Tara may have a bit of a hill to climb

ACCOUNTS JUST filed for the Tara lead and zinc mine in Co Meath show that its Swedish parent company Boliden struck paydirt in 2006.

The Navan mine, which has had a chequered history since production began in 1977, netted Boliden a knockout pre-tax profit of €175 million, thanks largely to sky-high zinc prices of about $4,200 a tonne.

That represented about a fifth of Boliden's overall group profit.

In 2005, Tara produced a surplus of just €25 million.

Turnover, meanwhile, rose by 126 per cent to €318 million - all a far cry from a time earlier this decade when the mine was mothballed due to its high operating costs and rock bottom world zinc prices.

"The short-term future for the mine, with a current buoyant market, is positive," the directors' report boasted.

Unfortunately for Tara and Boliden, the world has changed dramatically since the end of 2006. The mine produced a smaller amount of zinc in 2007, while the price of the metal fell to $2,600 a tonne in the fourth quarter.

That price decline has continued with zinc currently trading at about $2,300 a tonne.

That doesn't factor either in the slide of the dollar against the euro.

Tara's costs are in euros, while its revenue is denominated in dollars, making it a tough place to be with the euro worth about $1.54.

On the plus side, Boliden has said the operating costs at Tara have been trimmed by about 30 per cent over the past couple of years, while the mine life has been extended to 2015 thanks to successful exploration of adjoining sites.

It will be some time before the effects of the current economic backdrop on Tara is made known but it won't be good.