MMG Ltd has announced approval of the updated development plan for the Dugald River zinc project in northwest Queensland, Australia. The updated plan for Dugald River includes a mine production rate of 1.5 Mt/y, construction of a concentrator and annual production of some 160,000 t/y of zinc in zinc concentrate, plus byproducts, over an estimated 28 year mine life. This places Dugald River within the world’s top ten zinc mines when operational.
“We are positive about the long-term fundamentals for zinc,” MMG Chief Executive Officer Andrew Michelmore said. “This decision reflects our confidence in zinc at a time of shrinking global supply. Dugald River remains one of the world’s highest grade undeveloped zinc deposits,” Michelmore said.
“Under the updated plan, Dugald River will come online at around a time when significant global zinc supply will disappear through mine closures,” he said.
The expected remaining cost of the project to first shipment of concentrate is around $750 million plus interest costs.
“The updated development plan reflects a prudent response to mine geotechnical conditions,” Michelmore said. “By taking the time to understand the unique characteristics of the orebody, we now have a robust plan for Dugald River that maximises long-term value for shareholders,” he said.
Discussions to amend funding arrangements have commenced with MMG’s existing lenders. Agreements with key energy, logistics and service providers will be revised based on the updated project plan.
Following satisfaction of remaining conditions, construction of remaining surface infrastructure facilities would commence in 2016 with first production from a Dugald River concentrator expected during the first half of 2018.
“During development and operation, the Dugald River project would provide 28 years of economic, employment and revenue contribution to Cloncurry and Queensland,” Michelmore said. “These decisions are tough during low commodity price cycles but we are confident that is just the time to invest. Our commitment to operational excellence and demonstrated financial discipline positions us to maximise the value of the operation across the zinc price cycle.”
Access to the Dugald River orebody via development declines in 2013 led to the identification of geotechnical aspects and ground conditions more challenging than prior assumptions. This prompted a review of the proposed mine development method followed by a trial stoping program, value engineering and additional project studies.
Dugald River is located approximately 65 km northwest of Cloncurry, in Queensland.
The Queensland Resources Council (QRC) has welcomed the announcement. QRC’s Deputy Chief Executive Greg Lane said the announcement was good news during tough times. “With global supply tightening, this announcement is good news for Queensland and even better news for Cloncurry and Townsville, which are set to benefit from jobs, both in and supporting the mine.”
“The revenue from royalties and exports is also set to benefit the state. I applaud MMG for pushing on and making tough decisions during the low commodity price cycle.”
This announcement is also a huge vote of confidence in northwest Queensland, to which the resources sector contributed $2.2 billion during 2013-14.
“Australia leads the world in economic zinc resources and one of Queensland’s resource strengths is the diversity of commodities we produce,” Lane said. “And with MMG’s Century mine winding down, this partial replacement production of zinc is good news for all Queenslanders.”
