Whenever it does manage a year's production at full capacity, the Arcon Mines operation at Galmoy, Co Kilkenny, is likely to generate annual revenue of more than £36 million, according to one Dublin analyst.
The company believes the mine could have a life of 13 years, and recent findings indicate there may be further ore bodies. So revenue in the region of £460 million could be produced by the mine during its lifetime, if the analyst is correct.
The ore is made into concentrate which is then sold to smelters. Deductions are made depending on the quality of the concentrate. The world price for zinc fluctuates.
Nevertheless the analyst's figure illustrates the scale of the Co Kilkenny resource. The company's debt, which exceeds $85 million (£62 million) but some of which is due to the parent company, is not so formidable when the value of the ore body is taken into account.
Mining companies have no control over the price at which they sell their product and so can only influence profitability through controlling cost base. The world price for zinc is currently at $1,070 per tonne, which is low. A base metal price survey carried out by Reuters this week has analysts predicting a price rise to $1,300. The analyst's revenue estimates are based on a conservative average price of $1,200, and so the value of the Galmoy mine could be greater.
This is the background to the strike at the Co Kilkenny mine which has been under way for the past two weeks. The company argues that it must control costs, that it is a small Irish company with large debts, and is in start-up mode. The union, SIPTU, argues that Arcon must begin to move towards bringing pay rates into line with those paid at Tara Mines. Both sides say they are willing to negotiate but differ on what sort of negotiations.
Arcon employs 145 people, some 78 of whom are in SIPTU. Many of the non-SIPTU employees are professionals. Last September the company agreed a company-union "house agreement" with the local branch of the ATGWU. However, that same month SIPTU began to represent some of the workers. SIPTU wrote to management in September on the workers' behalf. According to SIPTU's Kilkenny branch secretary, Mr Phil Funchion, the company did not respond to the letter, other than to say they had an agreement to recognise the ATGWU.
The September letter included broadly the pay claim the union was making, according to Mr Funchion. A Galmoy worker would get £16,000 per year, and a Tara mines worker £36,000 to £38,000, according to SIPTU. Arcon managing director Mr Jim Tilson, says Tara Mines has the highest operating costs and lowest efficiency in the world.
In October SIPTU, having not had a response to its pay claim, balloted its members for industrial action. However, industrial action was held off after it transpired the company was to attend Labour Relations Commission talks in Dublin on November 25th. The company recognised SIPTU's right to represent the workers.
At that meeting, Mr Funchion says, the union put forward its pay claim and the company said that wage increases would be in line with Partnership 2000. "When the lads got an absolute no to their claim, they went away and considered it and decided to serve notice for December 11th," Mr Funchion says.
There were further meetings but when the union decided that nothing greater than the terms of Partnership 2000 was on offer, notice of industrial action was reactivated. The new date was set for January 29th. Last minute talks were unsuccessful and the strike went ahead.
The company says it will not negotiate until the strike ends. The union says it will not end the strike before negotiations on pay. The company wants agreement on procedures and the company union relationship before it negotiates on the pay claim.
Arcon chief executive, Mr Tony O'Reilly jnr, said that last September SIPTU lobbied the Arcon workers in reference to other mining operations in Ireland. "We are willing to address the pay claims of our employees as best we can but they are not going to get Tara Mines rates at Galmoy."
