PERTH (miningweekly.com) – Hong Kong-listed MMG has approved the updated development plan for the Dugald River zinc/lead/silver project, in Queensland, bringing the project on line at a time when global zinc supply is expected to dissipate with the closure of a number of mines.

In April this year, MMG flagged that it was considering lower yearly throughputs at the Dugald River mine, allowing for a longer mine life.

The updated plan includes a mine production rate of 1.5-million tonnes a year, the construction of a concentrator and production of about 160 000 t/y of zinc-in-concentrate, plus by-products, over an estimated 28-year mine life. 

This was compared with initial plans that saw the mine process an average of two-million tonnes a year of ore, to produce between 200 000 t/y and 220 000 t/y of zinc concentrate, between 27 000 t/y and 30 000 t/y of lead-in-concentrate and about 900 000 oz/y of silver.

MMG would spend some $750-million on project costs to achieve first concentrate shipment.

MMG CEO Andrew Michelmore said the new development plan placed Dugald River within the world’s top ten zinc mines when operational.

“We are positive about the long-term fundamentals for zinc. This decision reflects our confidence in zinc at a time of shrinking global supply. Dugald River remains one of the world’s highest-grade undeveloped zinc deposits,” Michelmore said.

“The updated development plan reflects a prudent response to mine geotechnical conditions. By taking the time to understand the unique characteristics of the orebody, we now have a robust plan for Dugald River that maximises long-term value for shareholders,” he added.

Discussions to amend funding arrangements have commenced with MMG’s existing lenders, and agreements with key energy, logistics and service providers will be revised based on the updated project plan.

Following satisfaction of remaining conditions, construction of remaining surface infrastructure facilities would commence in 2016 with first production from a Dugald River concentrator expected in the first half of 2018.

“These decisions are tough during low commodity price cycles but we are confident that is just the time to invest. Our commitment to operational excellence and demonstrated financial discipline positions us [well] to maximise the value of the operation across the zinc price cycle," Michelmore said.

The Queensland Resources Council (QRC) has welcomed MMG’s investment into the state, with deputy CEO Greg Lane saying the announcement was good news during tough times.

“With global supply tightening, this announcement is good news for Queensland and even better news for Cloncurry and Townsville, which are set to benefit from jobs, both in and supporting the mine.”

Economic development organisation Townsville Enterprise also welcomed the investment, with GM for economic development Tracey Lines saying it was a major vote of confidence in the region.

“For this decision to be made at this point in the commodity cycle shows that investors have confidence in the future of the North Queensland region.

“The mining industry is integral to the Townsville North Queensland region’s economy and is essential to securing our long-term future. This investment secures the operation of the Dugald River mine for 28 years – that’s 28 years of secure employment for the region.”