Ironbark Zinc edges towards major mining operation at Citronen base metal project

Ironbark Zinc (ASX: IBG) is making solid progress towards finalising the Feasibility Study for it’s 100% owned Citronen base metal project in Greenland, which currently hosts in excess of 11 Billion pounds of zinc (Zn) and lead (Pb).

The company has also been granted a trading halt by the ASX pending the release of information about it entering an agreement for a financing facility.

Ironbark Zinc expects to make an announcement on or before the commencement of trading on Friday 14th October, 2011.

Ironbark Zinc is steadily putting the pieces together in the development of Citronen, one of a few World Class deposits wholly owned by a junior resource company.

The recent agreement with China Nonferrous Metal Industry (NFC) provides Ironbark with engineering, construction and delivery expertise of major international projects.

The Feasibility Study is focused on developing a large scale, long life base metal mining operation situated in politically stable Greenland.

The study is based on a 3 million tonne per annum (tpa) mining operation to produce between 175,000 and 275,000 tpa of 55% zinc concentrate and 10,000 to 26,000 tpa of 50% lead concentrate over a mine life of at least 13 years, not including Inferred mineralisation which could see a mine life of 16 years, with substantial potential for a much longer mine life.

The costs current estimated costs are interim and do not include any Inferred resources, which require further drilling to reclassify to Indicated or Measured categories.

Enticingly, the resource remains open in almost every direction which may support future mine expansion.

The Citronen project is targeting operating costs to concentrate (at the mine gate) in the range of US 32c/lb to US 42c/lb of zinc (US 37c/lb to US 49.5c/lb payable zinc) after lead credits (at the mine gate) for the first 5 years of production, depending on finalised mine schedule, resources and mining reserve conversion.

A capital cost of US$502 million on the base case, excluding first fills, has been estimated to a feasibility study level.

Significantly, the forecast operating costs for Citronen are lower than other major mines such as Century (Australia), the second largest zinc mine in the world and the Mount Isa mine (Australia).

Further work is ongoing so that Ironbark is prepared to take advantage of the market at a time when many of the worlds mines, some of them very large, have closed or are closing and with very few large scale replacement mines in the global pipeline.

Key points

The majority of the feasibility study has been completed and Ironbark retains a healthy cash balance of about $10 million at September 2011.

The large tonnage resource base of 60 Mt at 6% zinc + lead (Zn+Pb) with a potential mineable mineral inventory of 50 million tonnes with the majority in the Measured and Indicated category. The resource remains open to further mineralisation in almost every direction.

The first five years average diluted ore grade at a mining rate of 3 Mtpa delivered to the process plant will be approximately:

- Underground 7.5 Mt at between 6.1% and 6.8% Zn+Pb upgrading to mill feed grading to between 10% and
11.9% Zn+Pb.
- Open pit 7.5 Mt at approximately 3.7% Zn+Pb upgrading to mill feed of approximately 5.3% Zn+Pb at low strip ratios, although this will be moved the end of the mine life to give preference to underground tonnes due to a focus on targeting early high grade.

Citronen has excellent potential for the mine life to be increased beyond the current 13 years as defined within the Measured and Indicated resources.

The mineralisation remains open in most directions and is constrained only by drilling with reserve classification limited to the Measured and Indicated resources categories only.

The current Inferred resources will need to be infill drilled to a higher confidence level to be included in a mine plan but could take the mine life to 18.7 years.

A target resource of 165 M to 190 M tonnes at 5.7% to 6.5 % zinc + lead highlights the significant upside potential of this world class asset.

Life of Mine Revenue at US$ 1/lb Zn and US$ 0.90/lb Pb could exceed US$3.2 Billion.

Industry standard flowsheet that results in a saleable concentrate with feasibility process design recovering 85% of the zinc mined and approximately 60% of the lead mined overall with further testwork ongoing.

Opportunities for capital cost reduction have been identified and the following initiatives are underway including:

- China Nonferrous Metal Industry’s Foreign Engineering and Construction Co,Ltd. (NFC) and Arccon (WA) Pty Ltd signed a Memorandum of Understanding (MOU) with Ironbark to engineer, design, procure, supply, construct, test and commission the Citronen project.

- The MOU also envisages potential funding of the project development costs by major Chinese banks and entering into concentrate offtake sale agreements.

Metso Corporation, one of the world’s largest equipment suppliers to the mining industry have identified significant savings to the process plant capital cost which will be investigated in the coming months.

Ironbark has very strong and supportive shareholders in Nyrstar NV (the world’s largest zinc metal producer) and Glencore International AG (LON:GLEN), the world’s largest zinc trader.

The target Life of Mine average operating cost for Citronen is calculated to be US $57.87/t net of by product credits.

Greenland provides a supportive and pro-mining environment that operates under European law. The corporate tax rate is 30% (37% for repatriated funds) and there are no Government royalties.

In addition development expenditure and plant and equipment are deductable through depreciation at a rate of 30% on a declining balance basis.

Citronen has a clean and saleable concentrate product. The forecast zinc concentrate grade is 55% zinc with no forecast penalty limit breaches.

An Environmental Impact Assessment has been completed and lodged with the Bureau of Minerals and Petroleum, awaiting public comment.

The first draft of the Social Impact Assessment has been submitted to the Bureau of Minerals and Petroleum Greenland (BMP) for comment, with revision currently being addressed by Ironbark.

The preparation of the Feasibility Study is being coordinated by Wardrop Engineering Inc., in conjunction with Wardrop Engineering Inc./Tetra Tech, Metso Corp., MTHøjgaard Grønland ApS. (MTH) and with input from Ironbark and the in-house team of engineering, geological and environmental staff.