========================



UPDATE: Xstrata: McArthur Zinc Mine To Restart Immediately

djones

SYDNEY -(Dow Jones)- Diversified mining giant Xstrata Plc (XTA.LN) said Friday
it will immediately restart mining operations at its McArthur River zinc-lead
mine in Australia, following approval of an open-pit expansion by Australian
Environment Minister Peter Garrett.


The Zug-based miner will go ahead with the restart of the zinc operation with
a 150,000-metric-ton production capacity annually in the Northern Territory
despite metal prices languishing close to multiyear lows, and as demand outlook
remains gloomy.


"We want to keep producing bulk concentrate so we can keep our existing
customers. All along we have made clear that it's our intention to restart the
mine," a company spokesman told Dow Jones Newswires. Xstrata is one of the
world's largest zinc producers.


"All operations around the world are facing a tough operating environment, and
McArthur River isn't excluded. We will run the operation as efficiently as we
can. The decision to restart the mine immediately also sends a clear signal, I
believe," the spokesman said.


London Metal Exchange zinc prices are close to five-year lows at $1,125/ton.
Lead has fared slightly better in recent weeks, and is currently trading at $1,
072/ton after a four-year low of $851/ton in December.


As a result of low prices Xstrata decided to cut output of bulk zinc and lead
concentrate to 2 million tons from 2.5 million tons in December last year.
That's equivalent to 31,700 tons of contained zinc and 7,200 tons of contained
lead.


Last calender year, it produced 142,460 tons of zinc and 36,550 tons of lead
in concentrate.


Mining at the operation in the Northern Territory ceased on Dec. 17, and ore
stockpiles were exhausted by Jan. 26., after the government revoked a permit for
a US$110-million expansion granted earlier.


By then the mine had already been turned into an open-pit operation, requiring
the diversion of the McArthur River for several kilometers. But a court ruled
that an approval by a previous minister, Ian Campbell, was invalid because
correct procedures hadn't been followed.


The mine went on care and maintenance on Jan. 22. Xstrata hasn't yet
quantified production losses, but mining operations have restarted effectively
Friday, the spokesman said.


Xstrata said additional conditions for the approval were within the mine's
existing practices regarding environmental management and community
consultation.


"The decision by minister Garrett supports the fact that the original approval
of the mine's US$110-million open pit development in 2006 was correct," said
Brian Hearne, Xstrata's zinc operating officer.


The McArthur mine expansion involved the diversion of a river for several
kilometers.