The Digger Has Noted Elsewhere That There is a Developing Boom Occurring in Commodity Markets.

The Digger - 01-Dec-2017

Copper and Zinc Positioning

The Digger has noted elsewhere that there is a developing boom occurring in commodity markets and while it may have been led by lithium, and more recently, cobalt, it has also impacted the more common base metals like copper, nickel, aluminium, zinc and tin.

The upward movement in these prices has partly been driven by the market changing its perceptions on how quickly electric vehicles will penetrate the market and the realisation that with almost zero running costs and a lower purchase price in the future, it may be a lot quicker. More electric vehicles means an increase in demand for electric motors, batteries, charging stations, etc. and the metals that they require.

Indeed, BHP's preferred exposure to the energy storage revolution is through copper. "We have huge exposure to the potential outcomes of things like electric vehicles through our copper business," CEO Mackenzie recently reported.

Separately, while zinc is used in steel fabrication, it has been the decline in supply which has underpinned the recent price increases. This includes declining production levels or closure of a number of major zinc including Century, Lisheen, Jaguar, Mt Isa, Red Dog, etc. While new production is emerging, e.g. Dugald River, New Century Resources, these do not significantly offset the supply/demand imbalance stemming from forecast increasing demand against the loss of production from the major mines. 

In recognition of the attractiveness of both copper and zinc, the Breakaway Investment Group team has been busy over the last two years working on establishing a portfolio of assets in a vehicle called Tartana Resources Limited. Tartana Resources is planning on listing through an IPO in early 2018 and is completing a capital raising to finance the process.

The flagship asset is the Tartana copper project which is located 40 km west of Chillagoe, North Queensland. It comprises four granted mining leases and geology and mineralisation reflects a high-level porphyry copper/gold system lying within the Palmerville Fault Zone.

 Figure 1. Tartana Project including plant, heap leach pads and pit to the right.

Mining to-date (2004 - 2013; 1.2 Mt @ 0.8% Cu) has focused on mining shallow copper oxides at surface and then utilising heap leaching to recover copper in a high quality copper sulphate as a marketable product. The plant remains on site and can be restarted by Tartana Resources to continue copper sulphate production by sourcing copper from both on-site and elsewhere and which will generate a modest cash flow.

However, the main game is the advanced exploration opportunities - with both separate copper and zinc targets.

In terms of copper targets, while the limited surface mining removed the oxide resource, the copper sulphide resource remains below. Extensive drilling has confirmed a target of 33 million tonnes 0.6% copper but there are two additional considerations. One is that an extensive geophysical IP anomaly couple triple the target to 100 million tonnes while second is that there are incomplete analysis for most elements other than copper while some earlier copper assays appear to be understated by 20%.

Figure 2.

Separately, on another part of the lease is the Queen Grade zinc project. The mineralisation is expressed at the surface as a gossan and limited drilling has outlined vertical mineralisation with intersections including 33 metres at 12% zinc. Again drilling is incomplete as well as the assays that have been assayed but if the mineralisation continues the length of the gossan at surface, there is an exploration target of 2 to 3 million tonnes.

This target size is not unlike the King Vol lead/zinc orebody which is being developed by Auctus Minerals with backing by the large US private equity fund, Denham Capital on the adjacent mining lease.

After spending more than $150 milion developing the King Vol underground mine and refurbishing the Chillagoe concentrator and Mungana mine, King Vol commenced first production over the last month. The Queen Grade mineralisation is similar to the King Vol mineralisation and the fact that the King Vol orebody is very extensive down dip bodes well for our Queen Grade deposit. 

Tartana Resources is continuing to grow its portfolio and we believe it will represent an attractive copper and zinc play in early 2018.

For more information contact: Rachel Szabo on 02 9392 8011 or rachel.szabo@breakawayinvestmentgroup.com

Figure 2. Location Map (source: Mungana Gold Mines Limited)