Zazu Metals (ZAZ-T, ZAZUF-) is moving its Lik zinc-lead-silver deposit forward to the pre-feasibility stage after a scoping study proved positive for the property, 22 km from Teck‘ s (TCK.B-T, TCK-N) Red Dog zinc-lead mine in northwestern Alaska.
Teck is a 50% joint-venture partner in Lik, but Zazu has the exclusive right to obtain 80% of the property by meeting spending commitments by 2018.
The scoping study was based on Lik’s inferred and indicated resources and the life-of-mine production plan involves the production of 16 million tonnes grading 8.08%zinc, 2.57% lead and 47.9 grams silver per tonne.
Scott Wilson RPA estimated a pre-production capital cost of US$352 million including a 22% contingency for a 5,500 tonn- per-day mine and mill with an eight-year mine life. It also estimated life-of-mine operating costs of US$75 per tonne.
Their base case assumed metal prices of US$1 per lb. zinc, US$0.80 per lb. lead and US$16 per oz. silver. At these prices an open-pit mine at Lik would yield a pre-tax internal rate of return (IRR) of 9%.
The deposit is highly levered to the zinc price, however. Using US$1.10 and US$1.20 per lb. zinc in the same model yielded pre-tax IRR’s of 17% and 23% respectively.
The Lik deposit is divided into two by the Main Break Fault. South of the fault, Lik South is at or near surface and is an open-pittable zone; Lik North is a deeper resource that would be mined underground with access from the bottom of the Lik South pit.
Lik South has an indicated resource of 18.74 million tonnes grading 8.08% zinc, 2.62% lead and 52.8 grams silver and an inferred resource of 1.23 million tonnes grading 6.80% zinc, 2.12% lead and 35 grams silver at a 5%cut-off grade.
Lik North has 5.18 million tonnes grading 9.65% zinc, 3.25% lead and 51 grams silver of inferred resources at a 7% cut-off grade.
Zazu says it believes Lik’s project economics can improve when additional resources are included in future mine plans.
The scoping study excluded resources that may have to be mined from underground, the company explains. These resources include roughly 3 million tonnes of indicated resources and 1 million tonnes of inferred resources associated with Lik South; and 5 million tonnes of inferred resources in Lik North.
At presstime, Zazu Metals was trading at 25¢ per share. Over the last year the junior has traded in a range of 12.5-45¢ per share and has 30.66 million shares outstanding.
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