Zinc in them thar hills
Thursday March 30 2006
THE Irish mining industry is enjoying a renaissance as the price of both lead and zinc continue to set new records on the London Metal Exchange, encouraging explorers to plough millions into the search for new orebodies, as well as the re-examination of previously discovered deposits.
The most exciting of these is the Pallas Green deposit in Limerick, where multinational Noranda is working alongside its small Irish partner Minco in appraising a find judged to have the potential to rank alongside either Galmoy or Lisheen in size.
The Pallas Green project also encompasses the region around Castlegarde, where much of the area still remains untested by diamond drilling.
Minco believes that not only does Pallas Green represent a new discovery, but is analogous to the major mineralised zone called the Rathdowney trend, which has yielded both the Lisheen and Galmoy orebodies.
Its chief executive, Matthew Dorman, recently described the prospect as one of the best zinc assets in Ireland - and last year, the partners added a third drill rig to the two already working on the extensive site. By next month it is anticipated that a fourth rig will be drilling in the vicinity.
Industry watchers believe that the mineralised zone around Pallas Green extends for about 25km and that within that, there are at least two potential mine targets - just as Galmoy and Lisheen form two targets within the Rathdowney mineralised zone.
One of these targets extends for over one kilometre, making it comparable to the giant Tara orebody, a mine which ranks as the biggest zinc find of the 20th century.
"The current upswing is a window of opportunity for the industry," said one mining executive, who added that the industry is now paying the price for years of under-investment.
Paying, that is, through a shortage of production. While demand for zinc from China and India has soared, over the past two decades the industry largely failed to invest in new mines. Neither did it invest in new smelting capacity, with the result that it is now playing catch-up.
The executive estimated that this shortage will last for at least the next six years, possibly ten. "Unless the global economy falls apart, high zinc prices will last for the next six years - that's how long it will take supply to catch up with demand," he said.
In the meantime, zinc miners and explorers have the chance to cash in and no one will want to do so more than Noranda, the firm which operated the Tara mine for the decade between 1975 and 1985, when it cut its losses and sold out to Outokumpu.
Noranda had been attracted to Ireland as a 'white knight' in the struggle for control of Tara, supporting Pat Hughes' firm Northgate in its bid to retain control in the face of a hostile bid from Cominco.
Unfortunately, it never made any money at Tara, as for the entire decade zinc prices remained on the floor.
Since the middle of the last century Ireland has had an unbroken record as one of the major zinc regions of the world, with mines such as Tynagh in Galway and Silvermines in Tipperary puting the country to the forefront of the industry.
Both of these had been discovered and mined by Irish Base Metals, the Irish offshoot of Canadian giant Northgate which was also involved, along with Noranda, in the 1970 discovery of the giant Tara orebody at Navan in Co Meath.
The discovery of Tara sparked something of a zinc rush - but while millions were spent collecting miles of core samples and in conducting every type of geophysical survey, all of the subsequent discoveries were sub-economic.
For much of the period from 1975 on, the failure to add a major mine to Tara and the poor price of zinc on world markets meant that exploration was extremely hard to justify.
By the early part of this decade all of the major players had exited the Irish exploration scene, leaving only small Irish companies actively searching for zinc.
It was also a difficult time for mine operators. Estimates suggest that zinc producers need a price of at least $1,000 (?831) a tonne to justify mining. But for much of the period from 1975 prices were barely above this, while just two years ago they had dipped to a low of $800 a tonne.
The resurgence in zinc prices means that operators at Tara, Galmoy and Lisheen are at last generating huge amounts of cash. It has also led to a flood of applications for prospective terrain and has attracted the big names back to the country - the most notable being Cominco which has joined the likes of Noranda, Oarum, Lundin and Boliden - looking for new ore.
Their return marks a significant shift in emphasis, as both Galmoy and Lish een had been discovered by small Irish companies.
In 1986, Conroy Petroleum hit on the Galmoy discovery and a couple of years later Ivernia found the Lisheen orebody a few miles to the west.
The new entrants will have no shortage of potential targets, as in between the discovery of Tynagh and Galmoy, there were no fewer than seven sub-economic lead-zinc discoveries around the country, including Tatestown-Scallanstown, Oldcastle, Newtown Cashel, Keel and Harberton Bridge.
The mine at Navan is still producing today and will continue to produce ore for at least another decade. Its discovery was partially accidental, with geologists alerted to the presence of ore when workers were digging the foundations for ESB pylons, although they had already been exploring in the area.
The subsequent story of Tara and the dispute between Tara Mines and Bula was a sorry one for the Irish mining industry. As the landowners over part of the giant orebody owned the mineral rights - the land had never passed through the hands of the Land Commission - Bula was able to buy them up and drew up plans to mine the ore. The company failed to achieve this goal and the delays eventually led to a huge build-up of debt on the £44m worth of loans advanced to it by the State.
Whatever the rights or wrongs of the Tara saga, it did little to attract new entrants to the Irish mineral exploration business
Bula was put into receivership in the mid-1980s with some £64m in debts. Eventually, the company was liquidated with its slice of the orebody being sold to Outokumpu, which by then had taken over operation of the Tara mine.
Whatever the rights or wrongs of the saga, it did lit tle to attract new entrants to the Irish mineral exploration business, instead compounding the problems of a low zinc price and the lack of exploration success.
Today, the Tara mine is operated by Swedish group Boliden, which would appear to have secured a very good deal - they bought the mine in a cash and paper deal when zinc prices were on the floor.
Lundin Mining acquired Galmoy operator Arcon last year and recent reports indicated that it has already held talks about the purchase of Lisheen from its operator, British outfit Anglo American.
Sources said that a deal makes a lot of sense. Apart from the potential synergies in combining the two mine operations, which lie just a few miles apart, there are several interesting exploration targets straddling the ground between the two mines.
It marks a significant change from just three years ago, when Minco's discovery of its exciting prospect at Pallas Green was greeted with a resounding silence. Pallas Green has the potential to yield reserves comparable to those in production at Navan in Co Meath - not to mention the two other producing mines in Ireland, Lisheen in Co Tipperary and the neighbouring Galmoy deposit in Kilkenny.
