By Leia Michele Toovey- Exclusive to Lead Investing News

On the London Metal Exchange (LME), zinc prices have nearly halved to $1,198 a tonne from the end of 2007; last Thursday, lead fell to a two-year low in London.

In lead news, after reductions in automobile production, both General Motors Corp and Ford Motor Co cut vehicle production as sales slumped to their lowest level since 1991, the metal used in car batteries took a hit. Lead for delivery in three months declined $81, or 6.8 per cent, to $1,105 a tonne on the LME.  So far this year prices have dropped 57 per cent. Inventories in warehouses monitored by the LME rose to 41,200 tons.  Early Monday, zinc found support from the China stockpile plan and news Korea Zinc, the world’s second-biggest refiner, would cut production by 10 per cent for 13 months. So far, the mass amount of output cuts by lead and zinc companies have done little to stabilize the metals’ precipitous price decline.

Australian miner Oz Minerals Ltd (ASX:OZL), already in trouble due to the sharply falling value of metals, has been given one month instead of the two it was seeking to refinance $560 million in debt. The world second-biggest zinc supplier, and also a miner of nickel, copper, gold and silver, has also been granted a month-long share trading suspension by regulators, fearing the negotiations would be hindered by volatility in its share price. The extension to restructure its debt is until December 29. Under certain conditions, OZ Minerals could extend the deadline to the end of January; however, Oz minerals would not clarify what those conditions were. Last week, Oz Minerals made the announcement that it would cut production at its giant Century zinc mine by 4 per cent in 2009 and delay a$495 million ($323.5 million) in copper and gold mining projects. Costs at the Century mine were running at around $0.69 a pound, compared with current selling prices of around $0.55 a pound on the LME. 

Korea Zinc joins the growing list of companies slashing output to battle falling prices and weak demand. The world’s second-biggest zinc refiner will cut production by 10 per cent for 13 months, reducing output by 45,000 tonnes from its capacity of 450,000 until the end of 2009.  The company will closely monitor market conditions with the intention to increase output the instant market conditions improve.  

There may soon new Canadian leader in the mining sector.  The potential combination of HudBay Minerals (TSX: HBM) and Lundin Mining Corporation (TSX: LUN) would create Canada’s second-largest base metals producer as measured by market capitalization. The deal looks to be beneficial to both companies; the combination would see each Lundin shareholder receiving 0.3919 of a HudBay common share. The offer represents a 32 per cent premium over Lundin’s 30-day average trading price. HudBay will then loan Lundin $135.8 million for capital investments and general corporate purchases. Lundin will issue 97.0 million common shares to HudBay in return. However, as soon as the deal was proposed opposition was met. Analysts dislike the proposal, pointing out that Lundin’s mines are marginal at best and the company lost $200 million in Q3 2008 due to the write down many of its recently acquired projects. Jaguar Financial, which holds 5% of HudBay’s common shares, immediately, launched its own takeover bid for HudBay in hopes of putting a halt to the combination.

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