The Red Dog zinc-lead mine, concentrator and shipping facility in the Northwest Arctic Borough near Kotzebue, Alaska
Teck Resources Ltd. said it will forge ahead with production from its new Aqqaluk deposit at its Red Dog zinc mine in Alaska, as zinc prices sank to a six-month low.
Vancouver-based Teck warned earlier this year that production may have to be curtailed at Red Dog, one of the world's largest zinc mines, due to an environmental appeal.
While some permits still need to be renewed, Teck said it has enough to go ahead. The company was anxious to make a decision before the end of May, when pre-stripping at the site is scheduled to start, or risk losing production for more than a year, starting this fall.
Teck's announcement comes amid a continuing drop in metal prices, which have taken zinc to a six-month low of 82 cents (U.S.) a pound on the London Metal Exchange. The metal hit a high of $1.20 in January.
Zinc, copper and other base metals are being driven down on continued worries about Europe's debt crisis and a cooling of China's economy.
"(Zinc's drop) has more to do with the broader selloff," rather than Teck's plan to add more production, said Bank of Nova Scotia economist and commodity market specialist Patricia Mohr.
The price of copper also fell Thursday and is headed for a sixth-weekly drop in a row. That's the longest streak since a seven-week slide that ended in August, 2008, according to Bloomberg.
Teck said it decided to move forward at Red Dog after "constructive" discussions with the U.S. Environmental Protection Agency. Spokeswoman Marcia Smith said the company has a "viable plan" in place to resolve the permit appeal.
Teck produces about 5 per cent of the world's zinc, mostly from Red Dog.
"Teck will continue, so anyone who is anticipating a potential supply squeeze in zinc, it won't happen," in the near term, said BMO Nesbitt Burns analyst David Radclyffe.
Even with Red Dog, however, some analysts expect a supply shortage of the metal starting some time next year.
In the meantime, though, zinc supplies remain healthy, with current global inventories of about 560,000 tonnes, or roughly 17 days of consumption.
Teck is forecasting zinc production of about 550,000 tonnes this year. That's down from 711,000 in 2009, when quality of grade was higher.
Teck's zinc operations
Trail
Located in British Columbia, its operations include one of the world's largest fully integrated zinc and lead smelting and refining complexes and the Waneta hydroelectric dam and transmission system. The metallurgical operations produce refined zinc and lead and a variety of precious and specialty metals, chemicals and fertilizer products.
Red Dog
The Red Dog zinc-lead mine, which is located in northwest Alaska, near Kotzebue, is one of the world's largest zinc mines. The mine and concentrator properties are leased from, and were developed under the terms of a development and operating agreement with, the NANA Regional Corp., Inc., a native Alaskan development corporation.
Pend Oreille
The Pend Oreille mine, in northeastern Washington state, produced zinc and lead concentrates that were delivered to its Trail smelter 80 kilometres to the northwest, in B.C. The mine was closed and placed on care-and-maintenance in February, 2009, because of reduced metal demand and weak zinc prices.
Source: Teck Resources