Outokumpu buys Bula ore for €35m

FINNISH metals group Outokumpu is to buy the Bula ore body next to its Tara zinc mine in for €35 million which will extend the lifetime of the mine.

Production has been suspended since November last year due to weak markets, but the company, buoyed by the Bula deal, plans to restart the mine in September.

Outokumpu said acquiring the Bula ore body and completing a southwestern expansion would "significantly enhance the value of the Tara mine". It will buy the ore body from Bula receiver Laurence Crowley who was appointed receiver back in 1985.

Protracted legal wrangling between the banks and former directors Michael Wymes and Richard Wood resulted in a High Court case that lasted 277 days the longest in Irish legal history.

Subsequent appeals to the Supreme Court meant the line was not drawn in the sand until 1999 when Mr Crowley said he wanted to proceed with the sale of Bula.

Legal costs ran into millions, with the cost of the first trial put at about 4m while the bankers to Bula were owed just over 73m by the time the saga ended in 1999. The selling price only partly meets the losses to the banks which include Allied Irish Investment Bank, Northern Bank Finance Corporation and Ulster Investment Bank.

The former directors who challenged the receivership lost personal fortunes as a result of their involvement with Bula and the subsequent legal battle with banks and receiver.

Bula's sale yesterday puts an end to one of the most contentious and bitter episodes ever in the history of Irish business.

Bula is believed to include 8 million tonnes of ore, grading 10% zinc and 2% lead. Further verification drilling will be required to delineate the size of the mine.

Outokumpu had said in June it would reopen the mine which has an annual production of almost 200,000 tonnes in September as it expected the zinc market to move back into balance towards the year end.

About 660 jobs will be restored as a result of the re-opening and Tara's communications director said the mine has a solid future.

Zinc is used largely to galvanise iron and steel. Prices for the metal have been slowly improving from last year's 14-year lows. The low price has prompted one European producer, Metaleurop, to end production of primary metal at one of its French plants.

Outokumpu chief executive Eero Laatio in Ireland said the company still aims to sell Tara as part of its move to quit capital-intensive base metal mining.

But it was in no hurry to seal a deal and no discussions were ongoing.

At one point the company was linked to a deal with Inmet, but Mr Laatio denied this.

The group bought Tara Mines in 1986 from the original founders.

Its desire to sell has nothing to do with the state of zinc mining, said Mr Laatio.

The Finnish group this month made a 1.1 billion euro bid for the 47.6% of stainless steel maker AvestaPolarit it did not already own.

Outokumpu which had previously said it would lower its stake in the company denied the move was a U-turn.