Glencore has secured the first offtake agreement from the revived Thalanga mine, 60km west of Charters Towers.
As the Swiss mining house competes with Yancoal in the sale of Rio Tinto's Hunter Valley thermal coal assets, it emerged as the winner in a competitive offtake process for the copper concentrate from Red River Resources' Thalanga mine.
Red River picked up the zinc, copper and lead mine from the administrators of Kagara in 2014 and is on track to return the shuttered mine to production in the fourth quarter of 2017 at a capital cost of just $17.2 million.
Managing director Mel Palancian said the emerging producer was pleased Glencore had emerged as its copper offtake partner after a long process that kicked off in late 2016.
"Glencore is a well known, well understood business partner and it is important that we have a counter-party that has some strength behind it," he said.Glencore will purchase copper concentrate for three years from the Thalanga mine gate, which Mr Palancian said mitigated any risk associated with Glencore's warning last month it could no longer guarantee its copper processing facilities, which include a smelter in Mount Isa and refinery in Townsville, largely due to high energy costs.
"That is a state-wide issue that impacts everyone in Queensland and we are all doing our best to be competitive, but the agreement we have with Glencore is that they will take the concentrate at the mine gate," he said."What they choose to do with it from that point on is really up to them."
Red River has progressed to a short list of parties for Thalanga's lead and zinc offtake agreements and Mr Palancian said he anticipated concluding the discussions "shortly".
Once Red River gets Thalanga into production it will be the first "pure" zinc producer on the ASX at a time when analysts largely expect prices for the metal to rise.
Zinc last traded at about $US2500 a tonne, up from just over $US2000 a tonne this time last year but softer than a peak of almost $US3000 a tonne in February.
"The fundamentals for zinc look very good – the stockpiles are dropping, the arbitrage between prices has opened up and now we are finally seeing a response in metal premiums with the zinc metal premium jumping significantly," Mr Palancian said.
"There were a lot of large ASX zinc producers 10 years ago and now they are all gone and there is no pure-play zinc producer on the ASX, so that is our ambition, to fill that spot by bringing Thalanga back into production and then growing the business through discovery."
This story originally appeared on the Australian Financial Review