SYDNEY, Mar. 10 -- Minmetals Australia has no plans to restart its Avebury nickel mine, closed in 2008 due to depressed markets, predicting recent gains in nickel prices MNI3 are unsustainable.
"What I need to see is that the current prices are sustainable, and at the moment I can't see the current prices being sustained," MMG Chief Executive Andrew Michelmore told the Reuters Summit in a wide-ranging interview on Tuesday.
Michelmore, who helped orchestrate the $1.4 billion buyout of most of the mining assets of the former Oz Minerals to China's Minmetals in 2009, also said work was underway to extend the life of the giant 500,000-tonnes-per-year Century zinc mine in Australia beyond its 2015 closing date.
London Metal Exchange (LME) three-months nickel prices MNI3 were last indicated at $22,090/190 a tonne, nearly treble the recession low of $8,850 seen in October 2008 and up from around $19,000 at the end of last year.
But Michelmore said up to 100,000 tonnes of new nickel-producing capacity -- about 8 percent of world production last year -- from projects in Australia, Papua New Guinea and New Caledonia could hit the market in the short term.
"I'm sitting back and waiting to see how that develops because if it does come on, and with a rush, that could take the market down very quickly," Michelmore said.
The Avebury mine on the Australian island of Tasmania was slated to yield 8,500 tonnes of nickel a year -- in a world market of around 1.3 million tonnes -- all going to China's Jinchuan Group under an exclusive supply pact before being shut when nickel markets tanked.
The pact with Jinchuan still stands and will be reactivated when the mine reopens, Michelmore said.
Michelmore, who served as chief of the former WMC, once the world No. 3 nickel producer and sold to BHP Billiton in 2007 for $6 billion, also doused speculation Minmetals will act to list all or part of MMG on the Australian bourse in the near future.
"Quantity, timing and location are all still up in the air," he said.
"We've already got the funds we need and will only go to the market when we need to access further funds."
MMG, which also mines copper and gold in Laos, also is exploring for more zinc at its Dugald River lode near the Century mine and in northern Canada.
It agreed in February to jointly explore for nickel in the U.S. state of Minnesota with US Nickel USN.AX.
At Century, the world's second largest zinc mine after the Red Dog mine in Alaska owned by Teck Resources (TCKb.TO), operations may be extended if more exploitable ores are identified, Michelmore said.
"In 2014 we start ramping down for decommissioning in 2015 with our current reserves," he said.
Exploration drilling at the mine is about half complete but yet to find sufficient additional reserves he said.
"Obviously any zinc or lead we can find in the area is a bonus for us."
The nearby Dugald River deposit, which has not yet received board approval for development, could yield about 200,000 tonnes of zinc in concentrate at peak production, according to Michelmore.
"That's got a life of over 20 years, and would be an important one for us," Michelmore said. "As Century goes down we are likely to bring Dugald up."
Michelmore said he was undeterred by a number of proposed zinc mines awaiting development worldwide, counting on demand growth to underpin zinc markets.
Credit Suisse suggests the world could need 6 million tonnes more zinc mine capacity by 2016. That's a 60 percent increase in new mines.
Zinc's links to galvanised steel makers for consumption places producers in a good position to benefit from a recovery in steel making predicted over the next few years, according to Michelmore.
Moreover, the majority of the new projects will be developed around the time Century and Xstrata's (XTA.L) Brunswick mine close, removing some 700,000 tonnes of annual supply, he noted.
"If anything, we are seeing the amount of zinc from current production decreasing significantly," he said.