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Healthy pipeline of projects to support lead mine production for the next decade

23rd September 2019

By: Simone Liedtke

Creamer Media Social Media Editor & Senior Writer

     

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A healthy pipeline of projects over the next decade will support lead mine production growth, says research firm Fitch Solutions Macro Research, pointing out that the metal is often produced as a by-product of other metals, including zinc, silver and copper.

Globally, the top four producers – China, Australia, the US and Peru – will account for about 70% of global lead mine production over this period.

China and Australia currently account for the vast majority of global output, at 48.2% and 10.5%, respectively.

The firm also forecasts global lead mine production to grow at a yearly average of 1.8% from 2019 to 2028.

This, it says in a statement, is slightly faster than the 1.5% yearly average growth witnessed from 2009 to 2018.

In terms of tonnage, global lead output is expected to increase from 4.4-million tonnes in 2018 to 5.2-million tonnes by 2028.

CHINA

China's lead production will remain under pressure over the coming years on the back of government-led consolidations and mine closures owing to environmental concerns, as well as declining ore grades at some operations, says Fitch.

To combat the decline in ore grades, firms will look to process more ore by improving mining capacity, the research firm notes.

As a result, Fitch forecasts that China's lead production will grow by an average of 1.6% a year from 2019 to 2028.

This figure, the firm explains, represents a significant slowdown on the 4.3%-a-year average growth in the last decade.

Despite this, China is expected to remain far away from being the dominant global lead producer, with output forecast to reach 2.4-million tonnes by 2028.

US

Lead production in the US will continue to contract in the short term as rising production costs erode profit margins, while ageing operations continue to reduce output.

Subdued prices will put pressure on miners to cut capital expenditure and scale back operations, which will limit lead mine supply growth.

Further, high operating costs and environmental regulations will place US lead miners increasingly at a disadvantage to producers such as Peru and Australia, Fitch comments.

The firm forecasts US lead mine production to rise from 255 000 t this year to 263 000 t in 2028, averaging growth of 0.1% a year.

Currently, the largest producer of lead in the US is The Doe Run Company, with six mines in production in Missouri, representing the large portion of production in the country, while the second largest producer is Teck Resources, Fitch pointed out.

Upside risk to US production will stem from the $1.2-billion Hermosa project owned by South32, the research firm adds.

In June, South32 released a significant mineral resource estimate for the Hermosa project's Taylor deposit. According to Fitch, results show 155-million tonnes of resources, grading at 3.39% zinc, 3.67% lead and 69 g/t of silver.

South32 is advancing a prefeasibility study that it expects to complete prior to the end of fiscal year in 2020. Owing to this, Fitch says, the project is not yet fully incorporated into its forecast, and as a result, it represents “a significant upside risk” over the medium- to long-term.

AUSTRALIA

Lead production in Australia, meanwhile, is expected to achieve the highest growth rate out of the four largest producers from 2019 to 2028, especially as it recovers from an 8.9% compounded average decline in production over the last decade.

Fitch expects production growth to accelerate this year as the Dugald River mine ramps up production. As a result, the firm forecasts lead production in Australia to register yearly average growth of 2.7% from 2019 to 2028.

Australia is set to benefit from a strong project pipeline on the back of the world’s largest lead reserves, at 24-million tonnes as of 2018, which equates to about 29% of the total global reserves.

Of all major global lead producers, Fitch believes Australia holds the most new projects in the pipeline.

PERU

Peru's lead sector is also expected to experience solid production growth over the coming years, supported by a “sound” project pipeline across minerals, in which lead is often mined as a by-product.

Fitch forecasts Peru's lead production will increase from 315 000 t this year to 399 000 t by 2028.

The Antamina mine, which is owned by a consortium of international investors, along with Peruvian firms Cia Minera Milpo, Volcan Cia Minera and Sierra Metals, will remain the largest lead producer in the South American country.

Lead production growth is expected to recover over the coming years, averaging 2.9% a year from 2019 to 2028.

Further, traditional precious metal miners Bear Creek Mining Corp and Hochschild Mining are also developing multiple projects.

Given that lead is often found alongside silver, precious metal miners will add to the increase in mined lead output in the coming years, Fitch comments.

According to Fitch, the pipeline of lead mines remains robust with a combined 12 new projects, expansions and restarts expected to take place over the next decade.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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