Major Australian zinc miner cuts output to focus on grade

The Endeavour mine in New South Wales, which has been the cash cow that has been driving CBH Resources Ltd’s exploration and mine developments elsewhere, is now grazing on a thinner production diet to weather the lower zinc price.

PERTH  - 

There were few surprises when CBH Resources Ltd (ASX: CBH) declared today that its Endeavour mine would now operate on a new mine plan that would focus on lower tonnages but higher grades.

This point was highlighted in an earlier report when CBH announced a review was taking place, a factor that was cited as an issue in the decision by fellow Broken Hill miner Perilya Ltd (ASX: PEM) to withdraw from a proposed merger.

That decision was expected to impact on CBH's Rasp decline mine at Broken Hill, which was advancing towards commissioning and was to utilise Perilya's under-used milling capacity.

Like several Australian zinc producers who were flying high a year ago, CBH as a relatively new boy on the block has seen its share price slide from around A70 cents a year ago to finish today at A11.5 cents.

CBH's managing director Stephen Dennis said today that the new mine plan was aimed at ensuring Endeavour remains viable during the current downturn in commodity prices and so "the future profitability of the operation is maximised."

The new plan for 2008/09 will see production reduce from 1.3 million tonnes to 940,000 tonnes, taking in surface stockpiles of 65,000t.

The combined average grade for of the lead-zinc-silver ore was expected to increase from 9.4% to 11.5%, and should increase to a combined grade of 12.4% in 2009/10.

Dennis said that by increasing the mine cut-off grade, the size of Endeavour's overall reserve will decrease, but the mine life remains at a projected 10 years.

The workforce will now be further reduced from 384 to 233, inclusive of 40 personnel employed by a transport group which was being demobilised from site.

Zinc concentrate production is now expected to be 111,400t this year while lead concentrates should be about 57,000t.

Capital expenditure for 2008/09 is expected to be reduced to $A6.7 million ($US5.96 M), net of surplus equipment sales. Total cash cost reductions of $A56 M ($US49.89 M) were now expected for the current financial year.

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