As zinc market watchers well know, the base metal has enjoyed some very positive price action this year, with the consensus being that its good fortune is only likely to continue.
Indeed, just this week Scotiabank economist Patricia Mohr said she sees zinc rising to US$1.25 per pound this year, then hitting $1.60 to $1.70 next year, while Paul Crone, chief investment officer at Citrine Capital Management, said he believes zinc, along with nickel, will lead the base metals in 2015.
One company that’s taking advantage of zinc’s good fortune is Canada’s Cypress Development (TSXV:CYP,OTC Pink:CYDVF), whose current focus is the Gunman zinc-silver project in Nevada. Since the beginning of the summer, it’s completed a Phase 1 drill program at the project and moved on to Phase 2, receiving positive results along the way.
To learn more about what the company is up to, Zinc Investing News (ZIN) got in touch with Don Huston, the company’s president, CEO and director. Here’s what he had to say.
ZIN: Looking through your press releases, it seems like 2014 is the year things have really kicked off for Cypress Development, with lots of work being done at the Gunman project. Is the surge of activity due to zinc’s price outlook?
DH: Absolutely. We’ve held this particular zinc property, the Gunman in Nevada, since 1999 — we own it 100 percent. But with zinc prices fluctuating in the market year by year, there were many gaps of years that no work was done; it was just not a commodity that could be sold or promoted.
That said, there’s no doubt that there is a deposit here that is very rich and very high grade — anybody reading the news releases or looking at the NI 43-101 can see. It’s just that it needs to be expanded, and we’re in the right cycle here. Other people have said, and I concur, that there is a world marketplace for zinc again. It’s nice to see it well over a dollar and going higher. That just bodes well for a company like Cypress.
ZIN: One of Cypress’ aims is to develop projects near world-class deposits. Is Gunman near any such projects?
DH: If you can picture Nevada, it’s a lot of semi-desert, cactus and tumbleweeds. We’re up on the east flank of what’s called the Diamond Mountain Range, and 8 miles across the valley floor is Barrick Gold’s (TSX:ABX,NYSE:ABX) Bald Mountain gold mine.
It’s a heap leach project, and I make that point because Gunman is also very amenable to a heap leach type of extraction. We’ve done different tests on the amenability of being able to get the zinc and the silver out using a heap leach process, and with prototypes already in place nearby it makes it probable with environmental permits and all the rest being allowed.
ZIN: That’s an important advantage. And I would guess there’s infrastructure in the area as well?
DH: Absolutely. We’re not half a mile from pavement, and there’s a highway so we see vehicles go by all the time. And of course there’s power because Barrick’s Bald Mountain is supplied. So there are trucking routes, pavement, well-maintained roads. And towns — Eureka is only 35 miles away.
ZIN: In terms of what’s happening at Gunman, earlier this summer you completed a Phase 1 drilling program and since then have started on Phase 2. What have you learned from that work?
DH: We know now from years past of working this project that we have a definitive high-grade mineralized zone in what is called the RH zone. But we have to make it bigger, we have to expand the size. The grade looks after itself, it’s a tremendous grade, but it’s the size of it.
We are working on expansion now, and Phase 1 was very, very positive. I don’t think that many holes did not return fabulous numbers, so Phase 1 pleased us immensely. We’ve now started on Phase 2 drilling, but a precursor to that was a major sampling program. Very, very detailed surface mapping because Phase 1 alluded to places we should go in extending.
That was also very, very positive and clearly showed that the mineralized rock units down a quarter to half a mile south are the same rocks as we’re drilling in the RH zone. It’s the same thing, and to me that’s exciting. It allows the public to know that we’re not locked into one little pod and that this has very good potential to be expanded upon.
ZIN: Your share price went up after the announcement, so investors must have understood that.
DH: You’re absolutely right. There are about 150 million shares outstanding on Cypress, but regardless it’s a very liquid, fluid stock. We have a huge following and have for many, many years, certainly because of the Gunman property and also because of our gold property in Red Lake, Ontario — it’s beside the Goldcorp (TSX:G,NYSE:GG) mine. That’s another very good address for a small junior company to have.
ZIN: Is it those properties that have kept your shareholders so loyal?
