location, size and costs

October 06, 2009

Ironbark Gold Strikes A Deal With Nyrstar Which Should Underwrite A Profitable Future in Greenland.

Our Man In Oz / www.minesite.com

For reasons not fully understood Greenland holds a curious fascination for Australian explorers. Perhaps it’s the extreme difference in weather with Australians going anywhere to avoid the heat at home, though a more plausible reason is the geology. Greenland offers a chance to make discoveries exposed at the surface rather than buried under 30 metres of drifting sand. That is certainly the case with the inappropriately-named Aussie company, Ironbark Gold, which takes its name from a species of eucalypt tree native to Australia (not Greenland), and which is exploring in Greenland for zinc (not gold).
Disregarding the curious misnomers the point about Ironbark is that it has made what appears to be one of the world’s more significant zinc discoveries at the top end of Greenland.

Just how good the Citronen discovery might turn out to be is not yet fully appreciated by investors at home in Oz. That is not the case with people who know their zinc because Nyrstar, the world’s biggest zinc smelter, has voted with its wallet to snatch a 20 per cent stake in Ironbark, and put its foot on a large portion of future zinc production from Citronen.

In a deal reminiscent of how billionaire speculator, George Soros, last month plunged into emerging Papua New Guinea copper producer, Marengo Mining, Nyrstar has effectively put its foot on what it believes will be one of the world’s next generation of base metal mines. For Soros, copper was the drawcard as global industrial production recovers. For Nyrstar, a Belgian-based business created two years ago via the merger of Umicore and the metal smelting assets of Zinifex, it is zinc, and demand for galvanised, construction quality, steel.

On the Australian stock market, both Marengo and Ironbark have reacted positively, firstly to their discovery by well-heeled investors, and secondly by their discoveries of copper and zinc. Marengo, which placed its shares with Soros’s Quantum Partners at A9.5 cents, is now trading at A20 cents (well done George!). Ironbark, which placed its shares with Nyrstar at A12.5 cents is also now trading at A20 cents. For both Marengo and Ironbark there are months, and perhaps years, of exploration, evaluation and mine planning to go before either commits to the development of a mine. Marengo’s work has been well reported on Minesite. Ironbark is a newcomer, but Nyrstar’s investment elevates it to Marengo status.

There are three major factors underpinning interest in Citronen. Location, size and costs. It is located close to Europe and the smelters of Nyrstar, and while a long way north the ground and weather conditions are no different to northern Sweden or Finland. The orebody has the potential to be very big, it looks like it will be easy to mine, easy to upgrade, and have a low overall cost structure.

Ironbark managing director Jonathan Downes, describes Citronen as one of the world’s largest undeveloped zinc resources which has a natural appeal to Nyrstar. “Not only has Nyrstar made a significant financial investment in Ironbark, but it has also confirmed our development plans for Citronen through the signing of a life-of-mine off-take agreement for 35 per cent of production,” he said. “Nyrstar has indicated that it believes Citronen has the potential to become one of the world’s most significant zinc mines, comfortably placed on the cost curve and well positioned to supply its European smelters for years to come.”

To find Citronen on the map you need to go as far north as possible in Greenland and locate Citronen Fjord. This glacier cut inlet to the Arctic Sea provides the first clue that development (and exports) might not be as hard as it appears thanks to the deep and protected waters of the fjord. Drilling to date has outlined 9.2 billion pounds of combined zinc and lead within a global resource of 101.7 million tonnes of material assaying 4.7 per cent zinc and lead. Within that figure is a high-grade resource of 22.6 million tonnes at 8.2 per cent zinc and lead.

Most of the material outlined by Ironbark is located in three flat-lying structures, Beach, Discovery and Esrum. Two seams rich in zinc and lead are found in each structure with mining likely to start as an open cut and then move into an underground phase. Easy as the mining is likely to be a bonus for Ironbark is the discovery that Citronen’s ore is easy to beneficiate (upgrade) using a simple dense-media separation (DMS) process which separates heavy (zinc-bearing material) from light waste. In an early process concept Ironbark plans to mine the 8.2 per cent high-grade material at a rate of around three million tonnes a year, pass it through a DMS plant for 1.5 million tonnes of 16 per cent feedstock which would then be converted into a standard zinc concentrate. The first-stage upgrade significantly cuts capital costs, plant size and the power requirement.

A number of production options are being considered, ranging from a one million tonne-a-year start up to three million tonnes of ore annually. In terms of costs, the smaller option has a capital price tag of US$214 million. The bigger option US$405 million. Operating cost per pound of zinc equivalent would range from US26 cents a pound to US31 cents a pound, placing Citronen close to Anglo American’s Skorpion mine.

Downes, who spoke with Minesite before the Nyrstar agreement was signed, said the next stages of work at Citronen would include finalisation of a bankable feasibility study and continued exploration at a series of high-priority targets. “We’re very confident that Citronen will not be a single mine development,” he said. “The type of deposit we’re looking at generally occurs in camps, or multiple clusters.” If Downes is right then the Nyrstar deal is just the start of continued news flow from Ironbark.