Volcan suspends work at Islay mine in Peru on falling zinc price

Peruvian zinc-lead miner Volcan has suspended operations at its Islay mine since mid-July, mainly due to the weakening of the zinc price that has eroded mining margins, Fastmarkets has learned from industry sources

The Islay mine is located in Pasco, in central Peru, and was producing around 8,000 tonnes per year of zinc and 7,000 tpy of lead. Two underground mines, Animón and Islay, make up the Chungar unit, which has capacity for more than 46,000 tpy of zinc and 19,000 tpy of lead, making it the second-largest of Volcan’s mining units.

“The continuously falling zinc price has made the mine unprofitable, so operations had to be suspended until conditions turn for the better,” a market participant based in South America said.

The London Metal Exchange three-month zinc price closed at $2,289.50 per tonne on Wednesday, August 16, down by more than 30% from the beginning of this year, when it had gone above $3,400 per tonne.

At the end of May, the metal’s price dropped to about $2,236 per tonne, a near three-year low since July 2020.

With profitability being affected, mine closures or production cuts have already been seen in major resource-rich areas. The zinc price has slipped below $2,500 per tonne, a generally accepted breakeven point for most of the mines outside China, Fastmarkets has heard.

After Swedish miner Boliden announced in June that it was putting its Tara mine in Ireland on care and maintenance, Australian miner Aeris Resources planned to suspend its Jaguar mine in Western Australia in September due to low prices. The King Vol and Mungana mines in northern Queensland, operated by Australia’s Aurora Metals, also suspended production earlier this year.

“I won’t be surprised if more shutdowns happen,” a market participant based in South America said, adding that treatment charges (TCs) to China were expected to go down in the next few months amid tighter supply of overseas concentrates.

Fastmarkets’ price assessment of the zinc spot concentrate TC, cif China, was $160-190 per tonne on August 11, falling by more than 30% compared with $250-280 per tonne on January 13.

Because most Chinese mines switch to domestic feedstock during summer, buying appetite for spot imported cargoes remained low. Fastmarkets will continue to monitor both ends of the price range in future pricing sessions.

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