/ 17 July 2008

Low zinc price sinks Burkina Faso mine project

Plans to dig West Africa’s first zinc mine in impoverished Burkina Faso have been scrapped due to funding problems linked to depressed zinc prices, the project’s Australian owner, Aim Resources, said on Thursday.

Aim held an agreement to ship 45 000 tonnes of concentrate a year to Brazilian metals group Votorantim once its Perkoa mine started up, and it had also sought to supply other firms such as Xstrata in Spain and Boliden in Sweden.

”Current zinc prices and forecasts have made funding difficult for zinc projects and a downturn in both debt and equity markets has also significantly reduced financing opportunities,” Aim said in a statement.

Construction work started more than a year ago on the mine, which was tipped to become the single-largest contributor of gross domestic product to Burkina Faso, one of the world’s poorest countries. About 90% of the population is engaged in subsistence agriculture. Cotton is the main cash crop.

London Metal Exchange-traded zinc dropped almost 3% overnight to $1 795 a tonne and has lost over 20% of its value since January as supply outpaces demand. Most analysts predict the market to remain solidly in surplus.

Canada’s Teck Cominco said on Tuesday it was closing its Lennard Shelf zinc mine in Australia next month as lower prices had made it uneconomical to run.

Also in Australia, Zinifex has agreed to a friendly takeover by Oxiana, whose main asset is a copper mine in Laos, to help reduce its exposure to zinc. The new firm is called Oz Minerals.

Aims said it had explored funding options, including partnerships, to keep the project afloat without success.

Its board of directors would continue to evaluate ways to fund the mine, but ruled out an outright sale given present market conditions, it said. — Reuters