SYDNEY - Sandwiched between rows of vineyards and a town dump in southern Australia, Kevin Moriarty plans to dig up hundreds of thousands of tonnes of zinc now the price is right.
Moriarty is chairman of Terramin Australia, which is scheduled next year to start mining annually 70,000 tonnes ofthe silvery metal used to keep steel from rusting, with the financial help of US commodities trader Sempra Metals & Concentrate.
Sempra Metals is a subsidiary of Sempra Energy, which has agreed to pay up to A$17 million ($18.3 million) to help finance development of Terramin's Angus deposit, located about 1800km west of Sydney.
Sempra also has agreed to buy all the zinc with lead - estimated at 17,000 tonnes a year - the mine can yield.
Moriarty said the mine had enough ore to last for a minimum of 14 years.
"Sempra came to us, as did just about every other commodities trader," Moriarty said.
"Supplies of zinc all over the world are tight and traders are anxious to secure material."
Although the deposit on the outskirts of the town of Strathalbyn has been known for more than a decade, low demand and prices for zinc discouraged development by the previous owners, the now-defunct Aberfoyle group.
"When the price was low, it was hard to get a new project off the ground," Moriarty said.
Terramin had aimed to go public in 2002, but postponed the listing on the Australian bourse for two years as metals prices tanked and investors shied away from mining stocks.
In late 2001, Australian mining giant Pasminco went bankrupt, citing a low zinc price and bad investments.
But this year zinc prices have vaulted above US$1400 ($1975) a tonne for the first time in more than seven years, thanks to a resurgence in demand for steel at a time when many mines are running out or have little spare to sell.
Inventories of zinc held by the London Metal Exchange have fallen by more than 200,000 tonnes in the past year to about 540,000 tonnes.
