Are we on the cusp of a zinc shortage? Around the world, almost 2.4 million tonnes per year of zinc mine production will close between 2011 and 2016. The Skorpion mine in Namibia, the Tara and Lisheen mines in Ireland, the Perseverance and Brunswick mines in Canada and the Cerro Lindo operation in Peru, and several others, are soon to be exhausted and closed. With increasing demand projected by many industry experts, some think the zinc market profile may become very tight, particularly from 2012-2016.
Hunter Dickinson (HDI), the largest private mining group in Canada, shares that opinion. HDI, based in Vancouver, is a diverse operation with experience around the world. Over its quarter-century of existence the group has explored for mines, developed them, and has gained expertise in project engineering, project financing and partnering.
In 2007 HDI subtly shifted its corporate development strategy. The new strategy focused on building and maintaining a value-added interest in a portfolio of mineral companies. After the briefest of pauses during the economic downturn, the strategy was fully implemented last year. From the top down, Hunter Dickinson is bullish on base metals. HDI President & CEO Ronald Thiessen recently noted, “While many continue to temper optimistic views on the global economy with a sense of caution, it is hard to argue that copper and other base metal commodity prices are strengthening at a surprisingly fast rate – exceeding predictions of pundits and investors alike.”
HDI now has five companies under management, including a 30% interest in Heatherdale Resources (TSXV: HTR); a 23% interest in Curis Resources (TSXV: CUV); a 41% interest in Northcliff Resources (private); a 41% interest in Constantia Resources (private); and, an 11% interest in Rathdowney Resources. In 2007 Hunter Dickinson invested $7 million privately in Rathdowney which, at the time, had secured a large prospective lead-zinc land package in Ireland.
When the economic crisis hit in 2008, Rathdowney’s management team realized that a pure exploration play would likely not attract much attention from the investment community. Instead, the company set out to secure a more senior project. Already established in Europe, Rathdowney turned its attention to Poland, and its well know Upper Silesian lead-zinc bearing zone. The company was able to secure in mid-2010, after considerable effort over a two year period, the concessions for an advanced stage project with substantial historical resources of lead and zinc from the Polish government.
On March 17, 2011 Rathdowney completed its reverse takeover of Coreland Capital, a shell company (CPC) listed on the TSX Venture Exchange. Concurrent with the takeover and in association with HDI, Rathdowney raised just over $34 million privately at $1.00 per share to develop their projects. The company has drill targets ready in Ireland and a work program established in Poland to maximize conversion of historical resources into NI 43-101 compliance. MiningFeeds.com connected with Rathdowney President & CEO John Barry from his office in Ireland to find out more about their projects.
When you started Rathdowney, could you tell us why did you target zinc? And why did you focus on Europe, particularly Ireland and Poland?
It was early 2007 and the price of zinc was soaring. Some major zinc mines were slated to close in the medium term and the Chinese appetite for zinc was becoming ravenous. This year China will consume 44 per cent of world zinc mine supply. In the past China was a “swing” player in supply demand for the metal, quickly switching from net importer to net exporter depending on price. As the emerging economies grow and become richer and more sophisticated the raw need for copper and iron for infrastructure shift to second-cycle metals such as zinc as the middle-class expands and its main use for galvanising steel in construction increases with growing demand for cars and white goods (appliances). In Ireland, Rathdowney staked a large land position second only to Boliden and Teck. The best place to find a new mine is near an old mine and Ireland has world-class zinc mines such as Navan (5th largest in the world) and Lisheen (10th largest).
Hunter Dickinson (HDI) in Vancouver welcomed the idea of gaining a foothold in the exploration and development of base metals in Europe and became an early investor. Then in September 2008 Lehman Brothers collapsed and triggered the greatest global economic convulsion in living memory and the appetite for exploration risk almost completely evaporated. We had assembled a crack team which was amply funded and we had the support of HDI so we had to react quickly and find more advanced projects which had much less exploration risk. It so happened that our Chief Geologist Mike Mlynarczyk was Polish and Duncan Large our technical adviser based in Germany could provide insights into the advantages and opportunities for a first-mover into the Upper Silesian zinc-lead district of Poland.
Your project in Poland is clearly your lead horse, can you talk about the history behind the project and what the non-compliant 43-101 resources estimate looks like?
