Zinc prices climbed to a three-week high on Wednesday after Swedish miner Boliden said it will suspend production at Europe's largest zinc mine in Ireland within the next month because of "unsustainable financial losses".
Benchmark zinc was the biggest gainer on the London Metal Exchange (LME), climbing 3% to $2 452 a metric ton by 11:30 GMT for its highest since May 22.
Boliden also said it expects a negative impact of 700-million Swedish crowns ($65-million) on second-quarter earnings before interest and tax because it was forced to halt output at its largest production unit, the Ronnskar smelter in Sweden, after a fire broke out overnight.
The plant's cell house was completely destroyed by the fire, Boliden said. Other production at Ronnskar, a major producer of copper, zinc, lead and other metals, was stopped for safety reasons until further notice.
In Ireland, the company on Tuesday said that it planned to lay off 650 workers at the Tara mine, which had been hit by operational problems, declining zinc prices and high energy costs, adding that its workforce would be laid off until conditions improve.
Last year the Tara mine produced 103 000 metric tons of zinc in concentrate, 40% of the company's zinc concentrate output, Boliden data shows.
The mine suspension would tighten regional supply at a time when there are no zinc inventories in LME-registered warehouses in Europe, LME data showed.
"In the long-term interest of Boliden Tara Mines, we have taken the decision to temporarily suspend operations and place the mine into care and maintenance," Gunnar Nystrom, general manager at Boliden Tara Mines, said in a statement.
Boliden's acquisition of the Tara mine in Ireland in 2004 established it as a prominent zinc and lead producer, with more than two-million metric tons of ore extracted annually.
The company said its forecast decline in second-quarter earnings is also partly because of lower than expected ore grades at Tara and its Kevitsa nickel and copper mine in Finland.