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Ironbark Zinc makes progress with Mining Licence to develop Citronen

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Ironbark Zinc (ASX: IBG) continues to progress its Citronen Base Metal Project in Greenland towards granting of the Mining Licence.

Citronen is at an advanced post-feasibility stage and hosts a JORC compliant Measured, Indicated, and Inferred Resource of 70.8 million tonnes grading 5.7% zinc with lead credits, at a cut-off grade of 3.5% zinc. 

This could benefit from the continued uplift in the zinc price due to looming supply constraints facing the fourth most used metal from decades of under investment.

The company filed the Mining Licence application in October and the next stages require it to manage a public consultation process and enter into an Impact Benefit Agreement (IBA). 

The IBA is a document used to provide a formal framework for Ironbark’s obligations such as training and employment commitments to the Greenlandic people.

Evidence of investor support for the company and the Citronen project includes the overwhelming interest received for its $2.5 million placement that it completed in the September quarter.

It remains well funded and concentrated on its key goal of delivering shareholder value through building a globally significant base metals mining house.

Ironbark also continues to explore business development opportunities available through its US$50 million Glencore mergers and acquisition funding facility and is currently reviewing several promising opportunities.


Citronen Base Metal Project

Within the JORC Resource of 70.8 million tonnes grading 5.7% zinc with lead credits, the company has defined a higher grade resource of 29.9 million tonnes grading 7.1% zinc with lead credits, at a cut-off grade of 5.0% zinc. 

That includes a Measured Resource of 8.9 million tonnes grading 7.2% zinc equivalent, Indicated Resource of 13.7 million tonnes grading 7.3% zinc equivalent, and Inferred Resource 7.3 million tonnes grading 6.6% zinc equivalent. 

In April of 2013 Ironbark completed a feasibility study at Citronen that estimated:

NPV: US$609  Million (US$354M post tax)
IRR: 32.0% (22.2% post tax)
Equity Return: 37.9% (Geared NPV after tax)
Capital Cost: US$429.3 million inc contingency (US$484.8M with First Fills)
Operating Cost: US$0.59/lb zinc (Payable, Net of by-product credits, Years 1-5, Smelter fees additional US$0.12/lb zinc)
Mine Life: 14 years
Life of Mine Operating Costs: US$3.42 billion
Life of Mine Revenue: US$5.65 billion


Mining Licence Application 


The lodgement of the Mining Licence application is a defining step forward for Ironbark as the company progresses towards developing a globally significant zinc mining operation. 

A Mining Licence application in Greenland is comprehensive and encompasses regulations which cover all aspects of the proposed mine, including environmental permitting and social commitments. 

The application includes:

- Feasibility Study;
- Social Impact Assessment (SIA);
- Environmental Impact Assessment with base line surveys (EIA);
- Navigational Safety Investigation (NSI);
- Environmental Management;
- Training, Employment, Health and Safety planning (expanded through a later Impact Benefit Agreement); and
- Full Feasibility Study covering the Process Plant, Infrastructure Works, Mine Development- Underground and Open Pit, Tailings Disposal, Power Generation, Accommodation and Emergency Services, Ship-Loading and Shipping and Execution Planning.

The next stages of the Mining Licence application process require Ironbark to manage a public consultation process and enter into an Impact Benefit Agreement (IBA). 

The IBA is a document used to provide a formal framework for Ironbark’s obligations such as training and employment commitments to the Greenlandic people.

Following approval, the Mining Licence would provide Ironbark with the right to mine at Citronen for a period of 30 years.


Zinc supply side to drive development of Citronen

The continued uplift in the zinc price has put the spotlight on looming supply constraints facing the zinc industry.

Under investment in the zinc sector should continue to support the zinc price and management vision to build a major zinc mine.

The zinc price has risen from a yearly low of US$0.85 per pound to a high of US$1.10 and currently trades at US$1.01 per pound. 

Zinc stockpiles have also dropped from 1,030,000 tonnes to 700,000 tonnes over the same time span, and are indicating a tightening of supply and further upward price pressure. 


Cash position


The market’s growing appreciation of Ironbark’s positioning on the global zinc stage was evidenced in August this year by the overwhelming interest received for the company’s $2.5 million placement to be used to advance permitting and pre-development preparation works at Citronen.

This was more than four times oversubscribed, reflecting the strong support for Ironbark and the Citronen project. The placement was completed in one tranche of 28 million shares at $0.09 per share.

Cash available to the Company at the end of the September 2014 quarter was approximately $3.7 million with no debt. A payment contribution made to the Captains Flat exploration project in joint venture with Glencore resulted in a higher than normal $300,000 cost for exploration during the quarter.

Ironbark has continued to explore business development opportunities available through its US$50 million Glencore mergers and acquisition funding facility and is currently reviewing several promising opportunities. 

The Company reported expenditure of $608,000 on exploration and evaluation, and a total cash burn of $842,000 for the September quarter. 

Projected exploration outlay for the current quarter is estimated at $200,000, and a total cash burn of $450,000.


Analysis

Ironbark's future development of Citronen is tied to an appreciation in the price of zinc currently trades at US$1.01 per pound. However, there may be further gains ahead for zinc given supply side dynamics.

Zinc stockpiles have also dropped from 1,030,000 tonnes to 700,000 tonnes over the same time span, and are indicating a tightening of supply and further upward price pressure. 

Perth broker Hartleys placed a 12 month share price target of $0.34 on Ironbark.

The company last traded at $0.096. It noted that the company is leveraged to rising zinc prices is significant due to the scale of its Citronen zinc project in Greenland. 

Major catalysts include granting of mining licence by March quarter of 2015, completion of financing negotiations by June quarter of 2015, and possible commencement of site works in June quarter of 2015.



Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX “Small and Mid-cap” stocks with distribution in Australia, UK, North America and Hong Kong / China.

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