Arcon's Galmoy mine goes full steam ahead despite market mishap

The recent turmoil in the Far Eastern markets had special significance for one small Irish village. The price of Zinc, the main export of the Co Kilkenny townland of Galmoy, fell by almost 20 per cent. The sudden market "correction" knocked 16 per cent off the stock market value of the mining firm Arcon, which began production there last March.

But the company's chief executive, Mr Tony O'Reilly jnr, is unperturbed by the blow. "Ultimately, there is not much you can do about prices," he says.

He points to the company's recent financial restructuring, exploration success and predicted zinc price increases as reasons for optimism. Such confidence is supported by analysts including Davy, which last June put a value of 74p a share on the company, almost double the current trading price.

Yet Mr O'Reilly admits many people still "don't realise how well we're doing at Galmoy". In the first eight months of operations, almost 50,000 tonnes of zinc concentrate has been produced, and nearly 20 shipments of the product have been made to mainland Europe. Daily output targets are now regularly being broken, and exploration work has identified almost one million tonnes of new resources.

Nature has been partly responsible for achieving such rapid results. The minerals at Galmoy are easier and cheaper to mine as they lie near the surface, between 50 and 90 metres down.

With early teething problems overcome, a reassuring daily routine has been established at the mine. The CW orebody, the first of four to be exploited at the 200acre site, is producing an average of 2,600 tonnes of material a day, five days a week.

This is transported by conveyerbelt to a pyramid-shaped stockpiling building, where it is stored for up to a week before being brought to the mill.

Here the zinc is separated from the lead, turned to powder, dried and compacted to produce zinc concentrate. Unlike other Irish mining operations, Galmoy focuses almost exclusively on zinc. Whereas the Tara mines in Navan, Co Meath, have a zinc to lead radio of about 8:5, Galmoy's is 13:1.

The final product, which is 55 per cent zinc, is loaded onto trucks and driven - at a rate of 100 trucks a week - to the port of New Ross in Co Wexford. Two shipments are made every three weeks to smelters in Europe, which have agreed contracts with Arcon and turn the concentrate into pure zinc.

Between the mine and port, there is storage space for up to 12,000 tonnes of zinc concentrate, which is potentially useful if the company wanted to wait for favourable price movements before selling. However, Mr O'Reilly says: "as a company, we don't believe in stockpiling. We believe in maximising cash flow."

A budget of more than £500,000 a year has been allocated to finding new mineral sources by the company. Among the early discoveries is a 750,000tonne resource at Templetouhy Bog.

The exploration project is concentrated on an eight kilometre strip of land running through Galmoy north-east and south-west towards the new Lisheen mine in Co Tipperary, which is being developed jointly by Minorco Lisheen Ltd and Ivernia West.

Mr Jim Tilson, Arcon's managing director, maintains the area is "as good as you are likely to find". He says the company is determined not to go the way of other operations, like Silvermines, which "died" prematurely because rich local resources were not uncovered.

"Our objective is to become a long-term operator in the mining industry and not just a once off."

Arcon has 16 prospecting licences, seven in the district and nine spread between Limerick, Offaly, Sligo and Leitrim. The life-expectancy of the Galmoy mine is 13 years. However, if major finds were made, it could stay operational for at least half that again.

"We are eager to add to our resource base at Galmoy and in Ireland. But we are also looking further afield," says Mr O'Reilly. "We've seen a lot more opportunities coming our way and a change in the quality of opportunities being presented to us. Major international mining companies are now coming to us with proposals."

Zinc, copper and gold projects in locations as diverse as Australia, Canada, the US and South America are among the proposals being examined by Arcon.

Ironically, the protracted planning row over the Galmoy mine, which lasted six years and was fought at planning hearings and in the courts, has become an asset to the company. Few mining firms can match Arcon for experience, says Mr O'Reilly.

"We're unique in that we've done everything ourselves. We did the feasibility study, we got the planning permission, we financed it, we built it, and we commissioned it," he says. "I can't think of any other mining company which has done that."