Vancouver —
Vancouver-based Lundin is offering US$63 million in cash plus 5.6 million in shares for the Irish-based zinc and lead producer. The cash-and-share deal is worth a total of US$122.7 million.
ARCON produces zinc and lead from its Galmoy mine in Kilkenny Cty., which has been operating since 1997.
The combined company is expected to produce 152,000 tonnes zinc and 46,000 tonnes lead annually, plus copper and silver, and will have US$45 million in cash. Also, the larger production base should strengthen Lundin’s position in negotiating smelter contracts.
“Lundin will nearly double its zinc production and increase its reserves by fifty per cent in exchange for some twenty per cent of its equity,” says President Edward Posey. “That would make us the largest non-integrated primary zinc producer.”
Anthony O’Reilly, Jr., chairman of ARCON, supports the proposed merger and will be invited to join the board of Lundin.
Lundin says the acquisition is well-timed because prices for zinc are at a 7-year high (US63 per lb.) and lead is at nearly a 10-year high (US45 per lb.). Inventories of both metals on the London Metal Exchange are falling because of higher demand.
Lundin wants to reduce costs at the Galmoy mine by increasing recoveries at the mill and improving overall efficiency at a cost of US$3-6 million.
ARCON holds 267 sq. km of relatively unexplored ground around Galmoy. The Galmoy deposits lie in a northeast-striking carbonate belt comprising mainly limestones.
The zinc-lead mineralization, which occurs mainly as sphalerite and galena, is replacement-style and stratabound.
Resource figures for Galmoy were unavailable. However, a revised figure compliant with National Instrument 43-101 is expected in early April.
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