Korea Zinc to Invest in Canada's Woulfe Mining, Units (Update1)

SEOUL, Nov. 24 -- Korea Zinc Co., the world's biggest producer of refined zinc, agreed to buy stakes in Canada's Woulfe Mining Corp. and the miner's Korean units to take advantage of rising demand for minor metals, gold and silver.

The Korean company signed an initial agreement to buy 33.3 million new shares, or a 13.46 percent stake, in Woulfe Mining for C$10 million ($9.8 million), the Seoul-based company said in a regulatory filing today. Korea Zinc will also purchase new shares in the three units for a total C$40 million, it said.

The purpose of the investment is “to create a new growth engine by diversifying into minor metals including tungsten, molybdenum, gold and silver,” Korea Zinc said in the filing.

Zinc, used in rust-proofing steel, has fallen 17 percent this year, underperforming copper's 12 percent gain and gold's 25 percent jump. Silver soared 63 percent. Lack of investment in new mines will curb growth in molybdenum supplies for at least three years, Catherine Virga, an analyst at CPM Group Inc. said on Oct. 11. Molybdenum is used to toughen steel in alloys.

Under the terms of the deal, Korea Zinc will buy 51 percent of Sangdong Mining Corp., which is leading a project to re-open a molybdenum and tungsten mine in Korea, and 51 percent of Muguk Gold Corp. and 40 percent of Yeonwha Mining Corp., it said.

Korea Zinc ranks the first in terms of 2009 output of refined zinc, followed by Nyrstar and Hindustan Zinc Ltd. and Xstrata Plc., according to London-based metals-consulting company CRU.