose by 7.6 per cent to 7.96 million metric tonnes in the 11-month period from 7.39 million metric tonnes in January-November 2007. World demand for refined lead metal increased by 6.4 per cent to 7.95 million metric tonnes from 7.47 million metric tonnes as increases in refined lead use in the U.S. and China offset falling demand in Europe, Japan and parts of Southeast Asia.

In December, offshore sales of zinc scrap rebounded from a five year low. An increase in Chinese buying caused exports of the galvanizing scrap metal to climb 45.8 per cent to 2,610 short tonnes from a five-year low of 1,790 tonnes the previous month.  The Chinese returned in December, but were still buying at greatly reduced levels. Purchases totaled 2,104 tonnes, more than double the 873 tonnes imported in November, but well below the monthly average of 7,630 tonnes in 2007 and 8,780 tonens in the first 10 months of last year.

Lead and zinc prices both started 2009 strongly, but as the year has progressed lead’s better near term fundamentals have led it to continue as the more robust of the two metals. Zinc stocks on the London Metal Exchange have consistently risen; through the month of January alone stocks climbed nearly 35 per cent to end at 345,275 tonnes.  The world production of zinc was about 8.5 million tonnes in 2008. So far, production cuts have trimmed about 2.58 million tonnes; despite lower input costs about 25 per cent of zinc production is loss making.

Zinc’s future in the short term appears to be dim as the key end use markets, the construction and automobile sectors are still deteriorating. Global economic conditions suggest that there will be no near-term improvement to this situation.  Galvanized steel shipments from the US and Japan have dived since Q3 2008, with stainless steel output operating at an estimated 50 per cent of capacity.  The automobile sector is also witnessing record losses; GM just reported that in February auto sales plunged 53.1 per cent.  

Lead, on the other hand, is being supported by the high seasonal demand for lead replacement batteries. North American replacement battery shipments rose strongly in December, to almost nine million units, and up slightly in 2008 year-on-year. Lead’s short-term prospects should see it remain relatively well supported in the current price. The replacement battery sector is seasonal and generally robust during the northern hemisphere winter, so we expect support throughout the first quarter.

India’s Hindustan Zinc Ltd., a unit of London-listed Vedanta Resources has raised its zinc price by INR 3,400 a metric tonne to INR 71,300 per tonne effective immediately, the company said Thursday. The company kept its lead price unchanged at INR 68,900 per tonne. It didn’t give any reason for the raising zinc prices.

Company news

South Africa’s JSE-listed Exxaro believes the zinc market will show signs of improvement towards the end of 2010 or early 2011, however, the company forecasts that the zinc business will be depressed for the greater part of 2009. Analysts and fund managers have outspokenly questioned the strategic fit of the zinc business within Exxaro. JP Morgan analyst Steve Shepherd describes Exxaro as a nascent coal powerhouse in which the hobbling zinc business, Exxaro, inherited from the old State-owned steelmaking enterprise, Iscor, seems misplaced. Nkosi, however, believes that when the zinc market turns around, Exxaro will reap the benefits of being South Africa’s only zinc refiner.  

Vena Resources Inc. is pleased to announce that after an extensive 18 month effort the Government of Peru has approved an environmental impact assessment (EIA) for the Azulcocha polymetallic mine. Juan Vegarra, Chairman and CEO of Vena Resources commented: “This is a tremendously important milestone for the company. Vena has invested close to US$20 million in the development of the Azulcocha mine and has delineated a NI 43-101 compliant underground resource of close to 200 million pounds of Zinc thus far.”  A prefeasibility study was completed in June 2005 on the tailings with robust economics resulting in an NPV of US$37.2 million and an IRR of 157 per cent using US$0.50 per pound Zn and US$0.60 per pound Mn, without including possible gold credits With the approval of the EIA, Vena can now continue to explore from underground and surface locations for additional tonnage.

