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Interruptions at two major MMG mines

Diversified miner MMG has reported logistical issues at its Las Bambas and Dugald River mines, global top 10 producers in copper and zinc, respectively.
Interruptions at two major MMG mines Interruptions at two major MMG mines Interruptions at two major MMG mines Interruptions at two major MMG mines Interruptions at two major MMG mines

The portal at Dugald River in Queensland, Australia

Staff reporter

At Las Bambas in Peru, outbound copper concentrate transport is being interrupted by a community blockade 136km from the mine.

The blockade is related to a compensation claim for the a pre-existing easement on the Yavi Yavi farmland transferred to the Fuerabamba community as part of the 2011 Las Bambas resettlement agreement.

"Production continues at site, however, failure to resolve the situation, or any escalation, could impact on production in the near term," MMG CEO Geoffrey Gao said.

"Stocks at the Matarani port are exhausted and customers have been advised of delays to future shipments."

The government has stepped in to try and assist with the removal of the block, but has been unsuccessful so far.

Guidance of 385,000-405,000 tonnes was left unchanged.

At Dugald River in Queensland, logistics have been impacted by the recent extreme weather events and subsequent damage to the rail line.

"Production continues at site and we have now secured a fleet of trucks enabling us to continue to transport concentrate in sealed containers until rail access is expected to be re-established between late April and mid-May," Gao said.

Dugald River, which was commissioned last year, is expected to produce 165,000-175,000t of zinc in concentrate this year.

MMG reported a 2018 net profit after tax of US$137.4 million, down 61% but in line with its January guidance of $135-140 million.

Production for the year was 466,474t of copper and 223,041t of zinc, generating revenue of $3.67 billion, down 2%.

Underlying EBITDA from operations fell 8% to $1.75 billion, while net cashflow from operating activities dropped by 27% to $1.73 billion.

Net debt dropped by $733.4 million to $7.6 billion, reducing gearing from 74% to 72%.

"Throughout the year, we maintained our focus on making our business leaner, more efficient and positioned for growth," Gao said.

"We are committed to securing a strong future for our assets through development and near-mine exploration to extend mine life and to looking for our next value accretive external growth opportunity.

 "We are driven to deliver greater value for our shareholders by reducing debt, driving operational performance and asset development and careful cost management."

Gao said MMG had a focused portfolio in the right commodities.

Group guidance for 2019 is 462,500-485,000t of copper and 250,000-270,000t of zinc.

"In 2019 we expect to deliver increased metal production and will maintain our focus on achieving further efficiencies and cost reductions across the business," Gao said.

"MMG's core commodities of copper and zinc are well positioned to both contribute to - and benefit from - the de-carbonisation of future energy needs, an accelerating market for electric vehicles and developments in battery storage technology.

"We remain very confident in the near term macro-economic outlook and the robust supply-demand fundamentals of our core commodities."

MMG shares remained at A$5 in Australia and haven't traded since 2017. That price values the company at just under $4 billion.