Glencore Cutbacks Shift to Zinc in Metal Rout -- Update

By Rhiannon Hoyle 

SYDNEY-- Glencore PLC stepped up production cutbacks, this time slashing zinc output including the suspension of two mines after a collapse in prices for the industrial metal.

The Switzerland-headquartered commodities group said it would cut annual zinc production by roughly a third, or 500,000 metric tons, including closing its Lady Loretta mine in Australia and Iscaycruz mine in Peru. The changes will also reduce its annual output of lead, also produced at those mines, by about 100,000 tons, it said.

They are the latest in a string of mine closures for Glencore, from coal to platinum deposits, as sliding commodity prices make it harder for the resources giant to turn a profit. It comes at a time when the company has been under intense scrutiny by investors, concerned that falling raw-material prices could strain the mining and commodity-trading group's finances.

Zinc is primarily used for steel coatings, but goes into many products including car tires and sunscreen, and has few substitutes.

The company, which has zinc operations across Australia, Kazakhstan and South America, said it would be better off holding on to the resource until market prices improve. In addition to closing the two mines, its operations at George Fisher and McArthur River in Australia and various sites in Kazakhstan will pare production, it said.

It forecast fourth-quarter zinc output to fall by about 100,000 tons.

"Glencore believes that current prices do not correctly value the scarcity of our zinc resources," it said in a statement on Friday. "Our finite resources are valuable and reducing production, in response to current prices, preserves value and optionality for all stakeholders."

The company said it was upbeat on the longer-run prospects for zinc and lead prices.

Earlier this week, Glencore said it was closing its Eland platinum mine in South Africa, citing falling platinum prices and rising energy and labor costs there.

Last month, it said it would suspend operations at two copper mines, Katanga and Mopani, in the Democratic Republic of the Congo and Zambia, respectively, until it completes cost-reduction projects, which are due to end in the first half of 2017.

It has also closed coal mines in Australia in recent years amid a protracted slump in the market for that commodity, and has been trimming output at other mines this year as the market remains oversupplied.

Write to Rhiannon Hoyle at [e-mail]

(END) Dow Jones Newswires

October 08, 2015 21:05 ET (01:05 GMT)

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