China’s MMG Posts Third Straight Loss Amid Shift to Copper

  • Miner reports first-half loss of $93 million as sales halve
  • MMG hit by Australian zinc mine closure, lower metals prices

MMG Ltd., the miner owned by China’s top state-owned metals trader, posted a third straight half-yearly loss as revenue dropped 47 percent due to lower prices and the closure of a zinc mine in Australia. Its shares fell.

Its net loss widened to $93 million in the first six months, from $48 million a year earlier, according to a statement Tuesday. Revenue sank to $586 million from $1.1 billion. The closure of the company’s Century zinc mine, lower copper output in Laos, and declining metals prices all hit sales. The firm, controlled by China Minmetals Corp., is ramping up its Las Bambas mine in Peru, one of the world’s biggest new sources of copper.

“The challenging global economic conditions we experienced in 2015 continued into 2016, driving persistent commodity-price volatility and low growth rates,” Chairman Jiao Jian said in the statement. Las Bambas, set to produce between 250,000 and 350,000 tons of copper this year, will contribute to earnings from July 1, the company said.

Zinc has surged 40 percent this year, reaching its highest in more than a year in August, after mine closures and production cuts curbed supply. Still, average prices remain below last year’s levels after a downturn in demand growth in China, the world’s biggest buyer. The shuttering of Century after 16 years of operation contributed to a 73 percent slump in zinc revenue to $108 million. Copper sales dropped 36 percent to $360 million.

The rally in zinc prices had helped push MMG’s shares in Hong Kong to their highest in about a year on Tuesday at HK$2.05, before it released earnings. They fell as much as 4.4 percent Wednesday and traded 2.9 percent lower at HK$1.99 a share by 3:02 p.m. 

MMG’s planned Dugald River zinc mine in Australia will start output in 2018 amid a “widely anticipated zinc deficit” that’s expected to hit the global market next year, Jiao said. MMG is seeking zinc resources in Peru and elsewhere, Chief Executive Officer Andrew Michelmore said last month.

Just 10 percent of the Las Bambas resource has been explored, Chief Operating Officer Marcelo Bastos said on an earnings call Wednesday, adding that the project has many opportunities yet to be discovered.

Growth in global copper supply will fall significantly short of demand for the remainder of this decade, according to Citigroup Inc. in a note Tuesday. Many planned projects won’t come to fruition after spending cuts and tighter project financing, it said. The bank’s view contrasts with Barclays Plc, which has argued that the copper market faces a surplus up to 2020, which will weigh on prices.

MMG runs mines in Australia, Peru, Laos and the Democratic Republic of Congo.

— With assistance by Martin Ritchie

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