While the purchase of the Nevinstown orebody adds value to Tara Mines, its Finnish parent still plans to sell it off, writes Conor Lally

Despite the acquisition of Bula's Nevinstown orebody, the future of Tara Mines still depends on a recovery in global zinc prices. And Tara Mines Finnish parent company Outokumpu still plans to press ahead with its long-term plan to sell the company as it seeks to exit capital-intensive base-metal mining.

The Finnish company said the acquisition of the Nevinstown orebody would greatly enhance the value of Tara Mines, which is Europe's largest zinc mine. The deal, details of which were announced yesterday, also extends the life of the mine for five years to 2014.

And although no new jobs will be created, SIPTU has previously expressed the hope that the inclusion of the Nevinstown deposit in the operations of Tara Mines will bring more consistency to the sometimes patchy nature of employment at the company. Tara has closed the mine in the past for periods, laying off workers when the global price of zinc fell so low that mining activity at the site was not viable.

Analysts said the deal was positive for both Outokumpu and for the future of the existing mine. Mr Peter Jackson of Bloxham Stockbrokers said, in the resources sector, "bigger is better".

The acquisition would improve margins for Outokumpu but ultimately the success of the company's operations in Ireland would depend on improved zinc prices, which in turn depend on a global economic recovery, he said.

"Zinc is used in pretty much everything, so when global economic conditions are slower, people are, say, drinking less cans of coke, buying fewer new cars, so that impacts on demand for zinc, which keeps prices lower," he said.

Mr Jackson added that, following three decades of over-production worldwide, many resources sectors were suffering very depressed conditions to such an extent that, when inflation was stripped out, the price of zinc was now at its lowest level "for over 50 years".

"But like all resources, zinc is a cyclical industry and this acquisition shows the Finnish company can see beyond their noses. But it is a case of bigger is better. The smaller mines are the ones that are less efficient so anything that increases the size of a mine can only be seen as a good thing."

Tara Mines managing director Mr Eero Laatio said that, while workers were laid off last November, he was confident mining would resume at the site as planned in September. He said global zinc prices had rebounded by more than 10 per cent since 700 workers were laid off last November. In March, 530 of those employees were re-hired to work on the redevelopment of the mine and the remaining 170 employees are due back at the mine when it reopens.

However, while the upswing in zinc prices was welcomed by Mr Laatio, the strength of the euro against the dollar represented a fresh headache for the company. "It is affecting us because all of our costs are in euros and all of our revenues are in dollars," Mr Laatio said.