huge manganese potential with 43% grade

ZNC are targeting up to one billion tonnes of magnetite (iron ore) 120km away from Onslow, which will have a port in the near future. Other infrastructure, such as highway & power are nearby. The magnetite has low impurities & is close to surface, making for an excellent project. Recently, CXM made a JV deal at 18 cents per tonne of magnetite. At 800m tonnes, the resource could be sold for $144m. ZNC current market capitalisation is $15m.

Then there is the manganese, which is a speculative play. ZNC are targeting (for starters) 10MT, to be mined at 1MT pa. CSM truck their manganese 400km to port. ZNC would have to truck this 800km to Geralton. Using a 120 tonne road train, this would require 25 loads per day. At $10/km, transport costs would be $135 per tonne. In 2009, OMH had total costs of A$150 per tonne of ore (23% grade), which includes transport of 60km road to rail and rail 800 km to Darwin port. Taking a wild guess,transport costs could be $50 per tonne for OMH. So ZNC could mine & ship for $235/t of ore.

ZNC grade is 43%. At current price of US$7dtmu, ZNC would receive A$342 per tonne. Margin would be $107/t. Mine could get up on 200m shares at $60M capex. At US$7dtmu, this is 32 cents EPS. At US$8dtmu, this is 48cents EPS. At US$10dtmu, this is 80 cents EPS.

At US$7dtmu cash flow over 10 years would be $600m or $3 per share.

Magnetite drilling to commence June/July and manganese drilling to commence in August (hopefully).