Does Connemara Mining have the luck of the Irish?

Connemara Mining: luck of the Irish?

According to Irish mythology, the leprechaun was a small male faerie shoemaker. Over the years, the leprechaun was often associated with Irish gold, or at least its desire to stash some away.  In reality, successful gold exploration and development in Ireland is about as scarce as sightings of Ireland?s famous little green men.  Instead, Ireland is better known for two other less sexy minerals ? zinc and lead. 

It may come as a surprise to some that there is much mineral exploration or development in Ireland at all. The country is small, and breakneck economic expansion since joining the EU eight years ago has ensured a rapid contraction in land availability.  Yet Ireland is in the top ten producers of zinc globally. That zinc comes from only a handful high grade, underground mines. But if you think exploration for zinc in Ireland is small fry, think again ? Xstrata, Anglo American and Canadian giant, Teck Cominco are all in the thick of it.  And the reason they are in the thick of it is the high grade nature of Ireland?s zinc deposits.  

Arguably the most famous zinc mine in Ireland is Navan, which was discovered in 1970. Navan had an impressive 70 million tonnes of reserves grading 10% Zinc and 2.5% Lead when it went into production, and is still one of the top three underground mines in the country today.  Amazingly, after Navan in 1970, no further discoveries were made for 15 years, until the Galmoy discovery in 1986. Galmoy, like Navan, had eye popping grades ? 6.2 million tonnes @ 11.3% zinc and 1.1% lead.  Just four years later, a third mine, Lisheen, was discovered, holding 18.9 million tonnes @ 12.5% zinc and 2.2% lead.  So why the history lesson? Simply put the name of the game in Ireland is grade. High grade.  And that is exactly what Connemara Mining has hit in Limerick.

Connemara listed last year at 35 pence per share, after raising £1 million, giving it a market cap of £5 million ? pretty much bang on target for what you would expect from a grassroots mining company. The company is headed up by the affable John Teeling, whose name will be very familiar to many an investor, after floating several other resource companies over the years, including African Diamonds (AIM: AFD) and Petrel Resources (AIM: PET) ? two stocks that have rewarded loyal investors handsomely since listing. 

Connemara?s timing was good. In the last two years, buoyed by strong price increases in lead and zinc, Ireland has seen a huge influx of mineral exploration activity. Connemara on the other hand, had been quietly building a land position since 2000 and was well and truly ahead of the curve.  By the time Connemara listed, it had 38 licences, putting it in an enviable position to find joint venture partners to fund exploration.  And find a partner they did. Connemara joined forces with Teck Cominco.  Teck can earn 75% in 15 licences by expending US$3 million by 2010.  This was a good deal for Connemara; zinc exploration in Ireland is a tricky business as the ore bodies tend to lie quite deep, so drilling can be a bit hit and miss and therefore capital intensive.

Since brining a Teck into the fold, shareholders have digested some tasty morsels of drill core data. In particular, excitement has emanated from Connemara?s Stonepark licence in County Limerick, which lies in close proximity to the Xstrata/Minco Pallas Green Discovery and the Lisheen and Galmoy zinc mines .  Xstrata/Minco have just agreed to a 50,000 metre drill program at Pallas Green for 2008, and no doubt Connemara investors will be hoping they are following a similar path. For Teck and Connemara, the first sniff of success arrived from the fourth of a five hole scout drilling program at Stonepark last year which returned 4 metres grading 11.6% zinc and 3.4% lead, including 1.15 metres grading a whopping 28.6% zinc and 4.1% lead.  The mineralisation was intersected between depths of 376 and 380 metres ? very typical for Irish deposits, and in keeping with the mindset that the goal is a high grade underground mine.  The grade is certainly there, the next step was to confirm continuity of the ore body. This is exactly what Teck and Connemara have been doing this spring, with additional step out drilling.  Results hot off the press today confirm that the discovery hole was no fluke.  A second drill hole, 100 metres from the discovery hole, intersected 13.35 metres grading 3.25% zinc and 0.33% lead including 2.85 metres grading 12.18% zinc and 0.75% lead.  Connemara said the results ?are suggestive of the presence of a large base metal mineralised system?.   In order words, Connemara thinks it may be on to something.

This certainly affords investor?s in Connemara a degree of optimism. Two drill holes don?t make a mine, as John Teeling quite rightly pointed out to Proactiveinvestors when we spoke to him, and the mineral exploration business can be full of highs and lows.  But one can?t help but take on board some of Mr. Teeling?s contagious enthusiasm for zinc exploration in Ireland.  The close proximately of Pallas Green to Stonepark also throws up the potential that even a smaller sized deposit could have value as a feed source for other operations nearby.

 Zinc prices, down 50% from their high in 2007, are still trading at more than double the price a few years ago.  And zinc supply / demand forecasts are suggesting there could be a supply deficit by 2012 as China, India, Russia and Brazil continue to industrialise.  Zinc?s main uses are in batteries, die casting, brass and for galvanising steel to increase its resistance to corrosion.  A moot note for zinc statistics, a typical car built in China has 80 tonnes of zinc in it.  The number of cars in China is expected to increase from 25 million now to 400 million ?in a generation?. That?s a lot of zinc. 

There is more to Connemara than Stonepark.  Drilling success has been recorded in other areas too, but clearly the sparkle in any investor?s eye at the moment will be from the potential in Limerick.  Operating in Ireland brings many benefits too.  Political stability is a given, taxes are favourable and the government does not take a direct interest in projects.  Perhaps for many investors, a zinc explorer in Ireland may not sound like the makings of a exciting investment ? don?t be too sure about that.