November 13, 2008 / 9:53 AM / 10 years ago

UPDATE 1-Lundin Mining suspends zinc production at Neves-Corvo

Nov 13 (Reuters) - Lundin Mining (LUN.TO) said it is suspending zinc production at the Neves-Corvo copper/zinc mine in Portugal and putting its Aljustrel zinc mine onto care and maintenance, in view of current low zinc prices.

Zinc prices MZN3 on the London Metal Exchange have dropped 75 percent since a record high in late 2006 as fears of a global recession amid tighter credit markets threaten to hit world demand for industrial metals.

“At Neves-Corvo, it does not make economic sense to produce zinc at these prices,” Lundin CEO Phil Wright said in a statement.

“Fortunately we have the option of utilizing the zinc facilities to treat mixed ores so that copper production at the mine can be boosted in the short-term.”

Lundin planned to produce 80,000 tonnes of contained metal in concentrates per annum at Portugal-based Aljustrel, which cost $225 million to build.

Pre-production losses and shutdown costs are expected to amount to $80 million, the company said, adding that on-going care and maintenance costs are estimated to be in the order of 4 million euros ($5.05 million) per annum.

As a result of the Aljustrel decision, the company said it has taken a charge to earnings of $8 million in the third quarter with a likely further charge to earnings of $10 million to $15 million by the end of the year.

Lundin, which is based in Toronto but operates mainly in Europe, said it believes the medium-term prospects for zinc are good and expects zinc concentrates to be in short supply once global growth resumes.

Lundin is expected to report its third quarter results on Friday.

    Reporting by Ajay Kamalakaran in Bangalore

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