A surge in zinc de­mand over the last 12 months has MMG well placed as its $1.4 bil­lion Du­gald River mine nears first ship­ment in De­cem­ber, sev­eral months ahead of sched­ule.

The Australian Mining Review - - FRONT PAGE - El­iz­a­beth Fabri

Zinc re­mains in bullish ter­ri­tory as sup­ply en­ters crit­i­cally low lev­els and de­mand con­tin­ues its steady march up­wards – mak­ing it a great time for MMG’s $1.4 bil­lion, 170,000ozpa Du­gald River mine to en­ter pro­duc­tion.

“With ev­ery op­er­a­tion that I have come across there is al­ways an in­ten­tion by man­age­ment to try and see if you can push it above name­plate – es­pe­cially while prices are good.”

SIT­TING on one of the world’s largest un­de­vel­oped zinc- lead- sil­ver de­posits, Du­gald River will come on­line at an op­por­tune time for MMG as it works to­wards its goal of be­com­ing a top mid- tier min­ing com­pany by 2020.

It will be a game changer; once Du­gald River en­ters pro­duc­tion MMG will add a fur­ther 170,000 tonnes of zinc ( at peak) to its group pro­duc­tion a year.

This rep­re­sents a size­able in­crease on cur­rent group zinc pro­duc­tion, which was ex­pected to reach be­tween 65,000t and 72,000t in 2017.

The im­prov­ing zinc mar­ket will also work to the com­pany’s favour.

It has al­ready been a wa­ter­shed year for the base metal; af­ter steadily climb­ing over the course of the year fol­low­ing a se­quence of mine clo­sures, in Au­gust zinc surged above $ US3000 a tonne for the first time in al­most a decade.

Higher prices were ex­pected to con­tinue out to 2019 as the global mar­ket rides through a deficit.

“Just look­ing at the fun­da­men­tals sup­ply and de­mand wise there’s cer­tainly the ex­pec­ta­tion that the cur­rent price sit­u­a­tion won’t change overnight,” Du­gald River gen­eral man­ager of project de­liv­ery Pierre Malan told The Aus­tralian Min­ing Re­view.

“It will take some time for what is cur­rently about eight days of zinc stock in the in­ter­na­tional mar­ket ( eight days of con­sump­tion).

“That’s a very small stock po­si­tion, and for that stock po­si­tion to change, there will need to be some rad­i­cal changes by the sup­ply or de­mand side, and as we know on the sup­ply side changes to in­crease takes a bit of time.”

Du­gald River is ex­pected to be one of the world top 10 pro­duc­ing zinc mines. The com­pany’s op­ti­mised mine plan sup­ports a 1.7mtpa zinc op­er­a­tion plus by- prod­ucts in­clud­ing 18,000 tonnes of lead and 981,000 ounces of sil­ver in con­cen­trate per an­num.

The project has been on the draw­ing board for some time, but wasn’t pro­gressed un­til July 2015 when an up­dated de­vel­op­ment plan was ap­proved.

Not wast­ing any time, MMG be­gan con­struc­tion a month later, and has since been push­ing to­wards its goal of first pro­duc­tion in 2018.

How­ever a few months ago, the com­pany an­nounced pro­duc­tion was in fact able to be­gin ear­lier than ex­pected, with first ship­ments in late 2017.

When asked how the com­pany was able to achieve this mile­stone ahead of time, Mr Malan at­trib­uted the progress to “good work from its con­tract part­ners” and the project man­age­ment team on site.

“Our de­vel­op­ment pro­gram for this project was quite an ag­gres­sive one,” Mr Malan said.

“We haven’t had any ma­jor crit­i­cal path de­lays and as a re­sult we haven’t had to go sig­nif­i­cantly into any sched­ule con­tin­gency.

“That’s the rea­son we’ve been able to bring it for­ward into 2017.

“We are hope­fully look­ing at De­cem­ber (be­fore Christ­mas) get­ting our first ship­ment of con­cen­trate out of the Port of Townsville.”

Com­mis­sion­ing be­gins

At the end of Au­gust the project, in­clud­ing the un­der­ground mine and sur­face in­fra­struc­ture, was more than 80 per cent com­plete.

“We’re get­ting to a stage where we are fo­cus­ing on com­mis­sion­ing and con­struc­tion ver­i­fi­ca­tion through­out the sur­face plant while pro­duc­ing ore from un­der­ground and stock­pil­ing that on the sur­face,” Mr Malan said.

“We have al­ready man­aged to [stock­pile] about 330,000 tonnes of ore on the sur­face in readi­ness for start-up and ramp up.

“We’ll con­tinue with that over the next two to three months, and add about an­other 100,000t to the stock­pile prior to start up.”

