Glencore cuts 4 percent of world zinc output, price jumps

The Switzerland-based miner and commodities traders said on Friday it would reduce zinc production across its mining operations in Australia, South America and Kazakhstan by a third or around 500,000 tonnes a year.

The zinc cuts come on top of an array of measures Glencore announced last month to help it slash its $30 billion in net debt by a third, including lower copper production, suspension of its dividends and a sale of new shares.

“The main reason for the reduction is to preserve the value of Glencore’s reserves in the ground at a time of low zinc and lead prices, which do not correctly value the scarce nature of our resources”, the company said. In total, an estimated 6,200 employees and contractors work at operations in the north-west.

“This decision will ensure that our zinc operations are sustainable well into the future”, said Glencore in a statement.

It’s perhaps in that context that Glencore said that it “remains positive about the medium and long-term outlook for zinc”.

The $US750 million Dugald River mine is set to deliver an annual production of approximately 160,000 tonnes of (contained) zinc in concentrate, and nearly a million ounces of silver a year over the estimated 28-year mine life.

And in the more immediate term its own actions are likely to have a fillip on the zinc price too.

A Glencore spokesman in Australia declined to say how much the output cut would save in working capital or pay, nor how long it expected the cuts to last.

This week, the head of its coal business said its Australian coal mines will be shut down if the long downturn in commodity prices makes them unprofitable.