The Azulcocha deposit is not well defined yet, it is still open in multiple directions, for additional exploration to increase and define resources.   Azulcocha has historically been known as a zinc mine, however several drill holes discovered gold, lead and manganese zones. Vena plans to investigate these new targets as well as obtain final permits for full production at Azulcocha.

Positive sentiment that spread through the markets during the week edged up most of the base metals. The U.K. benchmark FTSE 100 Index jumped 0.9 per cent and Japan’s Nikkei 225 Stock Average closed 2.7 per cent higher in Tokyo.  Pessimistic data still came out of the America; the country will run a record deficit of $1.75 trillion, and fourth quarter ‘08 GDP took a bigger than anticipated hit.

Base metals still managed to speak by with some gains. Lead was up  $55, to $1,050 a tonne on the LME. Zinc climbed the most in two weeks after China’s stockpiling agency bought metal from domestic smelters, reducing supply. The State Reserve Bureau bought 100,000 metric tons, taking total purchases for the year to 159,000 tonnes.  Rumour has is that over the course of 2009, the SRB’s zinc purchases will total 300,000 tonnes. The SRB is taking advantage of relatively low prices to purchase the metal they will need over the next few years, while at the same time trying to help local smelters and miners survive.

European zinc producers are preparing to make further production cuts to combat a growing supply glut and weak prices. Output has already been slashed by 10 per cent, or 1 million tonnes worldwide, with more than a quarter coming from European producers. The production cuts to date are causing sharp drops in spot treatment and refining charges in Asia and are also responsible for decline in this year’s benchmark terms, which are now being settled at much more favourable terms for miners. However, in the grand scheme the cuts have done little to stabilize metal prices. Spot treatment charges for zinc concentrates shipped to China for smelting have plummeted to $110-$120 tonne from $190 a tonne at the start of 2009. Further production cuts are likely to occur among the producers in Europe where a strong Euro was providing little cushion for suppliers, given the hefty declines in U.S. dollar zinc prices.  

Despite softer metal’s prices, and output cuts in most countries in the world, Peru increased production of many of its metal exports. The global economic crisis has slammed prices for most of Peru’s metal exports, which account for more than half of total exports and are the government’s largest source of revenue .Peru is the world’s top producer of silver, No. 2 in copper and zinc and often ranks fifth in gold. Comparing January 2009 to January 2008, copper exports are up 25.89 per cent, zinc is up 5.22 per cent, and lead is down 4.34 per cent.

Company News

Peruvian miner Buenaventura posted a fourth-quarter net loss on Thursday of $6.1 million, versus a profit of $120.1 million in the same period a year ago. The company said the loss was tied to lower silver and base metal prices, which have collapsed because of the global economic crisis. Volumes of silver, lead and zinc sold in the fourth quarter were under volumes in the same period a year ago, while gold volumes and prices remained relatively stable. Total revenues fell 31 per cent to $165.2 million from $238.2 million in the fourth quarter of 2007. For the year, the company said net profit fell 44 per cent to $153.3 million in 2008 from $274.8 million in 2007.

Nyrstar, the world’s largest zinc producer, posted a wider-than-expected full-year loss after a drop in smelting fees and a 575 million-Euro ($735 million) asset write-down. The net loss was 595 million euros, the London-based company said in a statement. Sales dropped 37 per cent to 2.4 billion euros.  In the announcement, Nyrstar said  it will cut 190,000 tonnes of zinc output in the first half, following a 35,000-ton reduction in the fourth quarter. “The effects of the sudden and severe downturn in the global economy in the second half of 2008 are expected to persist throughout the year, which will make for a very challenging 2009,” Nyrstar said in the statement. The company will seek shareholder approval for a possible capital decrease so that it can pay a dividend for this year.

