UPDATE 2-Metals producers bear main brunt of Cyclone Yasi

Thu Feb 3, 2011 2:46am EST

Related Topics

* Xstrata evacuates Mt Isa copper unit as Cyclone Yasi heads west

* Century zinc mine also shut

* Xstrata copper, QNI nickel refineries remain shut after cyclone passes coast

* Weather still too risky to measure impact

* Coal miners less affected than metals producers (Adds details of Mt Isa, Century mine suspensions coal mine restarts, cyclone forecast quotes)

By James Regan

SYDNEY, Feb 3 (Reuters) - Copper and zinc producers on Thursday were bearing the main brunt of Cyclone Yasi as more operations across northeastern Australia were forced to close even as the storm lost steam.

Coal miners, on the other hand, were left little-scathed by the powerful storm that swept across the Coral Sea and smacked into the Australian coast late on Wednesday.

Still, meteorologists expect the storm to pack minimal cyclone strength as far inland as the Mt Isa mining region, 900 km from the coast. Xstrata Plc has started evacuating staff from its Mt Isa copper mining and smelting unit as Yasi continues its westward path inland, the company said.

Also, Xstrata's Ernest Henry Mine at Cloncurry even further inland has been reduced to a skeleton crew in anticipation of high winds generated by the storm, the company also said.

The Mt Isa operations yield around 160,000 tonnes of copper in concentrate and 214,000 tonnes of copper anode a year.

The Ernest Henry unit produces 90,000 tonnes of copper in concentrate a year, which is either transported to Mount Isa for smelting or sent to the port at Townsville for export.

Three-hundred kilometers north of Mt Isa, production from Century zinc mine was also suspended as Yasi closed in, according to mine owner MMG, a unit of Minmetals of China .

The Century mine in 2011 is forecast to yield just over 500,000 tonnes of zinc in concentrate, making it the world's second largest zinc mine behind Teck Resources' Red Dog mine in Alaska.

"With the combination of the weather and the availability of supplies, we wouldn't expect to start re-mobilising the site until Sunday (Feb. 6)," MMG spokesman Bruce Loveday said.

INTERRUPTED PRODUCTION

"This might amount to a week of interrupted production, though over the course of the year that would just disappear into the mine's normal volatility," Loveday said.

The global zinc market was in surplus by 223,000 tonnes in the first 11 months of 2010, according to the International Lead and Zinc Study Group (ILZSG)

But zinc futures are still up 15 percent since early December to $2,490 a tonne ($1.13 a pound) on expectations steelmakers will need more metal for galvanising steel products such as rebar used in construction.

The 30,000-tonnes-per-year QNI nickel refinery remained shut after the brunt of the cyclone slammed into the coastline overnight packing winds forecast up to 300 km (186 miles) an hour near its core, a spokesman for the refinery said.

"It is not yet safe to conduct an inspection of the site," the spokesman said.

The core of the cyclone, with gusts of more than 125 kmph, will weaken as it continues its a west-southwesterly direction over land, according to the Australian Bureau of Meteorology

Xstrata also said it will be later on Thursday at the earliest before it can provide an update on its copper division due to weather conditions.

Xstrata shut and evacuated its 300,000-tonnes-per-year Townsville copper refinery and port operations on Wednesday, saying it could be several days before operations returned to normal.

A one-week outage of the Townsville smelter would result in between 5,000 and 6,000 tonnes of lost production.

Copper prices -- already at record highs near $10,000 a tonne -- could rally to $12,000 a tonne and higher as output struggles to keep up with demand.

COAL ESCAPES FULL FORCE

Coal mines appeared to have been spared the full force of the storm, given most are located well in more southern regions outside the core of the storm.

"We've had no reports of any significant rainfall adding to problems for the coal mines," Queensland Resources Council spokesman Jim Devine said. "It's really a case of just getting the employees back to work now."

Rio Tinto expects to reopen its Hail Creek colliery on Friday after feeling only minimal impact from Yasi, according to the company.

Also, Xstrata said its Newlands coal mine has been reopened after shutting down Wednesday night and preparations were underway to restart its Collinsville coal mine where the cyclone knocked out power.

"It seems to have caused little direct damage," said Patersons Securities analyst Andrew Harrington.

Australia's largest coal freight company, QR National , will shortly resume services on two rail networks that were temporarily suspended in preparation for Cylone Yasi, the company said.

Queensland accounts for about a fifth of Australia's economy and 90 percent of its steelmaking coal exports.

A spokesman for Australia's largest coking coal export terminal Dalrymple Bay, said operations could reopen mid-day local time (0200 GMT). [ID:SDY2DE78X]

The coal terminal was still conducting inspections of its equipment on Thursday morning, but general operations manager Greg Smith said it appeared that the terminal was not damaged by the cyclone winds and rain.

Macarthur Coal said that its Coppabella and Moorvale mines were resuming normal operations after scaling back staffing due to Cyclone Yasi.

The mine sites were undamaged by the storm but the company will continue to monitor rainfall in the area, it said.

Dozens of dry bulk carriers have abandoned plans to pick-up coal cargoes in Australia due to the cyclone and have rerouted to the Atlantic in hopes of new business, shipbrokers said on Thursday.

(Additional reporting by Rebekah Kebede in PERTH and Randy Fabi in SINGAPORE; Editing by Manash Goswami)

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