Good news today! Group Eleven Resources (G11) our private Irish exploration company has a new partner. G11 got a shot in the arm with half of its second-round financing of CDN$1.5 million coming in from MAG Silver Corp (MAG). The financing was over-subscribed.
If anyone knows what it takes to make major discoveries it must be MAG. MAG has a current market capitalization of CDN$1.7 billion. MAG’s flagship property is the Juanicipio silver project in Mexico. Juanicipio is 44% owned by MAG and 56% owned by Fresnillo plc. Juanicipio is one of the richest, undeveloped silver deposits in the world. MAG discovered Juanicipio and it is now in development. Initial cash should flow in 2018. It is great to have with MAG’s support for G11 exploration in Ireland. MAG is a highly successful and respected group which certainly understands exploration.
G11 has a large exploration project portfolio in Ireland. It recently acquired extensive exploration ground around the old Silvermines zinc-lead mine. Silvermines closed in 1982. As the name of the local village implies it is also a district of historic silver-rich galena mining. In 1860 A.B. Wynne reported that the Dunalley family had worked the mines on and off since 1720. J. Rutty records 80 ounces of silver to the tonne of lead from Silvermines. Most likely this rich ore came from the nearby Shallee Mine. This was the richest tenor reported from Irish mine. Once they taught us in school that Ireland lacked a metal endowment of any consequence. Later, through the vision of one man theMidland zinc orefield became one of the richest zinc districts in the world – acre for acre.
Zinc mines are usually underground operations and generally small relative to copper mines. There has been little supply-side response to much higher zinc prices since the start of the year. There has been some supply coming into warehouses from darker corners. But focus on smelter treatment charges which have fallen. Smelters are starting to struggle to find concentrate supply. We will need $3,000 per tonne to bring new mines into production. Why? Because they have anaemic average grades of only 5.5% zinc. Within this small cluster of new zinc mines there is an outlier at 11% zinc so the rest of the crop averages only 4% zinc!
Within the top 20 zinc development projects the largest is Mehdiabad in Iran and the richest is Kipushi in the Congo. This top twenty is based on contained zinc in measured and indicated resources. Kipushi has super grades but is very deep and is landlocked in the heart of Africa. Apart from Iran and the Congo one of the top 20 is in such interesting jurisdictions as Algeria, Indonesia and Kazakhstan. One zinc project is in northern Greenland. Climate records for Citronen show there is a chance of being iced in during the shipping season. – the mine could miss out on a whole year of revenue. One of the 20 is Los Frailles in Aznalcóllar near Seville in Southern Spain. It has a history and is an environmental hot potato. If anyone thinks Selwyn in Canada will ever be mined then they know where to contact me.
There is a short-list in the probable and possible zinc development projects with large inferred resources. There is Glencore’s Pallasgreen zinc-lead deposit near Limerick in Ireland. The centre-of-gravity for this deposit is at a depth of 550 metres. There has been no drilling at Pallasgreen since 2014. The Taylor Deposit of Arizona Mining is also deep. It will likely miss this cycle as permitting is never easy in Arizona. Rathdowney’s Olza zinc deposit in southern Poland. The deposit is shallow and only a short rail distance to a smelter in the heart of Europe. But it does seem very quiet over there since I moved on in late 2013. All three of these large zinc inferred resources have average grades below 10% combined (Zn + Pb).
The zinc squeeze is starting to happen and end users have not felt the pinch yet. China produced 4.9 million tonnes of zinc in 2015 or about 37% of global annual production. China consumes about 45% of global mine supply. The 600,000 tonnes China imported last year is gone. China had a 375,000 to 390,000 tonne surplus inventory at the start of the year. Some 200,000 tonnes are gone and so now it is down to 130,000 to 140,000 tons (low quality).
Teck can’t produce more zinc in the medium term and would take five years to do an expansion. In the US there has been no sustaining capital investment in zinc mines for the past one to two years. Nyrstar, the world’s largest zinc refiner, sold off its zinc mines earlier in the year. It was unable to sustain them at a profit. Zinc end-users should not concern themselves about the long term. Rather they should be anxious in medium term and fret in the short term – the next four to six months. The other option is just to live and be mindful in the present. Take the advice of a Persian poet “the future and the past veil God from you. Burn both of them with fire”
John P. Barry
Managing Director of Irus Consulting Ltd. and Professional Geologist
A widely travelled and highly experienced economic geologist, John Barry is a confidential counsellor to the likely investor contemplating a considerable investment in the intricate business of mining metals. Dont take a flyer and trust altogether in luck and invest your money in an exploration or mining project on the strength of a printed prospectus or the advice of an interested friend without the preliminary investigation and site visit of a reliable geologist with a basic grasp of commerical reality. Irus Consulting provides strategic and practical management advice and guidance to its clients. Time is a precious commodity for my clients, and indeed myself, as it relentlessly ebbs away and so I try as best I can to avoid the mediocre - those projects and their champions which do not engender enthusiastic belief and passion.
Irus Services Include:
- High-level strategic advice
- Practical guidance and assistance on project sourcing, acquisition and implementation
- Rapid identification of key project value-drivers and potential fatal flaws.
- Capacity building and coordination of external consultants.
- Design and targeting of effective marketing campaigns
John Barry was part of very small teams which discovered and sourced several multi-million ounce gold deposits in Africa. He has worked as an economic geologist since 1988 and as a consultant and then responding to the entrepreneurial spirit he was a founder and manager of three public resource companies which raised a total of US$70million. These resource companies are currently successfully exploring and developing gold and base metal projects in Europe, and sub-Sahara Africa. John has seen a lot of rocks working for consultancies such as CSA in both Ireland and Australia and as Senior Associate Geologist with Chlumsky Armbrust & Meyer LLC which is based in Denver. He is a specialist in zin-lead exploration and in 1992 joined the exploration team which discovered the Lisheen zinc-lead deposit in Ireland as the resource was being expanded in the first couple of years after discovery and in 2008 led the first non Polish exploration company to successfully enter and acquire a major resource-project in the Upper Silesian Mississippi-Valley-Type (MVT) zinc-lead district in southern Poland the worlds largest minerlised district of its kind. John (P.Geo and EurGeol) holds a Masters Degree in Geology from Pennsylvania State University and a MBA from the Edinburgh School of Business, Heriot-Watt University, Scotland.
I would like to think that I have shown the tenacity, patience and focus required to implement many of my better ideas over the years and that I have learned valuable lessons from some failures. I believe one of my strengths is in communicating quite complex technical ideas in a concrete way that can be easily understood. I am a team- builder and motivator by projecting my enthusiasm and vision for a project. I am committed to the development of young geologists through supportive delegation. John is now moving more from managing public companies to freelance consultancy and a more advisory role so as to concentrate increasingly on assisting management in effective exploration and discovery. He is Managing Director of his own Exploration Management and Geological Consultancy: Irus Consulting Ltd. Please visit www.irusconsulting.com for more information and free newsletter registration.
John is now moving more from managing public companies to freelance consultancy and a more advisory role so as to concentrate increasingly on assisting management in effective exploration and discovery. He is MD of his own Exploration Management and Geological Consultancy Irus Consulting Ltd.