Vancouver — For a total investment of A$4.5 million,
Australian-listed
Karl-Axel Waplan, president of Lundin Mining, views the project as being a “low-cost, low-risk” opportunity for his company.
Lundin says the project is similar to other giant zinc projects, notably the Century mine in Australia, and the Red Dog mine in Alaska.
“Such rich zinc orebodies available and ready for development at a time of strong zinc demand are few and far between,” says Waplan. “The project enjoys excellent fiscal returns and appears to have the full support of the government of Iran.”
Through a wholly owned subsidiary, Lundin Mining plans to buy 76 million shares of Union at A3 per share. The transaction would be subject to approval of Union shareholders and to Lundin Mining securing rights to buy 75 million additional shares (also at A3), plus options for another 151 million shares at A10 per share exercisable by March 31, 2009.
Once the share purchase closes, Lundin would be allowed two seats on the board of Union Resources.
Since discovering the carbonate-hosted deposit, Union has carried out drilling and other programs to advance the project to feasibility. The company retained Aker Kvaerner Australia to prepare a bankable feasibility study, scheduled for completion early next year.
A preliminary study showed that the project was feasible, with operating costs within the lowest quartile of producing zinc mines worldwide.
At last report, the deposit hosted indicated resources of 75.2 million tonnes grading 7.38% zinc, 2.38% lead, and 62 grams silver per tonne, plus an additional 142.7 million tonnes of 7.1% zinc, 2.32% lead, and 46 grams silver in the inferred category. This estimate is compliant with Australia’s JORC code, but has not yet been reconciled to meet Canada’s National Instrument 43-101 reporting standards.
Since the resource estimate was released, an additional 15,000 metres of infill drilling have been completed to upgrade the resources most likely to be mined in the first decade of operation.
The feasibility study envisages a production rate of 500,000 tonnes per year of zinc metal, and 180,000 tonnes per year of lead and silver concentrates at full development, which could, at that rate, meet about 5% of global zinc demand.
An open-pit mine is proposed for the first years of production, using acid-leach processing to produce zinc metal. Pilot testing of an oxide plant is under way. Power is available at a 400-KV transmission line situated about 30 km from the site.
The mine could operate for three decades or longer, if underground mining of sulphide resources proves feasible. Another plant designed to acid-leach zinc sulphide concentrates would be required for this phase of operation.
About 33% of the known resources are oxide, with the remaining 67% in sulphides. The deposit covers an area of 2.5 by 1.5 km and is open to the north and south. On the east side, the deposit outcrops on a ridge where recent drilling returned a 78-metre intersection grading 8% zinc.
The Mehdiabad project is not without risks, particularly for Union Resources, as development would take place under the terms of a joint venture with the Islamic Republic of Iran. The company notes that civil unrest or trade sanctions could delay, impede, or prevent the project from being developed, and has taken out political risk insurance to mitigate these concerns.
The company does not yet hold a mining concession for the project in its own name, but says title rights are protected under a 1991 agreement with the Iranian Ministry of Mines and Industry. An exploitation licence would be required before mining can proceed, which the company expects to receive once the bankable feasibility study is completed.
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