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Benz Mining (TSXV:BZ) is capitalizing on the hot market for zinc through the recent acquisition of a zinc-lead-barite property in the Canadian Yukon Territory, which has an existing resource estimate and plenty of exploration upside.
The property has received approximately 17,000 m of drilling; which resulted in developing Technical Report NI43-101-compliant resource estimate (March 20, 2017), as well as Internal Scoping Study. Furthermore, Benz plans to advance the Mel project relatively quickly, moving into pre-feasibility study within next three years and production by end of 2021.
The project is supported by a management team with over 180 years combined experience in the mining industry. President and CEO Miloje Vicentijevic is a mining engineer who has worked at Faro zinc/lead operation, Mount Nansen gold operation, Shell’s Muskeg River oil sands constructing & operation; as well as for the mining divisions of engineering firms Worley Parsons Canada and Tetra Tech Wardrop. Director Gordon Bub, also a mining engineer, was the chairman and CEO of Breakwater Resources that was bought out by zinc-lead smelting company Nyrstar for $650 million.
The company recently raised $3.2 million for exploration and working capital, which brought the total outstanding shares to 24.6 million.
- Large undeveloped zinc-lead-barite deposit with existing technical report NI43-101 resource estimate
- Experienced management team including former CEO of zinc company bought for $650 million
- Exploration permits valid until 2025
- Internal scoping study shows attractive economics
- Bull market for zinc
- Potential for barite sales into oil drilling market
- Tight share structure: 24.6 million shares outstanding
Key Project: Mel Zinc-Lead-Barite Property
Located in southeast Yukon near the British Columbia border, the Mel property features four zinc-lead-barite zones that were last explored in the mid-1990s: Main Mel, Jeri, Jeri North and Mel East.
The Main Mel zone hosts an inferred resource of 5.28 million tons (6.51 percent zinc, 1.86 percent lead and 45.05 percent barite) according to an NI 43-101 resource estimate updated in March 2017.
The mineralized geology at the Main Mel zone consists of coarse-grained sphalerite and galena disseminated throughout a mixture of mudstone, silica-carbonate and coarsely crystalline barite. The zone is open down-dip and has potential to host a larger zinc-lead resource.
Permits have been secured for surface and underground exploration until 2025.
Over the past 30 years, until mid-nineties a number of mining companies including Newmont Mining, Cominco and Kobex Minerals. A total of 16,759 meters of diamond drilling, or 90 holes, has been completed to date, along with geochemical and geophysical studies, trenching and metallurgical test work. In today’s dollars, it was spent somewhere between $12M – $15M on the property.
Significantly, when Benz Mining acquired the project earlier this year for $2.7 million, an internal scoping study had been completed by previous owners along with the updated NI 43-101 and a 1989 pre-feasibility study. The internal scoping study envisions the mine producing 74 million pounds of zinc annually for eight years.
Using price estimates of $1.40 per pound zinc, $1.05/lb lead and $150/lb barite, the project yields an internal rate of return (IRR) of 30 percent. Adding 50% to the resource estimate could bump the IRR as high as 37 percent.
Benz has started exploration program and will complete drilling by end of October. Infill drilling will improve the accuracy of the current resource, thereby converting inferred resources to measured and indicated. A prefeasibility study is expected within the next two and a half to three years, after which the project would proceed to construction (EPCM). Given the work that has already been done, Benz does not anticipate needing a preliminary economic assessment (PEA). Initial production is slated for begin of 2022.
“We’re quite confident that with an internal scoping study, current resources estimate, plus geological confidence in finding the additional resources, and the rising demand for zinc, this project will be quickly developed to the EPCM and production,” said Vicentijevic.
High-grade zinc mineralization has been found at several reconnaissance-level drill holes and trenches at the Jeri and Jeri North zones located to the north of the Main Mel zone. Significant intersections from previous drilling include 13.11 percent zinc over 3.37 meters and 7.96 percent zinc over 4.15 meters at Jeri, and 9.90 percent zinc over 5.00 meters and 10.92 percent zinc over 7.6 meters at Jeri North. Delivering good drill core from these targets presents a chance for Benz to expand the shallower resources and the internal rate of return on the project.
