Ironbark Zinc (ASX:IBG) sees itself as fortuitously positioned in the current zinc market given its plans to develop one of the largest zinc projects in the world.
The 100% owned Citronen Zinc Project located in Greenland is at an advanced post-feasibility stage and valued at US$609 million.
Zinc is the fourth most consumed metal by volume and the supply gap is growing with major mines closing in recent years due to depletion.
Stockpiles of zinc at the London Metals Exchange are currently at 12 year lows and have been rapidly declining in 2017 to date.
To put more strain on the zinc price, demand for the commodity is growing at a forecast rate of 3% in 2017 as estimated by resources consultant Wood McKenzie.
Background
In April 2013, Citronen’s feasibility report forecast a pre-tax net present value to the project of US$609 million.
More recently, Ironbark has continued to progress the development of the wholly owned Citronen zinc project which is now permitted for a 30 year mine life.
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).
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.
The agreement is a major step towards advancing the financing and development of Ironbark as it progresses to become one of the world’s largest zinc mining companies.
NFC agreement: credible financing pathway
Under the agreement, NFC is to:
- 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.
Moving beyond the existing Memorandum of Understanding with NFC, Ironbark will see the 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.