LONDON, Jan. 22, 2020 /PRNewswire/ -- Glencore's 300,000 t/y Mount Isa copper smelter in Queensland has been pegged to close in 2023. However, Glencore has pointed to extending the life of the operation to 2026.
With low treatment and refining charges, high power and gas costs, should Glencore make the commitment? A key consideration is that operations that rely on the smelter include Glencore's own Townsville copper refinery.
A chequered history
Glencore's Mount Isa smelter, located in outback Queensland, is Australia's largest copper smelter. The 300,000 t/y operation sources material from Glencore's own X41, Enterprise and Black Rock Cave Mines as well as the Evolution/Glencore Ernest Henry joint venture and other third parties. Anodes produced at the smelter are then railed to Glencore's 300,000 t/y Townsville copper refinery. At present the smelter is set to close in 2022, which in turn will result in the closure of the refinery.
This, however, is not the first time the smelter has been on the chopping block. In 2011, the then COO of Xstrata Copper NQ (Glencore), Steven de Kruijff, cited that the smelter was suffering from poor margins and the potential existed to shut down the downstream circuit. He went further to say that the economic viability of the Mount Isa smelter and Townsville refinery was not sustainable in the long term. However, a deal was made with the Queensland government at the time to extend the life of the operation and to slowly reduce emissions from the operation up until its planned closure in 2016.
In 2015, the closure of the smelter was once again at the forefront. While the smelter had significantly improved its cost competitiveness and environmental performance, the longevity of the smelter was still in question. However, the Queensland government came through with new environmental licencing conditions and Glencore committed to investing A$60-70 M in ongoing maintenance for the smelter between 2016-2022. The other major consideration during this time was the A$30 M rebrick of the ISAMELT furnace, anode furnace, and rotary holding furnaces. To help secure the future of the operation, the Queensland Government in power at the time had offered to pay for half of the rebricking cost on the proviso that the operation continued the treatment of third-party material. Glencore turned down the government's offer, believing that investment decisions should be reflective of economic conditions.
The rebricking was completed in 2018 as part of a 38-day shutdown. Rebricking of the Mount Isa smelter is required every three to four years, which means the next would be required in 2022, which is the expiry date of the current environmental licence.
At present, the smelter is operating at a utilisation rate of 75-80%. Feed from the smelter is predominantly from Glencore at 60-70% of the total, with the remainder coming from third parties. With the smelter suffering from high fixed costs and high variable costs such as power (>A$150/MWh), the under-utilisation of the smelter and in turn the refinery, costs will be a primary driver of any long-term decision for the smelter.
Read the full story:
Read more about CRU: http://bit.ly/About_CRU
CRU offers unrivalled business intelligence on the global metals, mining and fertilizer industries through market analysis, price assessments, consultancy and events.
Since our foundation by Robert Perlman in 1969, we have consistently invested in primary research and robust methodologies, and developed expert teams in key locations worldwide, including in hard-to-reach markets such as China.
CRU employs over 280 experts and has more than 11 offices around the world, in Europe, the Americas, China, Asia and Australia – our office in Beijing opened in 2004 and Singapore in 2018.
When facing critical business decisions, you can rely on our first-hand knowledge to give you a complete view of a commodity market. And you can engage with our experts directly, for the full picture and a personalised response.
CRU – big enough to deliver a high-quality service, small enough to care about all of our customers.