Zijin Shuts Copper Smelter After Leakage; Shares Drop (Update1)

July 13 (Bloomberg) -- Zijin Mining Group Co., China's largest gold producer, said it shut the copper smelter at its biggest mine after a leakage of acidic waste water killed fish. The shares fell to a 17-month low.

The plant, which produces 12,800 metric tons of copper a year, will only be reopened after checks by local environmental authorities, spokesman Zhao Jugang said by phone today in an interview. The company will likely have to pay a penalty and compensate local fisheries, he said.

The leakage underscores the challenges China faces in seeking to impose higher environmental standards on commodity producers. Zijin in May said it took corrective measures on plants and mines after criticism from environmental protection agencies.

"We estimate for each month of production disruption, Zijin's FY10 copper output would be affected by 1.7 percent and earnings to be affected by 0.9 percent," Trina Chen, an analyst at Credit Suisse Group AG, wrote in a note today.

The shares, suspended yesterday for the announcement, dropped as much as 8 percent to 5.50 yuan, the lowest level since February 2009. They traded down 5.4 percent to 5.66 yuan at 9:36 a.m. in Shanghai trading.

The effect on drinking water is "limited" and the local water supply has normalized a few days after the incident, Zhao said from Shanhang city, Fujian province. The leakage occurred at Zijinshan mine.

Waste water containing copper and sulfate seeped into the Ting River in Fujian province on July 3, the company said in a filing to the Hong Kong exchange yesterday.