European metals company Nyrstar has about $1-billion in cash and says it wants to own more zinc mines. Lundin Mining has a zinc mine for sale that's worth about $1-billion.
It could just be coincidence, but the fact that Nyrstar has been selling bonds and stock to raise cash while Lundin is shopping assets that include its Zinkgruvan mine in Sweden has some investors talking that there could be a match here.
Nyrstar is the world's largest producer of zinc from its smelters, and it has been buying mines to feed the factories. It currently produces about a third of the zinc to feed smelters, but the company is on the record saying it wants to increase that to half in the not too distant future. Zinkgruvan puts out about 78,000 metric tons of zinc a year, and has an expected life of at least another decade.
The company also knows the Canadian mergers and acquisitions game. Nyrstar recently bought a Canadian-listed zinc mining company, Farallon Resources, in a deal that was completed in January.
To solidify its balance sheet, Nyrstar set out to raise 500 million Euros in a rights offering earlier this year. It followed that by selling 150-million euros worth of bonds. That works out to close to $1-billion Canadian dollars. That is close to the price of Zinkgruvan, based on analyst estimates of its net asset value.
There is interest from China in owning Lundin for its 24 per cent stake in the Tenke copper mine in Africa, as the Globe and Mail reported last week.
However, even if there is a Chinese bid for all of Lundin, it's not clear that the Chinese buyers would want to keep all the other assets. In that case, a company like Nyrstar could be an ally just as easily as a competitor.
Spokesmen for Nyrstar didn't immediately respond to a request for comment.