JOHANNESBURG (miningweekly.com) – Diversified major Glencore has revealed plans to cut back on its production of zinc across its portfolio in Australia, South America and Kazakhstan, saying a 500 000 t/y output reduction would preserve the value of its reserves in the ground at a time of low zinc and lead prices, which it believes does not correctly value the scarce nature of the resource.

These changes, which represented around one-third of Glencore's yearly zinc production, would reduce fourth-quarter mine production by around 100 000 t of contained zinc metal and would likely result in job cuts, the company cautioned.

Industry body, the Queensland Resources Council (QRC), which put the number of lost jobs at Glencore’s zinc mines in northwest Queensland at 470, described the move as a “temporary, but unfortunate” setback for a minerals province with strong potential for the future.

“Glencore has made it clear today that the job losses at the George Fisher and Lady Loretta mines are a temporary measure, reflecting the state of the global market, including a 27% drop in the zinc price since May.

“There is no doubt that these job losses are a setback for the Mount Isa region, but they need to be placed in the context of a total estimated mining industry residential workforce in the northwest of some 3 500 full-time employees. In total, an estimated 6 200 employees and contractors work at operations in the northwest,” it stated.

“These changes, although temporary, will unfortunately affect employees at our operations. This decision has not been taken lightly. In the coming days, we will engage with all employees and put in place support services to assist people who may be affected as a result of these changes,” it said in a statement.

Glencore would suspend operations at Lady Loretta, in Australia, and Iscaycruz, in Peru, while lowering production at the George Fisher and McArthur River operations, in Australia, as well as at various mine operations in Kazakhstan.

Despite the short-term production cuts, Glencore reassured the market that it remained positive about the medium- and long-term outlook for zinc, lead and silver prices.

“This decision will ensure that our zinc operations are sustainable well into the future, providing jobs in the communities where we operate and returns to shareholders,” it held.

Investec said Glencore's decision to cut output to help support commodity prices showed leadership and was more meaningful to the market than the coal supply cuts it previously announced.

"It also highlights the troubles faced by the miner, since it needs to cut its debt levels, and reducing output implies that some of this output may not be cost effective at current prices. It is however, a worrying reflection of the state of China – which currently consumes around 42% of the world’s zinc. The metal is Glencore’s third most important commodity for its industrial business and we had expected it to contribute 14% of the group's 2015 full-year earnings before interest, taxes, depreciation and amortisation," Investec added.

QRC CEO Michael Roche, meanwhile, reiterated that the Queensland minerals province still had a strong future, as demonstrated by the recent commitment by miner MMG to the new Dugald River zinc mine, which was set to be one of the top ten zinc mines in the world.

The $750-million Dugald River mine is set to deliver production of about 160 000 t/y of contained zinc-in-concentrate and almost one-million ounces of silver a year over the estimated 28-year mine life.

“Meanwhile, Altona Mining is working with its Chinese partner, SRIG, towards a commitment to build the Cloncurry copper project,” he said.

Roche added that he would meet with Ministers in the state of Queensland, led by Premier Annastacia Palaszczuk, on Monday, to discuss opportunities for the government to work with the QRC and the operations in the northwest on a suite of near-term challenges to existing operations in the region relating to the costs of rail freight and the availability of energy and water.