By Alastair Ford
“People are definitely interested”, says Dave Copeland of Rathdowney Resources. “Zinc is going to be in deficit. You look at the number of closures that are happening. And you look at who is developing large projects – nobody. The only significant project at all is Teck’s expansion of Red Dog in Alaska.”
And even at the smaller end of the market, there’s precious little in development. “There are only a very small handful of similar sized projects to us”, says Dave. “And it does very much come down to a small handful.”
The zinc price has dropped back a little of late, after soaring throughout last year. That made zinc one of the few bright spots in an otherwise depressed commodities and mining market, and prompted a certain resurgence of interest.
And there should be more to come. At the moment, the market is digesting news that the size of the zinc deficit has dropped. But Dave’s analysis mirrors a view widely held by analysts around the world – it will widen again.
And that’s where Rathdowney comes in with its Olza project, located in the upper Silesian mining district of Poland.
The aim, says Dave, is simple: “to get into production”. And progress towards that aim has lately been very encouraging
Chief executive Robert Konski takes up the story. “We’ve been in Poland since 2010”, he says. We have three concessions for exploration in south west Poland between two major cities, and between two international airports.”
So far so good.
But there’s more to it than ease of access. Olza is an area that has known mining for around 800 years, although lately there has been somewhat of a decline.
“Recently there were four zinc mines in our area”, says Robert. “Now there’s only one – Pomorzany. In addition to the mine there’s also a smelter and crushing facility. It’s been in operation for around 40 years, and so far it’s produced around 95 million tonnes.”
More to the point, continues Robert, “They’re right next door to us”.
That’s significant on many different counts. “There are some interesting synergies”, says Robert. “It means our concessions have access to rail.” First tick.
“And next door they were mining similar grades to what we have in our 43-101 report”, adds Dave. “They started off with the same amount of resources that we now have.”
What’s more, the mineralisation is, broadly speaking, the same. Both Pomorzany and Olga are part of what’s known in the trade as Mississippi Valley-type lead-zinc deposits. This presents no real challenges to a company like Rathdowney, which is itself part of the wider and world-renowned Hunter Dickinson group, famous for nurturing junior mining companies and making them grow.
Dave himself is a director of Hunter Dickinson, so there’s a clear line direct to the source there. “This project has the same grade and metallurgy as a classic Mississippi Valley project”, he says. “The resource is 21 million tonnes grading 6% lead and zinc.” What’s more, historical drilling indicates that there may be another 40 million to 50 million tonnes of ore on Rathdowney’s ground, although this has not yet been proved up to 43-101 standards.
Given that the mining and processing probably won’t be too complicated, how does it look economically?
Dave doesn’t want to anticipate the preliminary economic assessment, but he is able to give some pointers. As far as production costs are concerned, “we will be in that competitive range”, he says. The capex numbers are helped by the proximity of Pomorzany.
“We’re right in the middle of infrastructure”, says Dave. “We have an industrial site we would like to use that has power.”
And how about operating in Poland. Neither Dave nor Robert, who is a Pole himself, has any doubts on that score. Poland is a fully-fledged member of the EU and as such abides by EU regulations. The rule of law is secure. There’s an appetite for mining to help stimulate the economy. And although the bureaucracy can sometimes be slow, it is, on the whole, efficient.
The company makes significant efforts in regard to Corporate and Social Responsibility – for more on which, see here, and certainly strives to be a good citizen. But so far, since coming in when the regulations were changed back in 2010, Rathdowney has had few causes for regret.
“We are in the right commodity, at the right stage of development, in the right place”, says Dave.
There remains the question of funding, of course. But on that score, Rathdowney looks rather better positioned than many of its peers. For a start, there’s the support of Hunter Dickinson in the background. “We’re busy on the hunt as Rathdowney and as Hunter Dickinson looking for potential funding and a co-developer”, says Dave. “We’re keeping all our options open.”
And so far Rathdowney has proved itself adept at bringing new cash into the coffers. The company raised C$8.6 million with two tier-one funds and a private equity group back in September.
All of which goes a long way towards explaining why Rathdowney’s shares have not suffered the catastrophic collapse that’s been endured by some of its peers. In fact the shares have been relatively steady over the past year, and are currently trading at C$0.26, which is roughly where they were at this time last year.
In a brutal market, and for a company without the support of production, that’s not bad going. The results of the PEA will certainly make for interesting reading.