ZMI accelerates drilling campaign to take advantage of buoyant zinc price

Published at Aug 10, 2016, in Equities

Zinc of Ireland (ASX: ZMI), formerly Global Metals Exploration (ASX: GXN) has quickly mobilised its drilling rigs to target shallow, high grade mineralisation and extensions at its Kildare Project located 40 kilometres south-west of Dublin.

Having formalised the acquisition of 21 prospecting licences in seven project areas in Ireland for a total landholding of approximately 750 square metres on July 22, this development comes less than three weeks after purchase, highlighting management’s intent to accelerate exploration activity.

ZMI benefits from the fact that the projects acquired have undergone varying levels of exploration under previous ownership with historical drill results including 48 metres grading 12.2% zinc and lead from 14 metres, as well as 61 metres grading 10.3% zinc and lead from 6 metres.

The near surface high grade mineralisation is significant in terms of the company moving relatively quickly from exploration to development. It is also important in terms of minimising costs of exploration and proving up a commercially viable project.

The drilling program will test historical shallow mineralisation and potential extensions to historic mineralisation with a total of four holes across a 1000 metre section. Upcoming drilling results a potential share price catalysts, but it needs to be noted that investment decisions should not be made on the basis of exploration assumptions.

As a backdrop, ZMI raised a total of just over $1.3 million before costs under a prospectus dated July 19. Shares were issued at .08 cents together with one free listed option exercisable at 2 cents, expiring on July 21, 2017.

The placement was heavily oversubscribed and this is reflected in the subsequent share price performance which has seen a circa three-fold increase relative to the placement price. Shares in ZMI hit an intraday high of 2.6 cents on Monday of this week before closing at 2.3 cents, equivalent to Tuesday’s closing price.

Macquarie flags zinc as its favourite base metal with more to come in 2017

It would appear that ZMI is targeting the right commodity with zinc being the best performing base metal in 2016. Various analysts from Macquarie updated their view on precious and base metals, as well as the likes of iron ore and coal at the start of the week.

Copper was considered ‘past its best’ while nickel was viewed as a ‘potential improver’, but zinc received a ‘favourite’ rating as the broker highlighted an even better performance is expected next year.

There have been some strong rallies from microcap stocks in this space over the past six months with Red River Resources’ share price increasing more than three-fold from circa 8 cents at the start of the year to hit a 12 month high of 25 cents yesterday.

There has also been robust support for Heron Resources with its shares doubling in the last six months to yesterday’s 12 month high of 17.5 cents.

Importantly, in terms of peer comparisons, both of these companies are yet to bring their projects into production, indicating that investors are looking to move ahead of the curve which effectively brings ZMI into contention.

However, it should be noted that both share prices and commodity prices are subject to fluctuation and investors should take a cautious approach to any investment decision in ZMI stock and not base that decision solely on the price movements of the company and its peers.

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of Maven Capital Pty Ltd (AFSL No. 418504). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

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S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

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