Xstrata Acquiring German Zinc Operation

Xstrata Plc, based in Switzerland, had agreed to buy a German zinc smelter from Metaleurop SA for $100 million, making it Europe's biggest zinc producer. The sale follows Metaleurop’s move toward a recycling strategy in their core areas of non-ferrous metals.

The deal would boost Xstrata Zinc's total capacity to more than 600,000 metric tons from 470,000 -- 20.5 percent of European zinc metal production and 6.4 percent of global output.

Additionally, Xstrata is in discussions about the possible acquisition of Australian miner MIM Holdings Ltd., which has coal and big reserves of copper and zinc.

Reid said those talks were proceeding slowly and financing the German acquisition would not have any impact on the group's ability to do any MIM deal.

The overall price included a payment of $13 million for zinc-related inventories. The operation had another $8 million of surplus saleable inventories.

The metal is bought mainly by steelmakers for its anti-corrosive properties, but is also used in batteries and medicinal creams.

Xstrata Zinc Chief Executive Santiago Zaldumbide said the plant offered synergies with the company's Spanish smelter, San Juan de Nieva, part of Asturiana de Zinc SA, purchased last year, and was a cheaper way to expand than setting up a new plant from scratch.

"Key attractions of this acquisition include the potential for both operational and marketing synergies with San Juan, especially to the high-premium German customer base, and a possible expansion at an appropriate time in the future, which could double plant capacity to some 250,000 tonnes per annum," Zaldumbide said.

Private Swiss-based commodities group Glencore International AG has a 40 percent interest in Xstrata and also owns a third of Metaleurop.