OntZinc drills Balmat

The first hole drilled by OntZinc (OTZ-V) on the Northeast Fowler trend in upstate New York has cut a 2.8-metre interval averaging 19.5% zinc and 6.2% lead beginning at a depth of 412 metres.

The hole would appear to confirm the presence of ore-grade mineralization over minable widths in the target area.

The Northeast Fowler trend is in the same stratigraphic and structural setting as the Fowler deposit, 1.2 km up-plunge, which previously produced 6 million tonnes grading 9.6% zinc.

OntZinc estimates the trend has the potential for hosting 3 million tonnes grading 15-18% zinc, based on its similarity to the Fowler deposit and lower-dilution mining methods.

Follow-up drilling to test the up-plunge extent of the Northeast Fowler mineralization is under way.

The Northeast Fowler trend is 397 metres south of the Mahler deposit, which is fully developed for mining. Underground drilling on extensions of known mineralization there returned two 3.8-metre intersections averaging 24.5% and 24% zinc (T.N.M., April 12-18/04).

Reactivation plans at the Balmat mine call for production to be ramped up to an equivalent annual rate of 100 million lbs. zinc-in-concentrate per year between August 2004 and July 2005. Thereafter, annual production is expected to average 110 million lbs. The plan utilizes only half the operation’s mill capacity. In the long run, the company will look to prove up additional reserves sufficient for bringing the mill up to its full capacity of 200-220 million lbs. annually.

Toward that end, the company intends to have Quantec Geoscience carry out a geophysical survey to augment ongoing underground drilling. Surveying will focus on prospective, little-explored ground between the Hyatt and Balmat mines.

OntZinc’s subsidiary, St. Lawrence Zinc Co., is completing mine layouts and budgets for narrow-vein minimum-dilution mining, and estimates run-of-mine zinc ore grades at Balmat in the range of 12-13%.

So far, OntZinc has raised $5.3 million via an offering of units priced at 18 apiece. The company hopes to raise $10 million in all. A unit comprises one OntZinc share and half a warrant. One warrant is good for one share at 20 per share for two years.

Of the proceeds, OntZinc recently applied $2 million to complete its acquisition of the Gays River mine (also known as the Scotia mine) from Australian-based lead and zinc producer Pasminco. Pasminco retains a 2% net smelter return royalty. The balance of the proceeds will be used to revitalize Balmat, the Gays River mine near Halifax, N.S., and acquisitions in southwestern Ontario.

OntZinc has lined up RMB Resources, a South African-based financial institution, to arrange a US$10-million debt facility with a member of the First Rand Group. The financing is conditional on due diligence by RMB and approval by the Lender’s Credit Committee and the directors of OntZinc and St. Lawrence.

Balmat, formerly held by St. Joe Minerals, produced 30 million tonnes of ore at a grade of 9.5% zinc between 1930 and 2001. A resource and reserve audit in January 2003 pegged reserves at 1.8 million tonnes grading 11.94% zinc, including 643,000 tonnes of 12.77% zinc in the Mahler zone.

At the Scotia mine, OntZinc is looking at either completing ongoing technical work aimed at determining the economic viability of developing the zinc-lead deposit to production, joint-venturing the project, or selling it outright.

In the boardroom, OntZinc’s chairman and CEO Clifford Frame recently retired. Frame was the head of Curragh Resources, when a methane explosion at the Westray coal mine in Nova Scotia killed 26 miners in 1992.