Boliden breathes life into Garpenberg

A successful exploration program in and around Boliden’s (BLS-T, BDNNF-O) Garpenberg zinc-lead mine in Sweden has substantially boosted ore reserves, extending the mine’s life to over 10 years at current production levels, and led to the discovery of a new mineralized zone.

Boliden owns and operates the Garpenberg and Garpenberg Norra underground mines near Hedemora, 200 km west of Stockholm. Garpenberg’s orebodies contain zinc, silver and lead, together with some copper and gold. The ore from the Garpenberg mines is treated at the area’s concentrator, which has a capacity of more than 1 million tonnes per year. The main products are zinc and lead concentrates. A copper concentrate containing precious metals is also produced.

Last year, the mine yielded 58,413 tonnes zinc-in-concentrate, 20,720 tonnes lead and 3.1 million oz. silver, plus 565 tonnes copper and 6,500 oz. gold. Milled ore for the year totalled 1.1 million tonnes at a head grade of 5.8% zinc, 2.3% lead and 117 grams silver per tonne, plus 0.1% copper and 0.3 gram gold. Cash costs were US31 per lb. zinc.

The zinc concentrate is delivered to Boliden’s smelters — Kokkola, in Finland and Odda, in Norway — as well as to external smelters in Europe. The copper, lead and precious metal concentrates are shipped to the Ronnskar smelter in Sweden.

The Garpenberg area is one of the most historic mining districts in Sweden, dating back to medieval times. German miners were recruited to work the mines in the 14th century. They were called “Garpar,” and the area became known as Garpenberg.

Boliden acquired the Garpenberg mine in 1957 and brought the Garpenberg Norra mine into production in 1972. A 2,500-metre-long drift, completed in 2004, connects the two mines 800-900 metres below surface.

This year, Boliden is set to increase annual production to 1.2 million tonnes of ore, with the expansion of the concentrator and the construction of a paste fill plant, with full capacity expected by fall 2006. Garpenberg employs about 275 people.

Exploration in recent years has resulted in the discovery of several new deposits that are being mined or developed in the Garpenberg area. Under threat of closure, a new major deposit — Lappberget — was discovered between the two mines in 2002.

“But just when we were prepared to count this mining area out, we found new, extensive mineralization with high levels of zinc, lead and silver,” said Jan Mostrom, president of business area mines in Boliden’s 2005 annual report.

Lappberget now accounts for a significant share of Garpenberg’s mining production. In addition, an extension of the previously identified Dammsjon mineralization was discovered around the 800-metre level from the connecting drift in 2004.

At the beginning of 2006, ore reserves jumped to 10.6 million tonnes grading 5.7% zinc, 2.4% lead and 121 grams silver per tonne, plus 0.1% copper and 0.35 gram gold — almost triple what they had been a year earlier. Large portions of the Lappberget and Dammsjon deposits were converted into ore reserves. Lappberget now accounts for 5.4 million tonnes of proven and probable reserves, compared with a previously defined 850,000 tonnes of ore, while Dammsjon contains 3.5 million tonnes of ore, up from 500,000 tonnes a year ago.

Mineral resources have also been boosted by further drilling. While measured and indicated resources are down somewhat at 5.2 million tonnes grading 5.5% zinc, 2% lead, and 128 grams silver, plus 0.1% copper and 0.32 gram gold (compared with 7.5 million tonnes at the start of 2005), inferred resources have more than doubled to 8 million tonnes averaging 5.5% zinc, 2.5% lead, 93 grams silver and 0.4 gram gold per tonne.

“This rapid increase in the Garpenberg ore reserves shows that our strategy of focusing on mine-site exploration and allocating additional resources to drilling is yielding good results,” said president and CEO of Boliden, Jan Johansson. “We currently have a number of interesting areas in Garpenberg that will help provide new ore reserves and new production in the long run.”

Boliden spent SEK 149 million (US$20.38 million) on exploration in 2005, including SEK 100 million on mine-site and the balance on field exploration.

In December, Boliden announced the discovery of a new mineralized zone, called Kvarnberget.

“It’s a very interesting mineralization, with exciting potential for the future,” Mostrom remarked.

The new discovery was made not far from Lappberget. Of the eight holes drilled, six encountered mineralization. Highlights from that drilling include the following:

* 17.3 metres grading 6.3% zinc, 2.1% lead, 210 grams silver and 0.4 gram gold per tonne, followed closely by second intercept of 12.7 metres averaging 8.1% zinc, 3.4% lead, 132 grams silver and 0.3 gram gold in hole 1390;

* 41.4 metres of 8.7% zinc, 3.8% lead, 193 grams silver and 0.2 gram gold, plus 4.4 metres of 6.3% zinc, 3.2% lead, 0.3% copper, 63 grams silver and 1.1 grams gold in hole 1191;

* 10.3 metres grading 7.7% zinc, 4.4% lead, 313 grams silver and 0.7 gram gold in hole 1202;

* 10.7 metres averaging 7.1% zinc, 3.9% lead, 256 grams silver and 0.2 gram gold in hole 1346; and

* 7.1 metres of 3.2% zinc, 1.3% lead, 36 grams silver and 0.4 gram gold in hole 1361.

The upper limit of the new zone lies roughly 550 metres below surface and extends at least 1 km deep. The steeply dipping zone has a strike length of around 200 metres.

“This deposit is a tangible result of Boliden’s new exploration strategy, with its sharper focus on mine-site exploration, and it could make an important contribution to Garpenberg’s future ore reserves,” Johansson said.

Boliden enjoyed hefty profits in 2005 — the company’s best results in its 88-year history. The operating profit rose by 68% over the previous year to SEK 3.1 billion (US$420 million, while sales increased by 14% to just over SEK 20 billion (US$2.7 billion). The net profit rose to SEK 2 billion (US$270 million), a 68% gain over 2004. Earnings per share were up 42% at SEK 7.07.

The figures are principally a reflection of strong metals prices in 2005.

For the first three months of 2006, Boliden recorded an operating profit of SEK 1.7 billion (US$230 million), up 340% over the same period a year ago. Sales quarter-on-quarter rose 65% to SEK 7.4 billion (US$1 billion) and the net profit for the period was SEK 1.2 billion (US$162 million), more than triple when compared with the first three months of 2005. Earnings per share of SEK 4.28 marked a 387% improvement over last year’s quarter.

Boliden’s operations include the Aitik, Boliden Area and Garpenberg mines in Sweden, the Tara zinc mine in Ireland, the Harjavalta/Pori and Kokkola smelters in Finland, the Odda zinc smelter in Norway, plus the Ronnskar copper-lead refinery and Bergsoe lead smelter in Sweden.