And as the global economy continues to re-balance with those of Emerging Markets coming to the fore, how are things looking on the supply side of the equation? As we witnessed with Uranium and more recently with Rare Earths, nothing focuses the mind more than a potential supply squeeze!
We took the opportunity to talk to John Teeling, Chairman of Connemara Mining (LON:CON). Zinc is their business. The Company has a total of 37 exploration licences in Ireland covering over 1,000 sq kms, and is the fourth largest ground holder by size in Ireland. Connemara have recently raised £1million providing the cash to fund their medium term exploration.
We hope you find this interesting:
MM: Connemara is focused on Zinc opportunities in Ireland. Can you provide our readers with some background with regard to Zinc in terms of its industrial usage and the anticipated global supply/demand balance going forward?
JT: Zinc is one of the most widely used metals in the world. It is used in housing, automobiles, goods etc. It has a number of specific properties which makes it an ideal metal for many uses. Zinc sacrifices itself to rust so you coat your tin roof or iron bucket or metal water tanks with zinc. When the metal is attacked by rust it eats the zinc and leaves the underlying metal so it greatly extends the life of these items.
Zinc is perfect for die casting in that it can be finely moulded to close tolerances hence its use in cars, fridges etc. The best example is model toys – the famous dinkies, all made from zinc. You can see the fine detail in the models.
Zinc consumption is directly correlated with industrial growth. The fast growing BRIC economies are using ever increasing quantities of zinc. In China the number of cars are expected to increase 10 fold in 10 years. There is vast demand for housing and household appliances in all of the developing world as a result of these demands zinc growth rates may have doubled from 2% per annum to 4%. This is the equivalent of one new large zinc mine a year.
Supply is at best flat or even declining. From the mid 1980s there was little incentive to explore as zinc prices languished. Price rises in the past few years have led to an upsurge of exploration. But deposits must be found then developed. Meanwhile existing mines are running out – just like two huge mines in Ireland – Tara expected to close in 2017 and Lisheen expected to close in 2013.
The 20 year fundamentals for zinc are very positive.
MM: In their recent broker note, Optiva Securities referred to your exploration prospects as being in ‘elephant territory’. Could you outline the key elements of your strategic exploration portfolio and how you expect them to create value for investors?
JT: Connemara is a tightly focused zinc explorer. We work only in Ireland where we hold 37 licences, the fourth largest licence holder in the country. Why Ireland, well Ireland is the best place in the world to find large zinc deposits. The geological selling of Ireland has produced jumbo sized discoveries. Tynagh in the 1960s, the then largest in Europe, Tara in 1970 still going and it still remains one of the biggest zinc mines in the world. Galmoy in 1986 one of the biggest finds in Europe. Lisheen, 10 km from Galmoy, still going as the 12th largest zinc mine in the world.
Irish zinc mine discoveries are many times the size of the average world zinc discovery. They also tend to be the richer.
The founders and directors of Connemara have extensive experience in Irish zinc. As Chairman, I, have been involved with Tynagh, Tara and Galway. Viv Byrne has 40 years zinc experience while Graham Reid has spent 30 years exploring in Ireland.
Our strategy was and is simple. Get good licences with the potential to host large zinc orebodies. We used our knowledge, experience and contacts to identify the best available ground. It worked. We have a major world class zinc discovery in Limerick. Connemara has a market cap of £4m. It has a 25% interest in one of the best zinc discoveries in the world in recent years. The potential should be obvious.
MM: Your Stonepark licence interests have yielded some interesting exploration results. Could you expand on these and explain how you see Stonepark developing over the coming months and into 2011?
JT: The Connemara zinc discovery in Stonepark grows more exciting with every drill result. With our partner Teck Cominco of Canada we had a good high grade hit in 2007 in Stonepark near the city of Limerick in Sth West of Ireland. In 2009, at Stonepark North about 1.7km from the 2007 drillholes we hit high grade shallow (200 mts) zinc mineralisation. In the past year we have grown this discovery into a flat lying high grade zone up to 800 metres long with two discoveries 500 metres to the side. We either have a very large orebody or, more likely, a series of parallel high grade zones. The only true lie detector in mining is a drillhole so over the next 18 months we will drill up to 50 holes in the area. We want to test the length, breadth, depth and consistency of what we have.
Meanwhile, right beside us, Xstrata with their Irish partners, Minco, are drilling out their zinc discovery. Recently high grade results announcements show the orebody moving closer and closer toward our Stonepark discovery.
It is now clear that there is an extremely large zinc mineralised orebody in the area – one of the biggest in the world. Estimates range from up to 40 million tonnes (Tech) to 60 million tonnes “Beaufort Report”.
In recent days Xstrata published information suggesting a new 6,000 tonne per day zinc mine in Limerick would come on stream at the latest 2017. Given that the Lisheen mine, 60km from Limerick will exhaust its ore by 2013 there is a strong incentive to mine in Limerick and rail to Lisheen.
MM: Your recent fundraising has provided the company with additional resources for the on-going exploration programme. How much headroom does this funding provide the Company with regard to its budgeted exploration programme?
JT: We raised £1 million recently. We are a very small company as we are conscious of dilution. The £1 million will fund our share of exploration in Limerick and drilling as well as on our solely owned licences near in Lisheen mine and the old Silvermines zinc mine. The targets are good.
Together with limited overhead our exploration budget to end 2011 is fully bonded. Continued good results in Limerick and hits on either of our new drill sites could increase spending. But funding more success will not be a problem.
MM: What news flow can investors look forward to from Connemara over the rest of the year and into 2011?
JT: New flow will come from 4 areas.
Stonepark Drilling: We will have a flow of results on a regular basis. We hope to show a continuation of the shallow flat lying high grade zones.
Newcastle West: We will drill 15 holes on our joint venture licence southwest of Stonepark.
Nenagh/Thurles: Up to 10 holes will be drilled on our wholly owned licences near Lisheen and Silvermines.
Corporate Newsflow: The Lisheen mine now owned by Vedanta of India, a FTSE 100 miner, will run out of ore in 2013. The Stonepark ore is suited to the Lisheen processing plant. A rail link exists from Stonepark to within 10 km of Lisheen. Secondly there are sound geological reasons to merge Connemara with Minco, the junior partner in the discovery next door to Stonepark. A combined venture would have strong control over the two discoveries. Finally, we are looking at finding an Asian joint venture partner to drill our licences. It is early stages.
End
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