THE INSIDE STORY: Ironbark Zinc (ASX: IBG) is focused on the zinc component of the company’s wholly-owned Citronen base metal deposit located in Greenland.
The Citronen project currently hosts in excess of 13 billion pounds of zinc and lead with a JORC-compliant resource of 55.8 million tonnes at 6.1 per cent zinc and lead, including an Indicated resource of 29.9 million tonnes at 5.8 per cent zinc and 0.6 per cent lead, and an Inferred resource of 25.9 million tonnes at 5 per cent zinc and 0.7 per cent lead.
This includes a higher grade resource of 22.6 million tonnes at 8.2 per cent zinc and lead with an Indicated resource of 14.3 million tonnes at 7.8 per cent zinc and 0.7 per cent lead and an Inferred resource of 8.2 million tonnes at 7.1 per cent zinc and 0.7 per cent lead.
The company recently lodged a formal application for an Exploitation Licence (Mining Licence) for Citronen with the Greenland Government authorities.
“Being able to lodge the Mining Licence application is a defining step forward, not just for the Citronen project but for Ironbark as a company,” Ironbark Zinc managing director Jonathan Downes told The Resources Roadhouse.
“Defining because it is an important step that enables us to progress the project that much closer to towards developing a globally significant zinc mining operation, which will ultimately rank as the fifth largest in the world.
“The thing that defines the Citronen project, as far as being ASX-listed junior exploration play goes, is that zinc has, in recent times, been a neglected commodity.
“There is no other ASX-listed company that has dedicatedly focused on a zinc project right through such a long period of negativity and taken it as far as we have.
“We have followed it through. We purchased a world-class asset and have spent over $50 million taking it through a BFS to now having just lodged our Mining Licence permit.”
It is true that zinc has not been high on the commodity hit-list as investors and developers have concentrated their collective attention on the traditional market favourites of gold and iron ore.
So much so, one could say this has resulted in zinc being under-invested for far too long, however, this looks likely to change with a serious shortage about to hit the market.
Zinc is probably the one commodity that is the most resource-constrained and there is very limited, potential new supply to come on to fill the gap.
The key to this supply issue is the depletion and upcoming closure of great producing zinc mines, such as the 500 tonnes per annum Century mine of MMG and the 215,000tpa Lisheen mine of Vedanta Resources, which are both scheduled to close in early 2015.
Zinc prices are on the rise. While this is not any great phenomenon it is to be expected according to mining engineering economists AME Group, which suggests zinc price forecasts are being driven by impending mine closures.
These closures of Lisheen and Century are not inconsequential with the zinc market experiencing a 200,000 tonnes deficit from the first half of 2014, and MMG facing delays with its proposed 215,000tpa Dugald River operation in Queensland.
All this conspires to indicate the zinc market faces a deficit of over 4300,000 tonnes in the full year 2014.
In June the LME zinc spot settlement price rose by a healthy 7.7 per cent taking it to US$2,214 per tonne.
AME Group said zinc prices reached three-year record highs during June this year as LME stocks tumbled to four year lows.
“In June, LME warehouse stocks continued their falling trend from December 2012 and fell another 43,000 tonnes, or 6.5 per cent, to 668,000 tonnes, a level not seen since November 2010,” AME Group said.
Another contributing factor to the rise in zinc’s fortunes has been a slow rise in production of refined zinc, only four per cent during May to 461,000 tonnes, in China.
AME explained Chinese production of zinc is broadly cyclical, which has its analysts expecting refined zinc production to fall further.
“In May, Chinese imports of finished zinc were down month on month by 24 per cent to 49,000 tonnes; however, year-to-date quantities are still 27 per cent higher year on year compared to 2013,” AME said.
“Chinese imports of zinc concentrates, whilst down 21 per cent year on year in April, are still showing a 21 per cent increase for the first third of the year compared to 2013.
“The influx of imported concentrates into China have seen treatment charges (TCs) climb to US$140-155 per tonne, up from US$135-145 per tonne.
“This has been the second consecutive month of increases with rises in April attributed to ample local supply.”
No matter which way you approach it, the result will be a serious lack from the supply side of the global zinc equation.
The situation is underlined by the fact there have been very few companies with the vision to explore new deposits or develop new mines for a very long time.
“The serious supply issues are going to bite and they’re going to bite hard. There will be a classic zinc run, like the one we saw back in 2007, where zinc ran all the way up to hit US$2.20 per pound,” Downes said.
“At the moment the long-term tenure average for zinc is around US$1.30 per pound, and at present the price is sitting around US$1.02 per pound.
“Even if it gets back to long-term average we are looking at developing a very healthy mine, which means that should we see a real tightness in the market, which many analysts are forecasting, we anticipate seeing an extraordinary zinc run.
“We are on the starting blocks. We have done everything – the granting of the Mining Licence Application was the final piece of the puzzle – so when the zinc run comes we will be ready for it.”
A recent capital raising of $2.5 million ensures the company can continue to progress permitting and pre-development preparation works at Citronen.
The placement was strongly supported by Ironbark’s loyal shareholder base to the point where it was more than four times oversubscribed.
“Our shareholder base, which includes strategic partners China Nonferrous, Nyrstar and Glencore, has a strong attachment to and understanding of the global zinc industry,” Downes said.
As part of the Mining Licence application, Ironbark will undertake a full Feasibility Study covering the Process Plant, Infrastructure Works, Mine Development-Underground and Open Pit, Tailings Disposal, Power Generation, Accommodation and Emergency Services, Ship-Loading and Shipping and Execution Planning.
“We look forward to making significant progress on permitting and development as we progress the project to the next stage,” Downes continued.
“This is a fantastic project, in a supportive mining jurisdiction that will be producing a much sought-after commodity.
“How can we not be excited by what the future may hold?”
Ironbark Zinc Limited (ASX: IBG)
…The Short Story
350 Hay Street
Subiaco WA 6008
Ph: +61 8 6461 6350
Fax: +61 8 6210 1872
DIRECTORS and MANAGEMENT
Jonathon Downes, Adrian Byass, Gregory Campbell, Chris James, Peter Duncombe Bennetto, John McConnell, David Kelly, Gary Comb
Nyrstar NV 23.62%
Glencore Xstrata 10.66%
L1 Capital 8.16%
Board and Mgt 5.9%