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Ironbark Zinc eyes development of world-class zinc project

Ironbark was recently awarded a mining permit at Citronen.
Ironbark Zinc eyes development of world-class zinc project
The stock is trading up 75% over the past 12 months

Ironbark Zinc (ASX:IBG) continues to advance its wholly-owned Citronen project, one of the largest zinc projects in the world, located in Greenland.

The stock is trading up 75% over the past 12 months, supported by a strong zinc price that rallied 60% during 2016.

The project has a current 2012 JORC resource of 70.8 million tonnes at 5.7% zinc and lead, which represents over 13.1 billion pounds of zinc and lead.

This gives Ironbark the opportunity to develop one of the world’s largest zinc mining operations.

The company was recently awarded a mining permit at Citronen, a major milestone in the project’s advancement, as it gives the company the right to exploit the project for a 30 year period.

Ironbark is also actively seeking to grow, with Glencore to provide Ironbark with a US$50 million convertible note funding facility to acquire assets and for working capital.

Additional benefits of the Glencore partnership is attractive offtake and marketing arrangements have been agreed.


Project portfolio

Ironbark’s has projects located in the Greenland and in the Australian state of New South Wales.

- Greenland: Citronen zinc-lead project (flagship);
- Greenland: Mestersvig zinc-lead-silver project;
- Greenland: Washington Land zinc-lead-silver project;
- New South Wales: Captains Flat base metals project (joint venture with Glencore); and
- New South Wales: Fiery Creek copper-gold project.


Citronen project

Citronen rates as one of the world’s largest credible zinc development projects at an advanced post-feasibility stage.

Citronen holds over 13 billion pounds of zinc and lead and has a projected 14 year mine life, which is defined only by the limits of drilling.

In April 2013, Citronen’s feasibility report forecast a pre-tax net present value to the project of US$609 million.

Significantly, Ironbark was recently granted a 30-year mining licence for Citronen.

Ironbark is now advancing towards the financing and development of Citronen.


Recent developments: financing and development

Following the grant of the mining licence, Ironbark entered into an agreement with China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd (NFC).

The agreement will:

- Incorporate current Chinese equipment and construction costs into the Citronen feasibility study;
- Prepare a project study report in compliance with the financing requirement of China's banks;
- Ensure the technical criteria is in compliance with local laws, regulations, standards and codes in Greenland and China; and
- Assist Ironbark in securing Chinese project debt financing for the development of Citronen under the terms of the earlier memorandum of understanding.

Ironbark will see the Citronen feasibility study updated and tailored to meet the Chinese banking requirements that will target 70% debt financing and provide NFC with an option to acquire up to 19.9% of the Citronen project.

NFC is one of the world’s largest construction engineering groups and has the relevant experience and the capability to provide the key equipment for the Citronen project.


Zinc market

Zinc was one of the top performing commodities in 2016 gaining 60% as the markets supply/demand balance tightened dramatically.

Zinc reached an eight year high during February 2017, trading over US$2,950 per tonne.

Currently at US$2,780 per tonne, zinc remains a top performing commodity.

Miner and commodities trader Glencore (LON:GLEN) expects zinc prices to remain high as tight supply translates into lower metal production in 2017, which should cause further inventory drawdowns.


Analysis

The recent granting of the mining permit provides a platform for Ironbark to move forward with the development of the project and realise its goal to become a major mid-tier mining company.

It is a particularly significant achievement for Ironbark given Greenland has approved only six mining operations over the past eight years.

This platform has already been supported by the recent agreement with NFC, representing a major step towards advancing the financing and development of Citronen.

NFC has a strong relationship with the Chinese banking sector that is expected to provide a strong basis to achieve the debt funding objectives of 70% of the capital for Citronen.

The Citronen resource remains open ended in every direction, conceivably adding many years to the current life of mine of 14 years.

Ironbark shares are trading up 75% over the past 12 months, currently priced at $0.087.

The company is well positioned with a 100%-owned advanced zinc resource with a granted mining licence, in a market of rising zinc prices and a financing pathway with major partners.

Ironbark is sufficiently funded after raising $2.3 million in January via the issue of 28.75 million shares in a placement priced at $0.08 to sophisticated and professional investors.

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