Shares in base-metals miner Lundin Mining slid on Thursday, after the company posted a second-quarter loss of $108,42-million, and said that its Aljustral project, in Portugal, was not economically viable at current zinc prices.

The company recorded a $152,8-million noncash impairment after writing down the value of the Aljustrel operations, where it is battling falling zinc prices, high input costs and a slower-than-expected ramp-up.

Second-quarter revenue declined to $294,1-million, from $319,9-million a year earlier, which the company said was largely related to weaker zinc prices. Copper sales accounted for 70% of revenue for the period.

The company said on Thursday it was considering its options for Aljustrel, which could include a decision to target the known copper resources for early extraction, and expected to make a decision on the way forward before the end of the third quarter.

As things stand, Lundin now expects to produce 30 000 t of zinc this year from Aljustral, compared with its initial guidance of 51 000 t.

The operation is “a low-grade, high-cost operation, which at present zinc prices is not a viable business,” president and CEO Phil Wright said on a conference call.

The company realised an average zinc price of $2 115/t in the second quarter, 42% lower than a year earlier.

“The situation remains uncertain and there may be further impairment charges arising from additional capital and preproduction operating expenditures at Aljustrel," added Wright.

Lundin's admission that the Aljustrel operation cannot survive at current zinc prices comes less than a month after Vancouver-based Teck Cominco and its partner Xstrata Resources announced that they would close their Pillar mine, in Australia, prematurely because of slumping metal prices, which were compounded by a strong Australian currency.

Lundin, which owns and operates mines in Portugal, Sweden, Ireland and Spain, revised its copper and nickel production forecasts for 2008 upwards on Thursday, but cut its guidance for zinc and lead.

The company now expects to produce 96 000 t of copper and 7 000 t of nickel, thanks to improvements in copper production at the Neves-Corvo mine, in Portugal, and higher nickel and copper output at the Aguablanca operation, in Spain.

However, it is forecasting output of 45 000 t of contained lead and 181 000 t of contained zinc.

Lundin has made a series of significant corporate transactions in the last two years, including a merger with EuroZinc Mining, a $1,4-billion stock-swap deal to buy Tenke Mining, giving the company a stake in the giant Tenke Fungurume copper/cobalt project being built by Freeport McMoRan, and the acquisition of Rio Narcea Gold Mines for about $925-million.

Shares in the company declined 4,43% in Toronto on Thursday, to C$5,18 apiece.

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