A Zinc Bull In A China Shop
The world’s zinc supply is diminishing.
The machine that is China is once again rearing its insatiable head – the same machine that propelled resources to their all-time highs during the last supercycle.
And now zinc warehouse stocks are already at 10-year lows.
So, the Mel project is not only in a jurisdiction known for its zinc deposits, it has had ample historical work to prove its incredible potential.
Prior to Benz, there were 90 holes drilled for 16,759 meters.
The project has also seen numerous soil geochemical surveys, geophysical surveys (IP, gravity, VLF, and magnetics), metallurgical test work, and several resource estimations.
The Main Zone still remains open on strike and depth, while the Jeri and Jeri North Zones have had limited reconnaissance-level drilling. The East Zone remains untested by drilling. This means there is significant upside potential.
Benz Mining recently completed a 9-hole in-fill drill program, which confirmed the mineralization in the resource model. Highlights included:
Hole No. 053 – 11.15% zinc with 0.33% lead over 3.53 metres true-width;
The project was sought as a zinc project, thus has not been tested for concurrent precious metal mineralization. There is a very high likelihood that silver can be recovered.
Preliminary metallurgical tests have yielded high flotation concentrates, including 62.8% zinc and 78.0-78.8% lead, and recoveries of 93.3% zinc and 97.9% lead.
Compared to other Canadian zinc companies, Benz Mining is the cheapest by far:
This disconnect in valuation is confirmed by Benz’s internal estimates.
According to the internal scoping study, the initial CapEx will be C$125 million, and the project will yield an average EBITDA of $56.3 million per year, after production start-up for the first 7 years. Based on current market prices, this yields an NPV8 of C$152 million and IRR of 30.23%.
Next steps? 2018 will see further drilling to upgrade the inferred resource to the M&I category. We will also get more of information on the tenor and distribution of silver in the Mel deposit.
Permitting will also begin in 2018, which will be vital for the updated PFS. Benz Mining believes it will be in production by 2021. As one of the few projects slated for near-term projection, you can imagine the kind of interest it will garner by starved smelters.
The Benz team is led by experienced management that includes a $650 million past zinc transaction. While the economics of the project are appealing, there is incredible upside in additional high-grade deposits.
With zinc also poised to explode, we cannot imagine Benz Mining flying under the radar for long.