Global commodities and mining giant GlencoreXstrata has halted the $139-million expansion project at its Cobar copper mine in New South Wales and dismissed its development contractor Macmahon Holdings without assigning reasons
When asked if the contract termination was indicative of the project being cancelled, Glencore's local representatives told Sydney Morning Herald, ''The company is considering its options with regard to the project.''
Just a fortnight ago, Australia's Bureau of Resources and Energy Economics said investment in the resources sector has peaked and were set to decline. The agency estimated that around $150 billion of high value projects have been delayed or cancelled since April 2012.
Just a day before, two other major miners BHP Billiton and Oz Minerals also deferred their South Australian copper projects.
Copper prices have fallen about 26 per cent from their record highs of over $10,000 a tonne in February 2011 to around $7,400 a tonne now, primarily on Chinese growth concerns and slower than expected global economic recovery.
A cancellation of the project would take Glencore Xstrata to the group of other miners such as BHP, Rio Tinto, Newcrest and Fortescue, who have been cutting their expenditure plans by shelving or cancelling resource projects in recent months.
The Cobar mine expansion involved deepening of the mine shaft in a bid to reduce production costs at the copper and silver mine.
''Macmahon is currently seeking clarification on the reasons for, and consequences of, the termination,'' the company said in a statement.
The termination of the expansion project will aggravate further the financial position of Mcmahon which forecast a $20 million loss for the current year ending 30 June.
The Cobar mine project was expected to add $6 million in revenues to Macmahon this month and a further $80 million in the next financial year. About 70 employees are working on the expansion work.
Operations at the existing Cobar mine, where about 300 people are employed, are expected to continue for now, although Glencore Xstrata declined to comment on its long-term commitment to the mine.
Separately, it has been reported that Chinese companies are eying Glencore Xstrata's large Las Bambas copper project in Peru which it has been forced to sell as part of the deal with Chinese regulators for approving the mega Glencore-Xstrata merger deal. (See: China's Chinalco and MMG Ltd eye Glencore Xstrata's copper mines in Peru)
According to latest reports, Rio Tinto is seeking to sell its 80-per cent stake in Northparkes copper mine in Australia, as the company's chief executive Sam Walsh is stepping up efforts to cut company's debt and protect its 'A' credit rating.
Bucking the trend, junior explorer and developer Rex Minerals Ltd has admitted that the change in plan of the BHP and Oz has helped it to cut the cost of its Hillside copper-gold project on the Yorke Peninsula in South Australia from 900 million to approximately 800-840 million.
Rex also said that it has clinched a $550-million project financing from China Nonferrous Metal Industry to develop the Hillside project.