Ironbark Zinc Limited (ASX:IBG) is progressing towards the bankable feasibility study for its 100%-owned Citronen zinc-lead project in Greenland, with most of the heavy lifting already completed.
A large investment has been made by the company during this year in updating, upgrading and de-risking the development plan, with the geology, mining and ESG up to date.
The metallurgical performance and process flowsheet is being refined and de-risked while the definitive logistics plan (port, shipping, personnel, construction, etc) will resolve issues that have been under-studied historically.
Mine plan improved
The company has improved the mine plan, with a major increase in zinc metal recovery in the early years.
This plan is also more robust, considering a lowered zinc price assumption to US$1.20 per pound and the mine development now including twin production declines.
Ironbark has also confirmed as viable a 3.3 million tonnes per annum run rate and a 14-year mine life with a maiden ore reserve of 21.6 million tonnes at 6.3% zinc equivalent.
An additional 90,000 tonnes of zinc metal will be produced in the first six years of operation, substantially improving early cashflow.
Notably, the binding offtake agreements for ~LOM metal production remain in effect.
Indicative strategic timeline.
Bridging the funding gap
The bankable feasibility study will enable the project to move towards a financial investment decision (FID) in the second half of 2021.
This is underpinned by the EXIM LOI which the company considers a potentially transformational opportunity.
EXIM Bank is the official Export Credit Agency (ECA) of the US Government and is a Tier-1 counter party, with billions of dollars invested, a strong mining team, and a pro-Greenland outlook.
Ironbark is EXIM’s first Australian deal since the Roy Hill Project in 2014.
The EXIM LOI facility of US$216 million underwrites purchase of any Goods & Services ex-USA, providing very low cost, long tenor project loans.
Commercial project debt financing discussions are greatly aided by the EXIM/ECA stamp of approval and in 2021, the company aims to convert this to a binding facility.
Citronen project potential
Ironbark company is confident that Citronen will be developed because it has a favourable capital and operating cost structure and comparative risk profile with no impediments to 2021 FID.
The project also has competitive capital intensity and grade profile, with binding take or pay, long term concentrate offtake agreements agreed with Tier 1 buyers.
In addition, the stable political jurisdiction in Greenland is underpinned by strong ‘rule of law’ governance framework and the company enjoys strong support from the government for a foundational mine in country – with EIA/SIA approvals already granted and no major flora, fauna or indigenous issues on site.
There was a strong recovery in the zinc price the second half of 2020.
Zinc market outlook
The zinc price recently made 12-month highs and a substantial price upside remains vs copper (which typically recovers earlier in cycle, up ~20% vs 12 months prior).
Citronen optimised this in 2020 at US$1.20/per pound vs spot today US$1.25/per pound.
There has also been a combination of supply disruptions and demand uplift in recent months, with the rapid fall in TCs over 2020 (US$315/tonne in February, down to US$110/tonne in October) suggestive of an underlying concentrate shortfall.
Looking at the long-term zinc supply-demand balance, new mines will be required to meet demand post-2025, with Wood Mackenzie estimating a pronounced concentrate deficit from 2027 for several years.
Long-term global zinc consumption is estimated to have a CAGR of around 1.3%, growth which is driven by the continued urbanisation and industrialisation of the developing world, especially in Asia.
The demand for zinc in fertiliser also provides major upside potential in the long term.
Beyond zinc, the company also has exposure to Australian gold and base metals via its Fiery Creek and Captains Flat Projects in NSW.