DH: These properties we have are real. You and I both know there are a lot of junior companies out there that struggle, especially over the last couple of years in this marketplace, and we’re very fortunate that we’re not one of them. We’ve been able always to keep ourselves funded and keep the lights on, continue on with programs like this Phase 2 program that’s just started.
ZIN: What’s next for Cypress? Looking towards the end of the year, I imagine you’re going to be finishing this Phase 2 program, putting out the results, but what will happen after that?
DH: Phase 3. There is absolutely more to come — we’re very, very confident with this Phase 2 drilling that we’re going to do in that it is focused on what we already know, the RH zone, and attempting again to expand it, to add proven tonnage to what we know. I think it’s important in this business to be able to say that it is indicated, or it is real. We are going to do that.
That said, it takes a lot of thought to decide where to go and drill. It’s not like we’re walking the drill 5,000 feet away. It’s on tight, controlled grid spacing. When you have a product like this, or any kind of potential orebody, you must determine the size of it — you have to see how big it really is, so you systematically step out from what you know. That’s what we’re doing in Phase 2, and I’m very, very confident that we will do the same with Phase 3.
ZIN: And you’ll have enough money to move through to that stage?
DH: We are very careful with the budgets that we propose to do this work. They’re not huge budgets, just enough to get somewhere between 10 and 15 shallow holes, 300 to 400 feet, drilled each time. This particular mineralized zone sits just beneath the surface, so it’s very, very easy to get at — that’s why I said heap leach earlier, it will be open pittable because it sits right from surface down. Surface to about 400 feet is the main exposure.
ZIN: You talked a little about how zinc has just come into favor after being out of favor for quite awhile. Are you concerned that by the time you’re ready to take Gunman into production zinc will be trending down again?
DH: I can’t think that way. I understand, and others in this business do, that all things are cyclical. In and out of favor, as you say. I cannot predict what the world markets will do, but I know that if a project like the Gunman is good enough — if it’s rich enough, big enough, exciting enough — it will happen.
I think all people understand that zinc is a multifaceted mineral in that it’s used in so many things; from makeup to fertilizer, zinc is becoming more and more popular all the time. You want a toaster, you want car bumpers — it’s in all facets of our life. And there is a growing shortage in the world again. Huge mines are shutting, and they supply 10 to 20 percent of the world’s zinc. There has to be a replacement.
I also believe having this particular property in the great state of Nevada is very good. Why? Because it’s home grown. We don’t have to go to China or Mongolia, we know the rules and the playing field. I don’t know whether the price will come down, but I hope zinc stays where it is. It sure looks like a lot of influential people, such as Dundee Securities, have suggested that zinc is in the right cycle now.
ZIN: Anything else you’d like to add?
DH: As I mentioned, we have a wonderful gold project in Northwestern Ontario in the town of Red Lake. It’s adjacent to the Goldcorp mine, and we’re very, very fortunate to have a land package there. We continue to work at development. I don’t have an orebody in that ground per se, but we’re always looking.
The reason I bring up the gold project is to show you that we’re not a one-trick pony. I think it very much is important that investors know that and realize that we will diversify, we can diversify, we will do things. We put the money in the ground, we’re explorers. We’re doers. We started this Phase 2 program in the middle of August, the dog days of August, which is maybe the worst part of the market, because we believe that September could be a very good month. We feel that by spending just a small amount of money at this time, a couple hundred thousand dollars, we’ll have results available for when a good market maybe starts in September, October.
We’re having fun, and this zinc project — if you look at all the assays, it’s not only you and I talking. We’re a small junior exploration company, and there are others in the mid-tier range and in the upper echelons that have come to me at different times and expressed interest in Gunman. Many years ago Cominco talked to me, but at the time zinc was out of favor and the project was a bit too small — they were looking for huge tonnage in the billions of tonnes. Projects that size are rapidly disappearing on this planet; new ones need to be found, and now it’s the smaller-sized, richer orebodies that are the flavor of the day. The Gunman absolutely fits that bill.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Interviews conducted by the Investing News Network are edited for clarity. The Investing News Network does not guarantee the accuracy or thoroughness of the information reported. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.