By Leia Michele Toovey- Exclusive to Zinc Investing News

The recent price crash in the metals means that many miners who were once raking in cash are now cutting output and suspending operations just to stay afloat. 

Analysts are already bracing for metal prices to skyrocket when demand recoups. The mining boom we just witnessed was enhanced by lack of supply; and with current projects being scrapped and/or set back, and future plans in hiatus, when demand rebounds there will be a supply glut that will slingshot prices. Zinc is one of the metals most positioned for an acute supply shortage. The crunch point could come as early as 2011 or 2012 once surplus inventories from the current downturn are worked off.

Some of the projects deferred will be gone for good. Once again we will be short of concentrates when the economic cycle turns up. Zinc producers have been swift to respond to plummeting prices by cutting supply, and it is anticipated that around 800,000 tonnes of zinc mine output could be lost in 2009. The major mining firms will be best positioned to benefit from the next metals boom, and predictions indicated that prices will overtake recent historic peaks. Rio, BHP, and Vale are believed to be among the best positioned companies will good assets and low cost operations.

Recent cutbacks

Kazakh zinc miner Shalkiya Zinc announced on Friday that the fall in zinc prices had forced it to shut down zinc and lead concentrate production until summer 2009. “The shut-down has been undertaken in the context of current market circumstances and depressed zinc concentrate prices and is aimed at preserving the company’s financial position,” Shalkiya Zinc said in a statement. The company, which sold 13,100 tonnes of zinc concentrate in the first half of 2008, said it still planned to build a new ore processing plant. The company is currently exploring financing options for the construction of the new plant, including international and domestic banks.

OZ Minerals, the world’s second- largest zinc mining company, has shut their Avebury nickel mine in Australia because of declining prices. Closing the mine is part of a companywide review aimed at cutting margins. OZ Minerals, which is seeking to refinance $560 million of debt, cut zinc output at its Golden Grove mine this year because of the global economic slowdown. The price of nickel, used in steelmaking, has fallen 70 per cent from a March high in London. “At these prices, it is simply more economical to keep this metal in the ground and resume production when prices improve,” Chief Executive Officer Andrew Michelmore said in a statement.

Xstrata Plc has cut ore production by 20 per cent at its McArthur River lead-zinc mine in northern Australia. “We have reduced mine production from 2.5 million tonnes per year to 2.0 million tonnes,” an Xstrata spokeswoman said. On an annual basis, the move would result in the loss of 68,000 tonnes of concentrate, containing 31,700 tonnes of zinc metal and 7,200 tonnes of lead. The length of the curtailment will depend on market conditions. While the mine had only recently been producing at the 2.5 million tonnes-rates after an earlier expansion, some market watchers were anticipating that 2009 production would be higher.

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