CANCUN, Mexico Struggling
with the double whammy of high energy costs and low treatment
charges, Japanese zinc smelters are moving to invest in mines
in order to secure a steady supply of raw material, a senior
executive at Dowa Metals & Mining Co. Ltd. said.
Toshiaki Suyama, general manager
of the Tokyo-based companys resource development and raw
materials department, said Japans smelting sector does
not get the state and local subsidies that its counterpart in
"Dowa is itself investing in
zinc and copper mines to secure a steady supply of
concentrates. We also expect a profit from the mine (that the
company invests in), but it is important for us to secure
concentrates," he told AMM.
Dowa, which operates
Japans largest zinc smelter, gets about 30 percent of its
zinc concentrate requirements from its own mines; the company
plans to boost this to 50 percent within about five years. It
also gets about 10 percent of its copper concentrates from its
own mines, with a target of 30 percent within the same time
Toshiaki said the targets will
be achieved largely through greenfield joint ventures, such as
that recently concluded with Vancouver, British Columbia-based
Constantine Metal Resources Ltd. for the Palmer zinc and copper
mine in Alaska.
Announced at the start of
February, the Palmer joint venture will give Dowa the rights to
the concentrates produced at the mine. It is a long-term
strategy: Palmer isnt expected to come onstream for
another seven or eight years.
"We definitely need a partner
for copper, but for zinc it depends on the size of the
project," Toshiaki said.
Dowa also owns a 39-percent
stake in the Tizapa Mine in central Mexico, which produces
zinc, lead and copper concentrates from sulfide ore. The zinc
concentrate from Tizapa is processed at Dowas smelter and
refinery in Japans Akita prefecture. It similarly has a
stake in two mainly copper concentrate mines, Huckleberry and
Gibraltar, both in British Columbia.
Zinc treatment chargesthe
fees paid to smelters by miners for turning their concentrates
into finished metalhave favored miners in the past couple
of years, settling last year at $191 per tonne.
This year, with a concentrates
market widely deemed to be in surplus, the smelters have got
the upper hand in negotiations, which reportedly were finalized
at the International Zinc Association conference in Cancun this
Teck and Korea Zinc Co. Ltd.
settled a benchmark zinc treatment charge at $210.50 per tonne,
swinging terms in favor of smelters for the coming year,
industry sources told AMM (
amm.com, Feb. 27).
The market has moved in favor of
the smelters due to a zinc concentrates surplus in China, where
miners have increased output and built up stocks, resulting in
lower imports. Meanwhile, Chinese smelting capacity is down,
meaning less concentrates are being used and the stockpile is
Dowa buys on long-term
contracts; it waits for the benchmark, but negotiates its own
contracts in the background. The company is looking to secure a
higher treatment charge this year, Toshiaki told AMM
before Teck and Korea Zinc settled.
"Obviously we are subject to
market direction, but we need higher treatment
chargesChinese mines do not need to import western
material so the spot market has been very weak, and Japanese
smelters are struggling in terms of higher costs," Toshiaki
The closure of the
countrys nuclear power stations following the Fukushima
disaster almost two years ago has seriously hit the
countrys industrial producers, including its metal
"The government wants to restart
the nuclear plants, but there are many steps to be overcome. It
wants to reopen the plants soon, within a year, but it could be
two years, so many smelting companies in Japan have to struggle
in the interim with higher electricity costs," Toshiaki told
AMM. "The weak yen helps, but a greater portion is
being offset by the high electricity costs."
Dowa is now sourcing energy from
imported coal, hydro-power and natural gas.