GLENCORE still needs to make a business case for the extension of the Mount Isa copper smelter, even though the operations remain strong and the environment authority on Tuesday approved its operations until 2022.
The chief operating officer of the company’s north Queensland copper assets, Mike Westerman, said the smelter needed to remain profitable, especially considering company and market difficulties.
On Tuesday, Glencore’s shares slid 30 per cent but then soared 17 per cent yesterday. “There is an absolute disconnect between the share price, and the valuation of the company,” Mr Westerman said. “I just want to make that clear.”
If further redundancies needed to be made at the mine then they would be “hard decisions” that would be “for the longterm good” of the Mount Isa community.
However, Mount Isa operations remained strong and “the trick” to operating profitably was by not putting tonnes of copper onto the market at a loss, he said.
When asked whether reducing the amount of copper on the market would affect the copper smelter’s business case, Mr Westerman said: “The decision around the smelter has everything to do with us making sure our asset is profitable in the long term.
“We would not be considering that unless we thought we had the ability to do that in the long term.”
The business case would be decided in “the near future” but several factors needed to be determined.
He said further discussions were being held with the Queensland government about rail rates.
Glencore needed to be certain that the nearby acid plant belonging to fertiliser company Incitec Pivot continued to take the smelter’s gas until 2022. The business case also depended on other mines.
Mr Westerman said third party ore would have an impact on the smelter’s profitability.
As part of the business case the company was projecting how much third party ore would be used in the smelter in the next four years.
“We can lock into our production profile to make sure that we are not only profitable for the next one to two years,” he said.
“Glencore needs to make sure our production profile drives a very low unit cost of the copper smelter so it can compete with other similiar assets in China and Indonesia, and emerging markets.”
Environment Minister Steven Miles said he was impressed with the mine’s monitoring program before he toured the copper smelter on Tuesday. “Not just of the operation but of current and forecasted weather conditions,” Mr Miles said.
The Queensland government moved all the barriers for Glencore to present a strong business case for the copper smelter.
“Really, all Glencore needs to do is make that decision,” Mr Miles said.
He said the first phone calls he took as minister after this year’s election were from Mount Isa state MP Rob Katter and Mount Isa Mayor Tony McGrady, who highlighted the significance of the smelter.
The smelter was scheduled for closure in 2016 and would affect 750 local jobs and operations at the Townsville copper refinery.
Mr Miles said the Department of Environment and Heritage Protection created an amended environmental authority for the smelter, but there were six new conditions and one amendment.
Under new conditions, the mine was required to have a community information program and introduce a smartphone alert system for locals.
Mr Katter attended the copper smelter tour on Tuesday and the following day addressed concerns from the community about falls in the Glencore share price.
He said he believed the low value of the Australian dollar would soften any blow to Mount Isa’s “robust operations”.
“The global lower copper price in Australia means our copper price is still really strong,” Mr Katter said.
“A 30 per cent drop in Glencore and 17 per cent rise the next day shows this is not the solid market advice to hang your hat on.”