Nyrstar NV today announced that it has acquired the Contonga and Pucarrajo polymetallic mines in Peru for approximately US$23 million, in line with the Company's strategy to selectively pursue opportunities in mining.  

The Contonga and Pucarrajo mines comprise approximately 4,900 hectares of mining concessions, located 500 kilometres north of Lima in the Ancash region, which is well known for its significant zinc, lead, silver, gold and copper deposits.  The Contonga mine is located adjacent to the world-class Antamina mine, one of the world's largest copper-zinc mines.

The Contonga mine is an underground zinc-lead-copper-silver mine with more than 100 years of operating history, and is currently processing approximately 660 tonnes per day of ore. The Pucarrajo mine is an underground zinc-lead-silver mine which has been in operation for more than 30 years, and has a capacity of approximately 1,100 tonnes per day of ore. Operations at the Pucarrajo mine have been suspended since June 2009 due to cash constraints as a result of the financial crisis.   

Nyrstar intends to ramp-up both operations to a combined capacity of more than 2,000 tonnes per day of ore by the end of 2012, resulting in annual production of approximately 40,000 tonnes of zinc in concentrate, 4,000 tonnes of lead in concentrate, 1,000 tonnes of copper in concentrate and 1.5 million troy ounces of silver. The ramped-up operations are expected to operate with C1 cash costs[1] of less than US$1000 per tonne of payable zinc due to significant by-product credits.

Leveraging Nyrstar's existing operating presence in Peru, the Contonga and Pucarrajo mines will be managed in conjunction with the Coricancha mine by a single experienced management team, and will utilise the shared services of Nyrstar's Lima office.  

Similar to Nyrstar's Coricancha mine, exploration at the Contonga and Pucarrajo mines by previous owners has been limited.  Accordingly, Nyrstar intends to undertake a modern exploration program that is expected to significantly increase mineral reserves and resources.

Commenting on the acquisition, Roland Junck, chief executive officer of Nyrstar, stated:

"The acquisition of the Contonga and Pucarrajo mines allows us to continue to pursue our upstream integration into metals where we have existing expertise and proven capability, whilst leveraging the operational benefits of managing our assets in clusters. 

The Contonga and Pucarrajo mines are very competitive on the cost curve due to strong by-product credits, and will take our capacity for zinc metal production from own concentrates to approximately 25% by 2012. We continue to actively explore opportunities to deliver on our strategy."

As part of the acquisition Nyrstar will also assume debts of approximately US$16 million associated with the operations. Part of the purchase price (US$5 million) will be held in an escrow account for 12 months as security for the vendor's obligations in relation to customary representations and warranties relating to the acquisition.

Reserves and Resources

The following is a summary of the most recent reserve and resource statements for the Contonga and Pucarrajo mines.

[1] C1 cash costs are the net direct cash costs incurred from mining through to refined metal (including operating costs, treatment charges, concentrate freight costs), less by-product credits