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Sumitomo to lift San Cristobal production

Publishing Date
03 Jun 2009 1:56pm GMT
Mining Journal
Sumitomo Corp, Japan’s third-largest trading company, will increase production at its zinc mine in Bolivia this year after the project turned profitable in the past quarter on reduced costs and rising metal prices.

Output will exceed an original plan to produce 225,000t of zinc in concentrate after ore processing reached 44,000t/d in April, 10% more than planned, Koichiro Yazaki, manager at Sumitomo’s San Cristobal Project Department, said in an interview in Tokyo. Production was 204,000t last year and 69,000t in the past quarter.

Metals have gained 36% this year, based on an index of six industrial metals, on signs the worst global recession since the Great Depression is easing and as China stockpiled copper, aluminum and zinc. Bank of Japan board member Hidetoshi Kamezaki said today Japan’s economy, the second-largest, is no longer in freefall and a recovery will take hold soon.

“Production of industrial metals will probably increase as the outlook for their demand and prices becomes better on an improvement in global economies,” Takaki Shigemoto, an analyst at Tokyo-based commodity broker Okachi & Co, said. “Some mines may restart operations that they suspended amid the global recession.”

Zinc for three-month delivery on the London Metal Exchange dropped 0.4% to US$1,574/t in Tokyo on Wednesday, but is up 30% this year. Prices touched a four-year low of US$1,038 on December 12, after reaching US$2,900 earlier last year, as the recession eroded demand for the metal used to galvanize steel.

“We expect metal prices will probably increase from the current level, although they may have difficulty returning to last year’s peak,” Takahiro Izuta, Sumitomo’s corporate officer, said. “Prices will likely rebound in tandem with the recovery in global economies.”

Prime Minister Taro Aso has pledged to spend Y25 trillion (US$261 billion) to prop up the Japanese economy and China is spending Yu4 trillion (US$586 billion) to boost its growth as nations around the world commit funds to stimulate a recovery.

Japanese trading companies are increasing overseas resource investments to secure domestic supplies and to benefit from long-term global demand as competition for materials gains amid rising consumption in China. Sumitomo gained ownership of San Cristobal, the world’s sixth-largest producer of the metal and the third-biggest in silver, after buying in March a 65% stake held by Apex Silver Mines Ltd.

The San Cristobal mine has reserves of 3.2Mt of zinc, 1.2Mt of lead and 12,600t of silver.

The San Cristobal mine started production in August 2007 after Sumitomo bought a 35% stake in the project from Apex Silver in 2006. Sumitomo’s investment and loans to the project have amounted to almost US$900 million, Mr Izuta said. The company paid US$27.5 million in March to gain full ownership

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