Perilya looks North
Thursday, 7th January, 2016
By Andrew Robertson
As it braces for another bad year ahead, battling base metals miner Perilya says re-opening the North Mine remains “critical” to its future in Broken Hill.
The company is desperate for a new primary ore source to replace the increasingly complex Southern Operation with its dwindling reserves, and believes the answer lies north.
Managing director Paul Arndt told the BDT that together with Potosi, the North Mine, which shut in 1993, had the potential to extend the life of its local operations to 2030 and beyond.
A management proposal to re-open the mine has already been approved by Perilya’s board and was now “sitting” with the miner’s Chinese owner, Zhongjin.
“I think it’s critical to the long term future of Broken Hill in terms of our mining operations in Broken Hill,” Mr Arndt said.
“We have commenced the approvals process and at this point in time we’re trying to work with government to try and fast track those approval processes.
“Because the mine was in care and maintenance for some time we do actually have to go through a full development approval process, and we’re trying to have that done in a proper way but also an expeditious way.”
The go-ahead for the mine could still be more than a year off, Mr Arndt said, adding the approvals process was ultimately in the hands of Perilya’s consultants and government.
“We’ve certainly got a supportive government so far; we’re in the early stage of that process.”
And with the ore it’s targeting buried deep in the mine, Mr Arndt said it would be several more years before the company could expect to see any financial return on its investment.
“So the real prize in the North Mine is the development of the ore body down to the deeper levels and that will take four to five years.”
In the meantime the miner, which made its second straight full year loss last year, continues to hang on for better economic times.
Mr Arndt said the past year had been an extremely difficult one for the company, with zinc and lead prices continuing to remain low, and that 2016 wasn’t looking any better.
“On a scale of difficulty it’s probably an eight out of ten and I think the year coming is probably going to be an eight to nine.
“So it’s more that we don’t see a rapid turnaround in circumstances.
“I don’t think (current) prices are sustainable at all, it’s just that people have a way of hanging on and that’s what we’re trying to do.”
The company would have been in an even more parlous position had it not decided to re-open the Potosi mine several years ago.
Where mining has become increasingly difficult at the Southern Operations, Mr Arndt said the shallower and more simplistic Potosi deposit was givingg up its ore with relatively ease.
“In the upper levels of that mine we’ve been able to source more ore and get a positive reconciliation that we’d hoped for but didn’t plan for.
“So the net effect of that is the mine life for Potosi is similar to when we first started to mine it.
“We’ve been able to replace the ore that we’ve mined effectively and still have five years plus.”
He said had the company not made the investment in Potosi “we’d be probably in dire circumstances at this point”.
“But the addition of Potosi has really helped to support the Southern Operations and it’s that same logic that we’ll apply with hopefully getting the North Mine up and operating.
“The operation of the North Mine along with Potosi with Southern feeding into it has the potential to extend the life out to 2030 and beyond, given a reasonable metal price environment.”
Mr Arndt also said the recent decision by workers to forego a pay rise this year was welcomed but “absolutely had to happen”.
Local CFMEU chief Greg Braes said unionists decided to roll over their existing enterprise bargaining agreement, minus any pay rise, for the next 12 months as a show of support for the struggling company.
“The decision was welcomed but also very very necessary and I think it’s important to recognise many of our staff have had no increase for three years,” Mr Arndt said.
He said that over that same period local employees working under the EBA have had significant rises that were not in line with what was occurring across the industry or reflective of the state of the company.
He said he would like to see wages frozen beyond this year.
“Where two years ago the rest of the industry really started to stop increases we’ve seen an increase in our wages bill of around $10 or $11 million a year.
“So in effect if we were able to suspend the wages at that point in time as a company we would be around $10 million a year better off.”
Despite the actions of the workforce, Mr Arndt also said he could not rule out job cuts if market conditions worsened.
“It’s just difficult to predict, we really don’t want to make any call on that.”