Junior zinc play Rathdowney Resources (CVE:RTH) is different from any other company in its small peer-group, as it has the ability to build a long-life zinc mine at "only a fraction of the cost" other peers would need to shell out, says president and CEO John Barry.
This places the company, with its flagship property in Poland, in a
prime position to benefit from the newfound buzz around zinc, as the
once-boring and over-stocked metal has become a new target for investors
given the expected increasing demand from emerging economies, combined
with the supply shortage forecast in the medium term.
In Poland, the company's properties lie in the Upper Silesian Mining
District, a region of Mississippi Valley-type (MVT) zinc-lead deposits,
which has supported a sequence of long-life zinc mines in the post WW II
era and where it has been granted two prospecting concessions and
applied for a third, encompassing an area of 150 square kilometres.
Located along strike from the operating Pomorzany-Olkusz mine,
Rathdowney's concessions were explored by the Polish State Geological
Institute, with a large historical drilling database of more than 1,000
The historical resource on all the properties is rather large at over
100 million tonnes, with a smaller but higher grade recent historical
estimate from 2008 on Zawiercie, part of the Olza project, estimated to
have 17 million tonnes in the C1+C2 category, grading 5.8% zinc and
For now, the company is looking to bring only a portion of the 100
million tonne resource to NI 43-101 compliant status, and started a C$20
million resource verification and exploration drilling campaign last
So far, it has drilled 110 holes with a total of six rigs, with the
zinc miner aiming to release a NI 43-101 compliant resource estimate by
mid-year, at which point it will start a preliminary economic assessment
(PEA) for the project.
Its Olza project is located in the historic Silesian MVT mining
district of Poland, 90 kilometres northwest of Krakow. The area has
extensive mining infrastructure including power and rail, as the project
is also near a state-owned zinc smelter complex that is expected to
have additional smelting capacity when the Pomorzany mine closes in the
next three to five years.
"For the PEA, the concept is to plug
into the state-owned infrastructure that already exists in the area, as
the plan is to just run the zinc from our mine on the existing rail to
the nearby zinc smelter, significantly reducing costs," says Barry.
makes our project more advanced and different from every other zinc
junior out there at the moment. It costs a lot of money these days to
build a new mine with power, infrastructure and plant."
Indeed, the company considers a start-up for operations with a one
million tonne of ore per year throughput through the nearby plant as
realistic, a plant which now has a 2.5 million tonne per annum capacity.
The idea would be to ramp up to two million tonnes within a few years.
Barry says this can be achieved due to the "much smaller" capex
required to start the operation as a result of the existing
infrastructure. The company wouldn't have to build a mill, concentrator
or permit waste facilities.
"We don't need to have such a large resource at the beginning. We
have a unique opportunity to get up and running with a relatively
smaller resource and get cash flow, and then build the resource around
The release of the PEA will be a milestone for the company, adds
Barry, after which Rathdowney plans to operate a few rigs to expand the
resource further, as now the miner is "mostly sampling" to verify and
compare the historical resources.
Highlights of the latest results from the company's drill program
include 2.70 metres of 25.85% lead plus zinc in hole OLZ-044, 21.73%
lead plus zinc over 2.70 metres in hole OLZ-051, and 9.38% lead plus
zinc over 3.60 metres in hole OLZ-047. In addition, hole OLZ-059 hit
6.00 metres of 4.25% lead plus zinc.
Barry says he is confident in the substantial historical resources at
the Polish concessions which have supported big mines in the past and
that he believes will have the potential to support long-life mines of
30 to 40 years in the future.
Aside from the infrastructure benefit, there is also a skilled labour
force in the area that will be looking for work once the Pomorzany mine
closes, Rathdowney's CEO adds.
The Polish project should no doubt come on the radar screen of the
big zinc producers like Xstrata (LON:XTA), which is due to merge with
commodities trader Glencore (LON:GLEN) in a $90 billion deal.
This is because, beginning in 2013, the Xstrata-owned Brunswick
and Perseverance mines in Canada, along with the Vedanta
Resources-owned Lisheen mine in Ireland will close, removing more than
half-a-million tonnes of zinc from the global system.
China's Minmetals is also on the hunt for zinc as its Century mine in Australia closes by 2015.
As a result, some of the major producers are already starting to
acquire smaller suppliers in order to secure zinc concentrate, and they
will be looking to secure mines like Olza that have a long-life supply
of the metal and are expandable.
Analysts are forecasting that the upcoming supply deficit, combined
with increasing consumption in places like China from industrial growth
and urbanization, will lead to a surge in zinc prices by mid-2014 -
sparking investment into new projects.
Zinc's uses range from coatings to protect iron and steel through
galvanization, to sheets for building and a range of chemical
applications. The metal is used in the automotive and building and
construction industries, with galvanized steel growth being the main
driver of zinc demand. The total world zinc consumption was estimated
to be 12.45 million tonnes in 2011.
With $22.5 million in the bank, Rathdowney "has the cash, and the
scaleable project with the infrastructure, making it the best in class
in terms of the junior zinc space," Barry stresses.
The company also has zinc properties in the zinc-lead-silver district
of the Irish Midlands, where its team continues to combine the data
obtained from the 2011 drill program with historical information in
order to define new targets for drill testing.
Work has now been prioritized in three project areas of Galway, Laois
and Westmeath South, with the company having drilled about 6,000 metres
and taken more than 20,000 samples.
"We haven't made a discovery yet on our Ireland properties, but we have narrowed down the project areas to three," says Barry.
"We look forward to developing the project with either our own
financial resources, or we may look at farming out these properties to
focus on Poland. A discovery in Ireland could be transformational."
Barry, an economic geologist who has worked in the exploration and
mining industry since 1988, said Rathdowney listed on the TSX Venture
Exchange in March of 2011, and currently has a market capitalization of
around $33 million with $22.5 million of cash, rendering it "cheap" at
around 42 cents per share.
The company is also backed by Hunter Dickinson, a diversified, global
mining group, who together with Rathdowney management, own around 18
percent of the junior zinc miner.