ZMI releases impressive maiden resource at Kildare

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Published 01-JUN-2017 13:40 P.M.

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3 minute read

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Shares in Zinc of Ireland (ASX:ZMI) surged 14% in the first hour of trading after the company released its maiden JORC Inferred Mineral Resource for the McGregor and Shamrock prospects at its 100% owned Kildare zinc project in Ireland.

Of course share trading patterns should not be used as the basis for an investment as they may or may not be replicated. Those considering this stock should seek independent financial advice.

It is important to note that this Maiden Resource has been established using extensive databases of historical drilling information, together with generations of geological mapping and geophysical surveys, and does not take into account the additional impact of recent drilling results.

While the Maiden Resource is impressive, a continuation of successful drilling by the company, which recently featured a 20.95 metre massive sulphide intersection at McGregor with visual concentrations of up to 25% zinc sulphide has the potential to substantially expand the size and grade of the resource, as well as reclassifying parts of the resource from Inferred to Indicated.

The Maiden Resource is large at 5.2 million tonnes, and the grade is robust at 8.6% combined zinc and lead. Interestingly, using a slightly higher cut-off grade of 6% combined zinc and lead would deliver a resource of 3.5 million tonnes grading 10.1% combined zinc and lead.

While a grade of 10.1% would be impressive, it is worth bearing in mind that based on comparable projects surrounding Kildare, on face value the current zinc price of circa US$1.17 per pound could potentially support a highly profitable project working on metrics of 5.2 million tonnes grading 8.6%.

It has traditionally been the scale of the projects and the volume of metal in the ground that have the supported long life/high return operations owned by blue-chip companies in this region.

At this run rate ZMI well positioned to accelerate transition from explorer to producer

Importantly, ZMI has been able to establish an impressive Maiden Resource in a short period of time with limited capital expenditure. This paves the way for further drilling and the potential to once again expand the resource in relatively quick time.

On this note, ZMI’s managing Director, Peter van der Borgh said, “Being able to put a high grade JORC Mineral Resource of this magnitude, grade and quality on the table within less than 12 months of acquiring the project is a huge achievement”.

Looking to the future and taking into account that ZMI has already secured an option over the former Galmoy processing plant, which once operated 60 kilometres along strike treating comparable ore, van der Borgh said, “We are very well-placed to fast track the development of the resource to take advantage of forecast strong zinc market conditions over the coming decade as the market continues to experience severe supply-side shortages”.

In the current environment, investors are likely to target companies that can bring projects into production relatively quickly, suggesting ZMI could come into focus.

It is also worth noting that institutional investors often have a mandate which prevents them from investing in emerging mining companies until a JORC compliant Mineral Resource is established.

Should this news place ZMI on the radar there is the possibility of a continuation of the heavy buying that has been evident on Thursday morning.

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