Australian officials threaten to close giant Glencore zinc mine

By James Regan

SYDNEY, Aug 27 (Reuters) - Glencore Plc (Xetra: A1JAGV - news) 's McArthur River zinc mine in Australia could be ordered to close unless it improves its environmental record and increases a financial bond covering rehabilitation of the site, according to government officials.

Residents near the zinc mine, one of the world's biggest, have complained of smoke coming from a waste rock dump, traces of lead in fish, and a contamination incident last year which resulted in cattle in the area having to be destroyed.

Adam Giles, the chief minister of the Northern Territory where the mine is located, said his government had been talking to Glencore for months about the need to come up with a plan to control increased levels of reactive waste rock, a chemical which turns into sulphuric acid when it meets water.

"We have been working with the mine itself to increase its level and standards of environmental protection at the site," Giles told Australian Broadcasting Corp.

"We have been adamant that unless Glencore fixes its environmental procedures and practices we will close the mine."

Miners in the Northern Territory are required to lodge a bond to cover 100 percent of the final remediation cost at every stage of the mine's life.

Glencore's chief operating officer for zinc in Australia, Greg Ashe, said the mine was engaged in a process with the government around the bond and was committed to finding a balanced solution that meets the expectations of the government, the mine and the community.

"McArthur River and Glencore have been very frank with the government and the community about the environmental and operating challenges we've been facing," Ashe told a mining conference in the Northern Territory city of Darwin.

"The McArthur River Mine will continue to operate so long as we are able to extract and process the ore safely, so long as we're able to maintain our social license to operate and so long as we're economic."

A spokesman for Northern Territory Minister for Mines and Energy David Tollner said Glencore had been issued with an Oct (HKSE: 3366-OL.HK - news) . 1 deadline to lodge an amended bond.

"We want to see significant changes, including increasing the environmental bond," said Tollner.

The concerns come two years after Glencore was granted approval to lift the rate of mining from 2.5 million tonnes of ore annually to 5 million tonnes and the yearly yield of zinc and lead bulk concentrate from 360,000 dry metric tonnes to 800,000 dry metric tonnes.

It (Other OTC: ITGL - news) also extended the mine's scheduled closure date by nine years to 2036.

(Editing by Michael Perry)