By Melanie Burton
MELBOURNE, Oct 27 (Reuters) - Privately backed Auctus Minerals is gearing up to start zinc production at two mines in Australia's northeast by around August next year, just as a deficit in the global zinc market is set to bite.
The miner, backed by U.S private equity firm Denham Capital, is looking to enter into commercial supply agreements in the first quarter of next year.
"Mungana is a restart of an old mine, and King Vol is a totally greenfield site," Steve Murdoch, managing director, told Reuters. "The first ore will probably hit the concentrator in August, September."
Auctus acquired the mines last year via a A$56 million ($43 million) takeover of Atherton Resources, which held the assets following the collapse of Kagara Ltd in 2012.
The company expects to produce about 20,000 tonnes of zinc in concentrate by the end of next year, and will operate at 50,000 tonnes per annum in 2018.
The zinc market is already showing signs of stress, after the closure of several giant mines last year, including Century, owned by China-backed MinMetals 1208.HK , also in Queensland state, and Lisheen in Ireland.
London Metal Exchange zinc CMZN3 prices have surged by more than 45 percent this year, and are expected to be among the top commodity performers for 2017. Prices were trading above $2,400 a tonne earlier this month, up from six-year lows below $1,500 in January.
"Our business model is to secure this development ready project, which we've done, bring it into production, establish a consistently strong cash flow, then we monetise the asset and move on. We're about halfway through that process," Murdoch said.
The mine will be mostly zinc, with gold, lead and copper concentrates. Auctus has not yet entered any sales contracts.
"We'll be entering the commercial market in a serious way, probably in the first quarter next year ... we are engaging both traders and direct customers both here in Australia and mainly in Asia," Murdoch said.
Auctus has already rejected two offers for its project, he said.
"We are a seller ... we intend to exit the property in probably 2019. It's a very open market in terms of offtake. The best offtake that we would suggest is 'You buy us and take the whole thing'."
($1 = 1.3089 Australian dollars)