MMG Says Review of A$1.5 Billion Zinc Project May Alter Budget

MMG Ltd. (1208), the listed unit of China’s biggest state-owned metals trader, may revise the cost and schedule for a planned A$1.5 billion ($1.4 billion) zinc project in Australia after it identified complexities in the ore body.

Melbourne-based MMG, in which China Minmetals Corp. has a 73 percent stake, will review its planned mining method, production volumes and processing facilities at the Dugald River project in Queensland state, where it plans to begin shipments from late 2015, it said today in a statement.

“The bottom line is that it’s too early to say,” whether the project will face cost overruns or a delay, MMG Chief Executive Officer Andrew Michelmore said today on a call with analysts and reporters. “We are still running with those timetables as we do this work.”

The Dugald River development is intended to replace output at MMG’s Century site, Australia’s largest open-cut zinc mine, which is scheduled to end production in around 2016. The company plans to complete the review of the project by year end.

Areas of shale at the top of the ore body may need additional ground support, while the company has discovered some crisscrossing of faults which could require changes to the technique used to mine the Dugald River site, Michelmore said on the call. MMG will process around 100,000 metric tons of Dugald River ore at its Century mine as part of the review.

MMG will make a final decision on the development of Dugald River after it considers the review and processing trial, it said.

The producer entered an agreement last month for as much as $1 billion of financing for a term of 13 years to develop Dugald River. In May, MMG awarded a A$290 million contract to Forge Group Ltd. (FGE) for the design and construction of a zinc-lead-silver concentrator and associated facilities at the site.

To contact the reporter on this story: David Stringer in Melbourne at dstringer3@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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