Zinc has been mined in Upper Silesia in southern Poland since the 12th century. The USGS estimates that it is the largest carbonate-hosted zinc district in the world in terms of total zinc metal endowment which is a measure of the total amount of metal ever mined and still in the ground. Since World War II and particularly during the 1970’s and 1980’s Polish geological surveys delineated zinc-lead deposits, with resources under a Soviet-era classification system some of which would be considered historic estimates under Canadian standards, northwest of the historic city of Krakow in Upper Silesia. State mining companies exploited some of these resources moving northwards in a serial or piecemeal fashion. Resources supported long-life mines and a customised zinc smelter was built. You have to understand the command-economy mind-set. Why would you need to explore and develop new mines when your existing mine could supply your smelter for forty years or more? Also, Poland has a quite bureaucratic permitting process based on Polish administrative law and acquiring exploration ground particularly containing major resources which have been officially gazetted is not a trivial process. Rathdowney staked exploration ground over the footprints of substantial deposits to the north of the Pomorzany Mine and nearby concentrator-smelter complex at Boleslaw. It took about 15 months to permit the first exploration concession. Poland is not a place where you can fly in and acquire quality exploration assets. A sustained presence and patience is required and Rathdowney committed to this process early on by assigning Mike Mlynarczyk to a full-time posting in Krakow. It was worth it because Rathdowney investors have 100 per cent exposure to exploration success with no equity held by any third-party vendor. Some 180 kilometres of diamond drilling had been completed but evidence is only in the State archives. The replacement value of the historical drilling is probably close to C$40 million. Rathdowney has electronically captured this vast amount of historical drilling in a project database and having raised C$34 million – on St. Patrick’s Day it so happened – the team is soon to embark on an aggressive resource verification drilling program on the Olza Project with an exploration target of 20 million tonnes to 120 million tonnes at around 6% Zinc equivalent. The State-owned Pomorzany mine will be exhausted in the next few years and is scheduled for closure in 2016. The sustainability of this historic mining district now depends on Rathdowney’s aggressive resource delineation program and there is no time to lose.
What type of infrastructure is available in the area (Poland)?
It could not be better. The best remaining historical resources are now within Rathdowney’s concessions and are located only 30 kilometres from the State-owned concentrator and zinc smelter. The concentrator can process 2.5 million tonnes of ore and the smelter can refine 100,000 tonnes of refined zinc metal. Also there is a rail spur from the main Warsaw-Katowice rail line which runs through the concession area right to the Boleslaw concentrator-smelter.
Your Irish concessions are spread throughout Ireland, and I noticed, strategically located either adjacent to existing mines or development projects. What is happening in the region and who else is operating there?
New Boliden operates the Navan Mine about 45 kilometres northwest of Dublin produces about 200,000 tonnes of zinc in concentrate and 40,000 tonnes of lead – there are no zinc smelters in Ireland. In Tipperary, Vedanta now operates the Lisheen Mine where some 1.5 million tonnes of ore are mined per year at an average grade of 12 per cent zinc and nearly 2 per cent lead. Lisheen is expected to close in 2014.
In recent years in the Pallas Green area of southern Ireland Xstrata in partnership with Junior explorer Minco has delineated an inferred resource of 24.1 million tonnes averaging 7.85% zinc and 1.35% Pb. There are some 23 drill rigs operating on the Pallas Green project. Nearby at Stonepark Teck in partnership with Connemara Mining are very optimistic about a new zinc discovery. Six drill rigs are churning through a 25,000 metre diamond drill program planned for this year. In County Clare, Lundin Mining in partnership with Belmore Resources is exploring the Kilbriken zinc-lead discovery where five drill-rigs are in operation. Drilling continues to cut thick high-grade zinc-lead-silver sulphide mineralisation. Rathdowney’s Mallow and Galway project areas are in this district straddling know mineralised structures.
It takes good people to develop good projects. Could you tell us about your team and also your relationship with Hunter Dickinson?
Yes people are as important if not more important than a particular project itself. If you back good people they will generate quality projects and that is exactly what happened with Rathdowney. I was having a pint of Guinness with David Hall in a Dublin pub and we came to the realization that there was only a handful of junior zinc explorers but lots of companies out looking for the next big discovery in copper. To the west and south lay the Midland Ore Field which, although small in area, is acre for acre one of the richest exploration districts in the world for zinc. There was some quality exploration ground available but we realised we would have to focus the best minds in the business to discover the next generation of concealed carbonate-hosted zinc deposits. I had worked on exploring the peripheral parts of the Navan resource back in 1988 and I joined the exploration team at Lisheen shortly after discovery in 1990 so I knew my way around the Irish zinc-lead district. David and I asked Dick Sillitoe one of the world’s foremost copper exploration geologists and Duncan Large an internationally respected expert on carbonate-hosted zinc-lead to help as technical advisors. Then Ron Holman, a retired octogenarian and discoverer of the Ballinalack zinc-lead deposit near Rathdowney’s Westmeath project areas, joined the team. Bill Fisher who at one stage was Boliden’s VP for Exploration also agreed to become technical advisers to Rathdowney. When Hunter Dickinson took an interest Mark Rebagliati was able to add his considerable experience to the mix. So we have a highly experience international team with a track record of discovery. This is why I like to say that with Hunter Dickinson and its pool of expertise that Rathdowney has the muscle of a major with the flexibility of a junior. The team has regular technical review sessions which support and provide guidance for our very talented team of geologists in Poland and Ireland. We have regular brain-storming sessions and now that the drill targets have been selected we look forward to engaging and passionate discussion and of course exciting results.
This interview appeared in 10 Base Metal Stocks to Watch – Part 2 – CLICK HERE – for the article.