Xstrata `Disappointed’ by Ruling on Mine Expansion

Xstrata `Disappointed’ by Ruling on Mine Expansion (Update1)

April 30 (Bloomberg) — Xstrata Plc, the world’s fourth- largest copper producer, said it is “disappointed” by an Australian court ruling over the planned $110 million expansion of its McArthur River zinc mine.

The Supreme Court has found in favor of an action brought against the Northern Territory government, which had approved the expansion, McArthur River Mining, a unit of Zug, Switzerland- based Xstrata, said today in an e-mailed statement.

The company will “carefully consider the judgment in coming days,” MRM General Manager Brian Hearne said in the statement.

In October, the Northern Territory Government approved the expansion to convert the existing underground mine into an open pit operation, Claire Divver, a London-based Xstrata spokeswoman, said today by phone.

Underground mining ceased at the project in 2005 and the expansion will extend the life of the mine by 25 years, Divver said. It also required the McArthur River to be diverted 5.5 kilometers, she said.

The mine opened in 1995 and produced 320,000 tons a year of zinc and lead contained in bulk concentrate, Divver said.

On March 6, Xstrata said it will increase the processing capacity at the mine by 39 percent at a cost of $37 million. The expansion will increase output of zinc and lead contained in concentrate to 430,000 tons a year, the company said at its full- year earnings statement.

Production of zinc concentrate would continue in order to meet customer requirements, MRM’s Hearne added.

The is a “small chance” that Xstrata will close the mine, which is one of the largest known deposits of zinc and lead in the world, Robin Bhar, a London-based analyst at UBS AG, wrote in a report today.

“Closure of McArthur River would remove around 150,000 tons of refined zinc from the market,” Bhar said. “As a result, projected surpluses would be smaller and a much tighter market would support higher zinc prices than we are currently forecasting.”

The action was brought by the Northern Land Council, MRM said in the statement.

To contact the reporter on this story: Brett Foley in London at bfoley8@bloomberg.net .


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