Outokumpu reconsiders Tara sale

Outokumpu has confirmed that it has held talks with several firms regarding the sale of its 200,000-tonne-per-year Tara zinc mine in the Irish Republic, but refused to confirm reports that Inmet Mining (IMN-T) was a potential buyer, reports Reuters.

Outokumpu spokesman Eero Mustala told the news service, “We are discussing with the different buyer candidates. I can’t give out any specific names.”

The Irish edition of the Sunday Times reported that the Canadian miner was in talks to buy the mine in a deal valued at more than $138 million.

Outokumpu suspended mining at Tara in early November of 2001, saying it would wait for an improvement in the zinc markets before bringing Tara back into production. Underground development work continued. Tara’s resource at the end of 2000 was 29 million tonnes grading 7.9% zinc and 2.2% lead.

Earlier this month, Outokumpu announced plans to for an improvement program to “secure the profitable operation and increased value of the Tara zinc mine in Ireland.” The company said it would make a decision on whether to restart production in May. Under the plan, the operation could be up and running as soon as June with pre-restart investments estimated between $14 million and $28 million.

Inmet held discussions with Outokumpu last year about buying Tara, but the Finnish company decided to hold on to the property and wait for zinc prices to recover.

Tara sale is part of a plan announced last year by Outokumpu to exit the capital intensive base metals mining business and sell off three of its mines including Finland’s Pyhasalmi copper and zinc operation, Tara and the Black Swan nickel mine in Australia.

Earlier this month, Outokumpu wrapped up a US$64-million deal with Inmet buying its Pyhasalmi copper-zinc mine in central Finland. The deal also includes an exploration portfolio, an alliance aimed at sharing mining and mineral processing technology, and life-of-mine, off-take agreements for copper and zinc concentrate from Pyhasalmi.

The deal cost Inmet $63.8 million in cash, the issuance to Outokumpu of a $19.8-million, 10-year, 6% promissory note plus 4 million shares at $4.50 apiece. As a result of the share issuance, Inmet now has about 39.3 million issued and outstanding shares, of which Outokumpu owns about 10.2%. Also under the deal, Outokumpu’s chief executive, Jyrki Juusela, joins Inmet’s board of directors.

Pyhasalmi, 60 km south of Oulu in central Finland, produces 30,000 tonnes copper and 14,000 tonnes zinc annually. The mine has reserves of 17.2 million tonnes with average grades of 1.2% copper, 2.8% zinc and 0.4 gram gold per tonne. An undeveloped low-grade pyrite zone carries 18.5 million tonnes containing 0.4% copper, 0.5% zinc and 45% sulphur.

Outokumpu has sunk about US$57 million into modernization during the last four years, and in July commissioned a 1,450-metre, fully automated hoisting shaft raising production rates to 76 tonnes per person per shift — among the highest in the industry. Operating costs dropped in turn with Pyhasalmi now producing copper at around US$530 per tonne (US24 per lb.). Direct mining costs averaged US$10.50 per tonne.

Mustala added that Outokumpu was in talks with several companies regarding the sale of the small but high-grade Black Swan nickel mine 53 km northeast of Kalgoorlie-Boulder, 600 km east of Perth. At the end of 1999, reserves were 1 million tonnes grading 4.2% nickel, with about half a million tonnes being mined annually for production of 20,000 tonnes nickel.