Irish zinc mines are past their peak in terms of production, writes Ciarán HancockBusiness Affairs Correspondent
LUNDIN MINING'S decision to close its lead and zinc mine at Galmoy in Co Kilkenny deals a huge blow to the Irish mining industry.
Galmoy, which was once controlled by Sir Anthony O'Reilly, is one of three large zinc producing mines on this island - the others being Tara in Co Meath and Lisheen in Tipperary.
Between them, they employ more than 1,000 workers and account for roughly 40 per cent of Europe's zinc output and 4 per cent of global production.
But each is past its peak in terms of production. Mining giant Anglo American is already working on a plan to wind down operations at Lisheen by 2013.
Zinc lies at the heart of industrial production, being used to galvanise steel products in both construction and car making. But prices have always fluctuated wildly, driven by supply and demand factors. Prices languished well below $1,000 a tonne at the turn of the decade, making the Irish mines unprofitable. However, in recent years prices bounced back, hitting about $4,500 a tonne fuelled by demand from China and India.
But they have fallen by about 50 per cent over the past year as global demand eased. In addition, energy prices have soared and the dollar has weakened against the euro. This has made it tougher for Irish mine operators, who get paid in dollars but have to meet their costs in euro.
That said, the Irish zinc sector has enjoyed a couple of sunshine years. Galmoy made a profit of €42.7 million in 2006 and a surplus of €8.7 million in 2005.
Galmoy paid no tax in either 2005 and 2006 due to the losses carried forward from earlier years. Its 2007 accounts are sure to show another healthy surplus.
Tara, which opened in 1977, is even more profitable. The company paid a €97 million dividend to its Swedish parent Boliden in 2007.
None of this will matter to the hundreds of miners here set to lose their jobs, but there is a chink of light at the end of the tunnel.
Minco and Connemara Resources are both prospecting in the Pallasgreen area in Limerick, where "world class" zinc deposits are said to be ripe for picking.
If this proves to be true, Ireland could remain as a leading zinc producer for some years yet.