South32’s deal, which supplies lead concentrates from its Cannington mine in Australia, sets headline treatment and refining charges (TC/RCs) at $98 per tonne/$0.60 per oz, against $124.70/$1 in 2017, sources with knowledge of the matter told Metal Bulletin.

The contract, which is a benchmark for other lead concentrate grades containing high silver content, has a combined treatment and refining charge value of $140.70 per dry metric tonne, based on Cannington’s 70-80 troy oz of silver per tonne of lead concentrates.

South32 declined to comment.

The deal comes at a point when the supply of lead concentrates is at its tightest in a decade due to key zinc-lead mines exiting the market and new projects bringing on relatively little lead contained in mined ores.

Spot TCs paid to smelters to compensate them for processing concentrates into refined metal flipped to premium in September last year and now stand at $20-40 per tonne for high-silver lead concentrates basis cif China.

Meanwhile, Teck Resources agreed similar TC/RCs at $99 per tonne/$1 per oz for low-silver lead concentrates from its Red Dog mine last month.

“It’s a clear reflection of where the market is going,” an informed source who declined to be named said.

“Certainly the demand for high-silver concentrates is there, considering more refining capacity at Korea Zinc and Stolberg,” the source said.

Korea Zinc, the world’s largest lead smelter by volume had expanded lead smelting capacity by 100,000 tonnes per year in 2016, mainly to capture greater volumes of silver and other byproducts.

But this February the smelters said that it expected to sell 10,000 tonnes fewer of refined lead in 2018, with sources reasoning that market forces were making the business of primary lead smelting uneconomical.

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