M.I.M. bidding to reduce costs

Integrated Australian metal producer M.I.M. Holdings is slashing costs and introducing new technology in a bid to cope with the slump in metal prices, says Chief Executive Officer Norman Fussell.

In a speech to the Toronto Society of Financial Analysts, Fussell said that while the company’s Mount Isa copper-lead-zinc-silver mining and metallurgical complex is one of the world’s largest, M.I.M. has experienced a dramatic decline in profitability.

Strategic alliances with German metals giant Metallgesellschaft AG, and interests in coal and gold production including the Porgera mine in Papua New Guinea, haven’t prevented M.I.M. from being overtaken by other low-cost producers.

Net operating profit fell to A$76 million in 1991 from A$295 million the previous year because of a 15% decline in the price of copper and a 27% drop in the price of zinc, Fussell said.

Now a 14% owned affiliate of Metallgesellschaft’s Toronto-based subsidiary Metall Mining (TSE), M.I.M. has introduced several initiatives in an attempt to re-establish itself amongst the world’s low-cost producers. By reducing its workforce by more than 1,000 (including 700 at Mount Isa), the Australian company has been able to reduce its annual costs by A$70 million and increase productivity by 20%.

Fussell said he expects the new 210,000-tonne Mount Isa copper smelter, built at a cost of A$100 million, to reduce M.I.M’s copper production costs by about US6 cents per lb. when it is commissioned in August.

Other aspects of the company’s strategy include expanding its copper output towards 250,000 tonnes at Mount Isa. With a new silver-lead-zinc mine at nearby Hilton scheduled to be running at its 1.7-million-tonne design capacity by mid-year, M.I.M. expects to produce 250,000 tonnes zinc and 210,000 tonnes of lead annually.

As well, M.I.M. is bidding to avoid fluctuating treatment charges by going downstream to follow its metal products through the processing stage to market. Fussell said the downstream objective is part of the logic behind M.I.M.’s decision to double its stake in Cominco (TSE) to 22.5% and to sell its 11.3% interest in Teck (TSE).