South African miner Anglovaal Mining (Avmin) said on Tuesday it would continue to produce cobalt at its loss-making Chambishi plant in Zambia as long as prices hold up.
”The mid-sixes (dollars a pound) is a break-even range for Chambishi,” said director of corporate development Julian Gwillim. ”We don’t see a large rise in prices but maintaining their current levels.”
Avmin aims to have its troublesome furnace at Chambishi running smoothly by December, after problems with a cooling system.
”Our annualised rate is about 4 500 tons per year and we’ll be close to our monthly target in December,” said Gwillim, putting cobalt output for this year at a reduced level of 3 700 tons due to the faulty furnace.
Avmin has invested $150-million in modernising its Chambishi plant, which should give it the capacity to produce about 6 500 tons per year of cobalt and 16 000 tons per year of copper, said Gwillim.
”Our cobalt output for 2003 will probably be put at our annualised rate, depending on prices.”
Copper output should rise to around 15 000 tons next year from a current rate of 1 000 tons per month in 2002, he added.
There has been a growing clamour among traders this year for producers to cut output to help lift cobalt prices, which have steadily declined from $10 to $6 a pound in the last year.
A surfeit of producer offers in the face of weakening demand from cobalt-consuming sectors such as aerospace, military and turbine-based power generators, was blamed for the price slump.
Prices did improve in the last week by $1 a pound from $6 mid-October, after US producer OM Group announced production cuts last week and the US government finished the month with no weekly sales.
In September, Avmin chairman Rick Menell said this year’s earnings would depend a great deal on higher cobalt prices, which were then about $6,60 a pound.
A company results report in September showed headline earnings per share fell to 184 cents from 259 cents in 2001 for the year ended June 30, 2002, largely due to losses at Chambishi.
Australia’s WMC Ltd was offering cobalt on Tuesday at $7,30 a pound for November delivery. – Reuters