Arehada Mining Limited (TSX: AHD) announced on Friday  that its wholly owned Chinese operating subsidiary, Arehada Mining Corporation  has obtained further extension for its bank loans and has re-assembled its management team on site to prepare for resumption of mining operations.   Arehada China has two short term bank loans with the Agricultural Bank of Chin, after discussions with Arehada China, the Agricultural Bank agreed to extend its loans. The Agricultural Bank has agreed that when Arehada China re-starts its mining operation and generates cash flow from operation, Arehada China would start to repay the interest on the loans, and when Arehada China has generated surplus cash flow after covering its operational and day-to-day business needs, the Company would start to repay the principal.  After a few months of care and maintenance, Arehada China is now gearing up to re-start its mining operations, thanks to the recent increase in zinc and lead prices. Arehada Mining Limited is engaged in the exploration, development, extraction and production of zinc, lead and silver in Dongwuzhumuqinqi, located in Inner Mongolia, China. Arehada produces zinc and lead concentrates, which are then sold to smelters in China.

In their bi-weekly price review, Hindustan Zinc Limited announced that effective Saturday, it had cut its prices of zinc, but held lead rates steady. 

Zinc prices will drop by Rs 800 per tonne to Rs 68,900; whereas lead maintained the Rs 70,200 per tonne level. Lead prices have remained strong this year; they have risen more than the other base metals in terms of percentage, whereas their decline has not been as steep.  The cold weather over the past week in western countries helped increase demand as people replaced batteries in their due to the freezing conditions.

Company news

Australian Zinc and copper producer Kagara Ltd, will sell as much as a 10.4 per cent stake in the company to a customer to bolster its balance sheets. The customer has been given the option to purchase as many as 25 million shares; this will raise about US $6.5 million. Further details of the offering, including the customer’s identity have yet to be released. A further announcement is expected on February 3.  Kagara, which was halted from trade Friday morning ahead of the sale, closed at 42 cents yesterday on the Australian stock exchange. The shares plunged 93 per cent last year. Kagara can sell as many as 25 million shares without seeking shareholder approval under Australian corporate regulations.

Oz Minerals Ltd, the world’s No. 2 zinc miner who is struggling to refinance debt, has been dealt another blow. The company will take a US $65.5 million charge for the second half due to price adjustments caused by falling metals prices. It said zinc output from its flagship Century zinc mine in eastern Australia, where production costs are higher than selling prices, slipped 3 per cent to 125,333 tonnes in the fourth quarter versus the previous quarter. Oz Minerals has been depleting its cash reserves rapidly as its operations have been squeezed by deterioration in commodities markets.  The company also said on Friday in a quarterly production update that it was making good progress in efforts to pay off debt, but did not elaborate. Oz Minerals, on Friday stated that zinc output at its Golden Grove operation, in Western Australia, had reached record quarterly levels for the three months ended December. Zinc production for the quarter jumped to 59825 tonnes, which was attributed to high zinc grades, recorded at 17.8 per cent compared with the 2008 average of 14.4 per cent. Oz Minerals stated that as a result of the good zinc production rates at Golden Grove during the last  quarter, the company pulled forward 7 500 tonnes  of previously forecast 2009 zinc production into the December quarter.

Xstrata ramped up its zinc production by 17 per cent to a total of 861,032 million tonnes in 2008. The significant increase in zinc production is a result of higher output from its Mount Isa and McArthur River mines in Australia and the startup of production at the new Perseverance mine in Canada in July 2008. Mount Isa zinc in concentrate output climbed to 283,063 tonnes in 2008 from 226,529 tonnes in 2007. McArthur River zinc in concentrate production climbed to 142,460 tonnes in 2008 from 137,737 tonnes in 2007, despite the expansion project at the open pit lead and zinc mine grinding to a halt in December 208 after the Australian federal court ruled that Xstrata had failed to go through the correct process before embarking upon the expansion. The project was given conditional approval to go ahead by the Australian government on January 22, 2009. Higher production from the Australian operations was partially offset by the closure in July 2008 of the JV Lennard Shelf operation in Western Australia, which had become uneconomic due to declining zinc and lead prices and increased energy and labor costs.