The decision by the Finnish mining group, Outokumpu, to mothball Tara Mines is likely to be only the first step towards a sale of all or part of the Meath mining operation.
And with zinc prices currently at their lowest level in 30 years and Tara losing €3 million a month at these prices, industry sources believe that if and when Tara does reopen it will be under different ownership.
While the statement from Tara simply referred to putting the Navan mine on care and maintenance, the statement from its parent company, Outokumpu, made it clear that the Finnish group plans to get out of base metals mining entirely.
"Outokumpu to exit base metal mining" was the heading on the statement from the Helsinki head office, which added that it had hired a Canadian consultant, RBC Capital Markets, to help it either sell the Tara mine and two others in Finland and Australia or else form joint ventures with mining companies which would take over the running of the mines. In effect, Outokumpu wants to get out of an increasingly volatile and oversupplied mining industry and concentrate on its smelting and other downstream businesses.
Outokumpu's decision to withdraw from base metals mining sent zinc and lead prices higher on the London Metal Exchange yesterday. But with lead-zinc mines all around the world being either shut down or mothballed, and with no signs that zinc prices are going to improve, industry sources believe Outokumpu will find it extremely difficult to find a buyer, except at a very low price. And with industry analysts forecasting little pick-up in zinc prices in the short term, the shutdown of the Tara mine is likely to be lengthy.
Tara Mines has had a chequered history since the orebody was first discovered near Navan in the late 1960s by Tara Exploration, a company owned by two Canadian groups, Noranda and Northgate. Commercial production began in 1977, but there were heavy early losses. This culminated in the takeover of a 75 per cent stake in the mine by Outokumpu for £72.9 million, with the State retaining its 25 per cent interest. In 1989, Outokumpu bought out the State's 25 per cent stake.
Over the next decade under Outokumpu's management, Tara lurched from crisis to crisis with poor industrial relations the reason for many of the company's problems. On more than one occasion protective notice was issued to the workforce after disputes disrupted production. The most serious of these disputes took place last year but was averted after the mine workforce agreed to radical changes in work practices.
In return, Outokumpu put in place a €47 million investment aimed at boosting production from 150,000 tonnes a year to 200,000 tonnes this year.
As recently as last May, Outokumpu's commitment to base metal mining seemed secure after the Finnish group paid almost €35 million for the adjoining Bula ore-body and said this would increase production to 250,000 tonnes a year by 2004.
But in the past year the zinc-mining industry has had to endure the worst fall in prices since the Great Depression. In September last year the price of zinc was $1,300 a tonne, but that has plummeted steadily since then and reached just $750 a tonne in recent weeks. That is the lowest in real terms since Tara began operations in 1977. The market for zinc, which is mainly used in anti-corrosion galvanising, has been hit badly by the economic downturn in the major industrialised countries and a substantial oversupply. Even recent mine closures around the world and the mothballing of Tara have resulted in only a marginal improvement in zinc prices.