“This is the zone where we see our blue sky opportunity,” Vicentijevic said.
Benz Mining has an interesting addition to its project in the form of barite – a lesser-known mineral that, when processed from tailings, is used as a drilling mud additive by the oil industry. A barite marketing study done in 2014 concluded that barite from the Mel property could be sold into the drilling products market in Western/Northern Canada. The study estimated a future Mel mine could sell 50,000 tonnes of barite a year and fetch $100 a tonne. Vicentijevic noted the volume would likely be higher considering that a nearby barite mine has shut down and Yukon & Alaska have not been included in the study. “Should the oil industry pick up and providing that Fort Nelson is one of the centers for northern oil industry activities, we’ll see opportunity to sell a lot of barite,” he said, adding barite production would reduce tailings volume and be sold at the mine gate (by the Alaska Hayway).
Benz is planning drill program and trenching/sampling activities in late September and October this year. The objective of the program is to confirm historical resource grade thickness, and recoveries. During the same timeframe, the company will focus on trenching and sampling at the Jeri and Jeri North zones. Metallurgical tests will also be completed using new samples The next two years should provide plenty of opportunity for stock price movement as the assay results roll in and project develops to the pre-feasibility stage.
A mining engineer with 40 years’ industry experience, including 20 years in investment banking, Gordon Bub is director of Glencairn Gold Corporation and Western Canadian Coal Corporation. Bub was chairman and CEO of Breakwater Resources Ltd. when Breakwater was purchased by zinc-lead smelting company Nyrstar for $650 million. He was also chairman of Black Hawk Mining Inc. and executive vice-president, Merchant Banking, at Dynamic Capital Inc.
Miloje Vicentijevic—President, CEO and Director
Miloje Vicentijevic is a mining engineer with over 25 years of engineering, construction, and operations experience. He was mining planning engineer at Fero Mine, mine superintendent at Mt. Nansen Mine, director of mining for Worley Parsons Canada, the mining division manager for Tetra Tech Wardrop Engineering, and technical services manager for Sherritt International Luscar’s mine operation in Alberta. Vicentijevic acts as a Qualified Person for mine planning and design, financial analysis, and NI 43-101 technical reporting for Benz.
Ron Hall—Chairman of the Board
Ron Hall has over 40 years of professional experience in the management, operation, evaluation and design of global mining projects. Hall has lived and worked in the UK, South Africa, Botswana, Canada, Australia and China, and has been involved in business and mining opportunities in India, Russia, North America, Chile, Brazil and Mexico. He is former independent director of Chinalco Mining International (a subsidiary of Chinese state-owned-enterprise Chinalco), which is developing the Torromocho copper project in Peru. Hall is also current director of Panoro Minerals Ltd.
Carlos Escribano— CFO and Director
Carlos Escribano is a chartered professional accountant and graduate of the University of British Columbia. He has held several senior-level accounting and financial reporting positions with producing and development-stage publicly-listed companies in the mining industry. In his previous role, Escribano served as CFO and VP Finance for a resource company publicly listed in Canada and the United States.
Michael B. Gareau—VP Geology and Exploration
Michael B. Gareau is a geologist with 40 years mining industry experience including regional and project exploration, mine site geology and exploration, evaluation, acquisition of early to advanced projects, resource estimation, and feasibility studies. His commodities range includes gold, silver, copper, molybdenum, base metals and some strategic metals. Gareau worked for 15 years with Placer Dome in technical and management positions, was VP Exploration for Black Hawk Mining, Glencairn Gold and Wega Mining, and has worked as a consultant for the past seven years.
H. Leo King — Member of the Advisory Board
H. Leo King, a professional geologist, has over 50 years’ experience in minerals exploration and mining geology, including 20 years in senior executive positions for several mineral resource companies. He has been directly involved in exploration and evaluation work on the Mel Property since 1976 and has authored a number of geological reports. He remains the most knowledgeable individual on all geological matters pertaining to the Mel property. King was president and director of International Barytex Resources Ltd. and Kobex Resources Ltd. until 2009 when the two companies amalgamated. He is currently president and a director of Pacific Imperial Mines Inc.