MELBOURNE (Reuters) - Australia’s New Century Resources is on track to turn a giant tailings dam into the world’s fifth-biggest source of zinc as it defies doubters to make its first shipment in August, said Patrick Walta, the mineral processor’s managing director.
New Century is processing the tailings, or the residue left over from previously mined ore, at the Century mine, previously the world’s largest zinc mine. The company expects the project will prove it is possible to rehabilitate mine sites for profit in an industry where remediation has been seen only as a cost.
“We want to be the Australian premier mine rehabilitation company,” said Walta, who first started looking at economic mine rehabilitation with his firm Raging Bull a decade ago, in an interview on Tuesday.
“For us, Century is great. It puts us on the map.”
New Century shot into view last year when its former incarnation, Century Bull, secured the tailings rights to the mine in the western part of Australia’s Queensland state that had depleted its resources and closed. It acquired the rights from MMG Ltd , the Australian unit of China Minmetals Corp.
Walta, a metallurgist by background, and Raging Bull, had been in talks with MMG for years on ways to recover more zinc from the still mineral-rich tailings and rehabilitate the mine, which had a hefty A$193 million ($142.2 million) closure provision.
New Century’s plan was to slash costs by re-processing the tailings using MMG’s existing plant, environmental permits, land use agreements and pipeline to a nearby port.
“We think by the end of next year it becomes a de-risked project, a top five zinc producer in the lowest cost quartile. And there’s plenty of opportunity to expand,” Walta said.
Shares in New Century, which is capitalized at A$672 million, started trading at A$0.50 per share last July, peaked at A$1.65 in October and closed at A$1.33 on Wednesday. Credit Suisse has a 12-month target of A$2.35.
While the miner has already lined up sales for most of its zinc production with four traders and a smelter, not everyone is convinced of the plan.
“I don’t want to talk about another company, but they’re all taking on an old pit... Let’s see what eventually happens,” said Ivan Glasenberg, chief executive of mining giant Glencore, which runs a neighboring mine, on an earnings call earlier this year.
According to a company presentation, New Century aims to produce 4,000 tonnes of zinc in the third quarter as it starts up, and 30,000 tonnes in the fourth quarter before reaching name plate capacity of 260,000 tonnes by the end of next year.
It is also assessing the potential to bring forward to next year development of three other deposits within a few kilometers of Century’s infrastructure with the view to extending the mine’s life to 10 years from six.
“Getting first tonnes is one part of the challenge. They now have to ramp up to nameplate capacity, sustain it and demonstrate that it is operating at the cost profile they expect,” said analyst Lachlan Shaw at UBS in Melbourne.
Reporting by Melanie Burton; Editing by Christian Schmollinger