viewAlta Zinc Ltd

Alta Zinc targets high-grade zones in 2018 as it looks to grow resource

The company aims to double the Gorno resource in 2018.

picture of zinc mine
Alta Zinc highlights tight supply of its Gorno low impurity zinc concentrate

Alta Zinc Ltd (ASX:AZI), operator of the Gorno Zinc Project in Italy, officially became the trading name of previously ASX listed entity Energia Minerals (formerly ASX:EMX) on December 4, 2017.

As well as a change of name, management will be looking for investors to gain a better understanding of the company’s zinc project with a view to turning around the group’s share price.

The company certainly appears to trade at a significant discount given it is a brownfield project with an established resource situated in a mining friendly jurisdiction with ready access to essential infrastructure.

Furthermore, much of the heavy lifting has been done for Alta Zinc in developing the mine as it was operated between 1920 and the 1980s, producing 6 million tonnes of combined zinc and lead at a grade of 14%.

$24 million invested in drilling and studies over three years

With access to 230 kilometres of underground tunnelling, the company has been undertaking an extensive exploration program, the results of which are likely to become evident in 2018.

Unfortunately, some of the extension drilling results can’t contribute to the JORC 2012 resource estimate.

However, Alexander Burns, managing director of Alta Zinc has recently been in discussions with potential offtakers and financiers who are considering this data as part of the overall picture as they assess the prospect of working with the company. 

WATCH: Energia Minerals starts trading as Alta Zinc following rebranding

Over the next 12 months, the goal is to grow the resource, as well as deciding on one of two options regarding a definitive feasibility study.

Understanding Gorno

Before getting too far ahead of ourselves it would pay to assess the attributes of Alta Zinc’s flagship Gorno project as it currently stands.

Gorno is a brownfield development based in northern Italy with a reported mineral resource of 3.3 million tonnes grading 4.8% zinc, 1.3% lead and 27 g/t silver.

The point of difference between the product that has historically been mined at Gorno and the majority of other projects lies in the low impurity zinc/lead concentrates, which can be achieved by utilising existing underground access.

There is more than just a marginal difference between the level of impurities in Gorno zinc concentrate and that produced by most other mines.

Burns said a back of the envelope figure in terms of iron (Fe) content in ore for the majority of producers was between 1.5% and 10%, much higher than Gorno’s product which is less than 1%.

Another important factor to consider is Gorno’s close proximity to end markets in Europe with a vast network of road and rail transport able to service that region. 

This combined with a range of port options, opens up export opportunities in China, Korea and Japan.

High-grade mineralisation to be targeted in 2018

Alta Zinc aims to increase the level of geological knowledge and confidence in the Mineral Resource over the next 12 months.

Arguably, of more importance though will be the targeting of new areas where high-grade mineralisation has been identified.

Five mineralised areas have been identified adjacent to the existing resource and plans are being developed to drill test these in 2018.

The commencement of these proposed drill programs will be subject to obtaining sufficient funding.

One of the early stage priorities will be the Piazzole or North Zone where 32 underground samples have been tested, returning grades up to 26.5% zinc and lead.

Extensive samples have also been taken from an area known as Pian Bracca which lies to the east of the major deposit.

Of the 43 underground samples analysed, hits of up to 47.5% zinc and lead were revealed.

Management is currently investigating the most appropriate method to fund this exploration strategy, and early stage discussions with a number of parties indicate there may be a number of options open to the company.

Management has track record of succes

Burns believes that the company can double the existing resource with this potentially happening in 2018 as the company moves to the definitive feasibility study stage.

His personal financial investment in the project which is in the vicinity of $6 million means his interests are closely aligned with fellow shareholders.

On the score of bringing the project into production, he has flagged 2021 as the most likely date.

This is based on growing the resource and completing the necessary studies in the next 12 months.

Plant construction is forecast to take two years which fits with a 2021 start.

It is worth noting that the project is fully permitted, effectively taking one of the bottlenecks off the table.

Zinc price near 10-year highs

While it is impossible to predict where the zinc price will be sitting when Gorno comes into production, it is obvious the strong run over the last two years is supported by fundamental supply/demand dynamics.

Zinc started its run from US$1460 per tonne in January 2016 and it has hardly missed a beat since then, finishing calendar year 2016 at US$2560 per tonne, and then going on to hit a 10 year high of US$3370 per tonne in October.

Analysts are of the view that the limited number of new near-term projects in the pipeline won’t be enough to offset the closure of large mines such as Century and Lisheen.

If one factors a potentially sustained tight supply for low impurity zinc concentrate into the equation, this would work in favour of Alta Zinc.

Importantly, the company has identified similar mineralisation and geological trends in the course of exploring extensions adjacent to areas that have previously produced the low impurity zinc concentrate.

Quick facts: Alta Zinc Ltd

Price: 0.007 AUD

Market: ASX
Market Cap: $15.21 m

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