Zinc Plus Advanced Technology Equals Beneficiary Pistol Bay
A well-versed theme in these columns is how technology has created a paradigm shift in mining exploration. Not only are mining companies now better equipped to survey historic mining sites on a smaller budget, but many of the metals they are looking for have underperformed in recent decades.
Take zinc. The zinc market of all of the London Metal Exchange (LME) traded metals is the contract with the lousiest supply and demand fundamentals. Somewhat akin to the shipping industry in recent years, the industry built a swathe of new mines in the 1980s and 1990s, flooding the market for decades. Only in recent years have some of those mines, such as the massive Century mine in Australia, became exhausted and created a more favourable price environment for zinc miners.
Although top producer Glencore aided the most recent price run by shutting down two mines in Australia, restarting them is unlikely to close a supply gap, heralding an era of promising economics for developers of new deposits. Charles Desjardins, the founder of Pistol Bay Mining Inc. (TSXV: PST), looked for a metal that could surprise on the upside in coming years, but has suffered from a dearth in exploration activity.
“The reason I got into zinc 3-4 years ago when prices were crappy, I was looking for where there might be a commodity shock, and zinc looked like a good prospect,” Desjardins said.
Pistol Bay bought a claim in Confederation Lake, Western Ontario where historical drilling in an area of volcanogenic massive sulphide ore (VMS) showed mineralization that would be attractive to mine in current market conditions. Being an area of zinc (of little interest to geologists since the 1970s), Desjardins was able to secure an area of 20,700 hectares (51,050 acres). With a 5% zinc equivalent cut-off, the Garnet Lake or Arrow Zone area holds an indicated resource of 2.1 million tons averaging 5.78% zinc, 0.72% copper, 0.60 g/t of gold and 19.5 g/t of silver (that’s 8.42% zinc equivalent).
Desjardins said another zinc project being developed currently by Calinex Mines Ltd. in New Brunswick gives an internal rate of return (IRR) estimate of 34% on a project with a 4.2% zinc equivalent, giving him optimism that the economics of his project are promising.
Get our daily investorintel update
A procession of companies explored the site in the 1970s, but airborne electromagnetic surveying has greatly evolved since then. Currently technology allows companies to detect anomalies as deep as 700 meters. One geologist of former mining company Noranda who worked at the Confederation Lake site told Desjardins recently that back in the 1970s, this type of surveying could only yield results until 200 meters depth.
Those studies were conducted when there was a looming global zinc shortage. The market scenario, like so many mining boom-to-bust cycles, prompted several major mining companies to develop zinc mines during that period. That geological work led to the discovery of the massive Red Dog mine in Alaska that started up in the late 1980s. The Century mine in northern Australia started in 1999, and accounted for up to 5% of global output until its closure in 2016.
The timely sale of a uranium deposit to mining giant Rio Tinto Plc funded Pistol Bay with $1.5 million this year to start drilling at the Arrow Zone. Results are due later this month. Pistol Bay also plans to drill the Fridart site in the Confederation Lake, that unlike all other targets contains high quantities of copper.
The airborne surveys and advanced downhole technology is giving Pistol Bay plenty of clues of where to drill next at the company’s concessions, which span 60 kilometers in length by 25 kilometers in width. Pistol Bay may form alliances with other exploration companies to advance work at other sites.
“This technology is giving us a whole new bunch of things to chase,” Desjardins said. “We are going to be a busy group.”
Matt Craze has covered commodity markets for more than 20 years, working as a researcher at CRU International, and for over 10 years as a ... <Read more about Matt Craze>