While it was too early to de­ter­mine ore qual­ity, so far there had been “no sur­prises” from the three small stopes it had mined, Mr Malan said.

On the sur­face, MMG had com­pleted about 97 per cent of con­struc­tion works in­clud­ing the tail­ings stor­age fa­cil­ity, re­claim and util­ity ar­eas, and was get­ting close to ore com­mis­sion­ing its grind­ing cir­cuit and start­ing wet com­mis­sion­ing of its flota­tion plant.

“The in­ten­tion will be to progress through wet com­mis­sion­ing into ore com­mis­sion­ing and hope­fully pro­duce the first con­cen­trate some­where late Oc­to­ber,” Mr Malan said.

The ex­pected re­main­ing cap­i­tal cost to project com­ple­tion was still con­sis­tent with pre­vi­ous guid­ance of be­tween $US600 mil­lion and $US620 mil­lion plus in­ter­est costs.

Re­cruit­ment was also in full swing, with all main­tain­ers and plant op­er­a­tors now on board.

“They’ve all started,” Mr Malan said. “We have started to in­tro­duce at a lim­ited scale, a night shift on the sur­face op­er­a­tions from the end of Au­gust, and that will form part of the wet com­mis­sion­ing and ore com­mis­sion­ing of the plant over the next two months.”

Once pro­duc­tion be­gins, the com­pany ex­pects to em­ploy a to­tal of 350 em­ploy­ees; slightly un­der its ini­tial es­ti­mate of 400.

Many of these em­ploy­ees will come from the nearby Clon­curry and Mt Isa re­gions, help­ing bring in eco­nomic ben­e­fits to the lo­cal com­mu­ni­ties.

“We don’t have any quo­tas; we have a process where we are very trans­par­ent and open about that we pre­fer to em­ploy lo­cally,” Mr Malan said.

“Only once we have ex­hausted all op­por­tu­ni­ties to em­ploy peo­ple out of those two lo­ca­tions, or to get peo­ple who are in­ter­ested to re­lo­cate to those cen­tres, do we go out to Townsville and fill the rest of va­can­cies with suit­ably qual­i­fied peo­ple.”

The next phase

While com­mis­sion­ing and train­ing staff was the pri­mary tasks for the rest of 2017, the Du­gald River team will soon shift its fo­cus to ramp-up.

For the first six to nine months of next year, all ef­forts will be placed on safely in­creas­ing pro­duc­tion from the mine and pro­cess­ing plant in or­der to hit name­plate ca­pac­ity.

“We will be hop­ing and plan­ning to achieve name­plate ca­pac­ity to­wards the end of 2018 at which point we can see what op­por­tu­ni­ties there might be to fur­ther de­bot­tle­neck the min­ing op­er­a­tion and pro­cess­ing plant [ to] boost the vol­ume above name­plate,” Mr Malan said.

“With ev­ery op­er­a­tion that I have come across there is al­ways an in­ten­tion by man­age­ment to try and push it above name­plate, es­pe­cially while prices are good; the re­turn on that in­cre­men­tal vol­ume is of­ten very good.”

Mr Malan said he had no “crys­tal ball” for zinc’s tra­jec­tory, but he was con­fi­dent prices would be sus­tained, es­pe­cially within the first few years of the project’s op­er­at­ing life.

“At the cur­rent price of around $ US1.40 per pound, that’s cer­tainly a good price for us,” he said.

“We will be hop­ing to make some rea­son­able mar­gins when we come into pro­duc­tion.

“Com­ing into pro­duc­tion even ev­ery week ear­lier than what you oth­er­wise would will be ben­e­fi­cial for the com­pany.”

Look­ing ahead, Mr Malan didn’t rule out an ex­ten­sion to the cur­rent 25 year mine life.

“We’ve got plenty of po­ten­tial within the ore­body, so what’s cur­rently a 25 year mine life could po­ten­tially ex­tend up to 40 years and be­yond,” he said.

“How­ever, there is a lot of work that will have to hap­pen in later years to prop­erly de­lin­eate that po­ten­tial re­source ly­ing un­der­neath the cur­rent ore­body; [ we need to] work through de­tails in terms of min­ing method and costs and see what needs to be done to bring that into the op­er­a­tion.”

“Our de­vel­op­ment pro­gram for this project was quite an ag­gres­sive one.”

All images: MMG.

The Du­gald River tail­ings stor­age fa­cil­ity dam wall.

The project will be­gin first ship­ment in De­cem­ber 2017.

Im­age: MMG.

The Du­gald River 1.7 mil­lion tonne per an­num pro­cess­ing plant.

The ex­panded per­ma­nent vil­lage.

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