News

18 May 2009

 

Nyrstar buys SRA’s mid-Tennessee mine complex for $10m

Nyrstar NV of Balen, Belgium, a supplier of zinc, lead and other valuable metals, has acquired the Mid-Tennessee Zinc Corp (MTZ) mine complex for nearly $10m from mining company Strategic Resource Acquisition Corp (SRA) of Toronto, Ontario, Canada, which had been planning to also recover germanium and gallium from the zinc residue.

MTZ acquired the mine complex in 2006 (previous owners have included Union Miniere and Pasminco). It includes facilities at three sites within about 10 miles of each other, within a 20-square-mile area of Smith County: Elmwood, Gordonsville and Cumberland. Ore is processed into zinc concentrate at the Gordonsville site, about 100 miles from a smelter and refinery owned by Nyrstar in Clarksville, TN.

Over a period of 18 months, SRA invested about $150m in a major capital program that revived the former zinc and germanium complex, which had a 28 year history of continuous operation from 1975 to 2003. SRA restarted production at MTZ in April 2008. Once in full production, the mine was expected to be the largest zinc producer in the USA. The most recent resource statement, from October, indicated a total ore reserve of about 30 million tons containing 1 million tons of zinc at an average ore grade of 3% zinc.

Last July, SRA also announced that a preliminary assessment (scoping study) had affirmed the economic viability of a proposed plant at MTZ to recover both germanium and gallium from the zinc concentrate (smelting residue), and that it was proceeding with the permitting, laboratory testing of the recovery process, as well as the planning of a pilot plant (for completion by first-quarter 2009).

However, cash costs per pound of payable zinc were subsequently well above the prevailing commodity prices. Due to both this and the credit market environment, the project was declared uneconomic. In October, SRA therefore said that it was initiating a temporary care and maintenance program at MTZ to keep the mining assets in ready condition (cutting staff correspondingly) while it pursued funding and strategic alternatives towards a restructuring to enable reinstating the project when prices improved.

However, after failing to file its audited financial statements for the fiscal year (to end September) by the end of the 2008 and failing to make interest payments on loans, in mid-January SRA and its MTZ subsidiary filed for protection in the US Bankruptcy Court, Middle District of Tennessee (Nashville) under Chapter 11 of the US Bankruptcy Code, while SRA also applied for ancillary protection under the Companies’ Creditors Arrangement Act in Canada. SRA listed assets of $1m and debt of as much as $100m; MTZ listed assets of $50,000 and debt of as much as $50m.

Nyrstar says that it intends to continue the care and maintenance program of the MTZ complex for the near future, but will review opportunities to recommence operations “as soon as commercially feasible”.

The firm adds that, once operations are restarted, the MTZ complex will continue to be a key source of zinc concentrate for its smelter in Cumberland Heights, Clarksville (which was originally built to treat concentrate from the MTZ complex), providing close to 50% of its requirements.

“Once operational, the acquisition of the mine complex provides us with an opportunity to capture a number of important synergies that should support a long-term sustainable future for Clarksville, in addition to capturing the value contained in the germanium- and gallium-rich concentrate,” says Nyrstar’s CEO Roland Junck.

See related items:

SRA reports scoping study on proposed germanium and gallium recovery plant

SRA agrees germanium and gallium leachate supply deals

Search: Germanium Gallium

Visit: www.nyrstar.com