MMG sees copper output sink 20% in first quarter, confirms Peru force majeure

(Reuters) - MMG Ltd said on Thursday its copper output fell 20% year-on-year in the first quarter because of lower-than-planned production at the Las Bambas mine in Peru, where the miner has declared force majeure because of coronavirus-related curbs.

Las Bambas is among the world’s biggest copper mines and one of the major mining projects that has cut production, prompting Australia-based MMG to formally withdraw its full-year production guidance for the mine earlier this month.

Company-wide copper production for the three months ended March 31 totalled 91,911 tonnes, MMG - which is majority-owned by China Minmetals Corp [CHMIN.UL] - said in a filing to the Hong Kong stock exchange, down from 114,369 tonnes a year earlier.

At Las Bambas, production of copper in concentrate slipped 28% year-on-year to 73,319 tonnes.

MMG said this was lower than planned because of repairs on an overland ore conveyor and local community blockades that impacted logistics, but the greatest disruption since mid-March has been because of the novel coronavirus, which has seen Peru declare a state of emergency to contain the spread.

Concentrate shipments “have been adversely impacted and are suspended,” while stocks at the port of Matarani are exhausted, MMG said.

“As a result, force majeure has been declared on Las Bambas copper and molybdenum concentrate sales agreements,” it added, noting all cargoes shipped overseas during the quarter had been received without any major interruptions.

Activating the force majeure clause allows certain terms of an otherwise legally binding agreement to be ignored because of unavoidable circumstances. Reuters reported the MMG force majeure on April 9.

Output of minor metal molybdenum at Las Bambas plunged 76% year-on-year in the first quarter to 124 tonnes, which MMG attributed to debottlenecking work on the molybdenum plant.

It did not give a revised production forecast for Las Bambas but said it was “working on a range of scenarios for recovery once restrictions have lifted” and will provide an update once there is greater certainty.

The company said it continues to expect Las Bambas to produce around 2 million tonnes of copper over the five-year period from 2021 to 2025.

MMG’s zinc output - at the Dugald River mine in Queensland and Rosebery deposit in Tasmania - was down 7% year-on-year in the first quarter at 52,957 tonnes but within expectations, the company said. Lead production fell 9% to 9,943 tonnes.

MMG is for now retaining previous full-year output guidance for those projects, as well as for its Kinsevere copper mine in the Democratic Republic of Congo.

Reporting by Shreya Mariam Job in Bengaluru and Tom Daly in Beijing; editing by Susan Fenton and Barbara Lewis