Connemara Mining “set fair” operationally, says chairman

Irish zinc miner Connemara Mining Company (LON:CON) said this morning it has all the funding it needs for the drilling programme at its zinc-lead discovery at Stonepark in Limerick in 2012.

Teck Ireland, the firm’s 75-per cent partner in Stonepark and operator of the venture, will continue to drill with multiple rigs through 2012 and “operationally Connemara is set fair”, according to its chairman John Teeling.

Earlier this month, Connemara revealed that the Stonepark partners had found a new zone of high-grade mineralisation intersected at Stonepark West, some 1.7 kilometres south west of the Stonepark North zone.

Its drill hole there, dubbed Hole 86, intersected high-grade zinc and lead mineralisation of 2.5 metres at 4.16 per cent zinc and 4.37 per cent lead, beginning at a depth of 382.5 metres.

In addition, Hole 64, which is located 580 metres east of the new discovery between Stonepark North and Stonepark West, intersected 3.1 metres of 1.92 per cent zinc and 0.56 per cent lead at a depth of 273 metres, with further zinc-lead mineralisation discovered at 288 metres. Drilling 1.5 kilometres to the west of the new discovery also intersected hydrothermal breccias similar to those at Stonepark West.

Connemara said that the nature of the Stonepark discoveries, like those found by Minco/Xstrata, are “typical of Irish zinc discoveries”. They can be large and rich but are often in separate zones, so they need a significant number of drill holes to reach a measured estimate of volume.

“We believe that the Limerick discoveries have the potential to produce at least one world class zinc mine. It is worth noting that the current discoveries are all on one of the 16 Limerick licences in the Connemara/Teck joint venture,” said Teeling.

Connemara’s interim results today showed that the firm made a operating loss of €198,000 during the six months to June 30, compared with a loss of €165,000 in H1 2010. Its net loss was €194,000 (H1 2010: €164,000).

At the end of June, the firm had cash and cash equivalents of €1 million (June 30 2010: €20,000).

Commenting on the investment climate, Teeling said that although Connemara is fully funded until the end of 2012 and its geological results are “outstanding”, the share price is a cause for concern, with a market capitalisation of just above £3 million.

“A series of events have combined to damage our share price. The general economic malaise is bad for speculative shares and the AIM market has been badly hit as retail investors try to exit illiquid positions.

This is further exacerbated by the many Irish investors who have seen their net worth decimated by the virtual collapse of the Irish economy and so are forced to sell their Connemara shares.

However, Teeling said that those investors not forced to sell should look to a number of fundamental facts. He pointed out that zinc demand continues to grow at rates of four per cent due entirely to Chinese, Indian, Brazilian and other emerging markets, and that these emerging markets are expected to grow far faster than declining Western economies.

Meanwhile, he added, zinc supply is sluggish with few new mines coming on stream and zinc prices above US$2,000 per tonne are profitable for producers.