Midnight Sun Mining Corp (TSX-V:MMA, OTCQB:MDNGF) arrived in Zambia, home of the second-largest copper producing belt in the world, more than a decade ago.
The company’s Solwezi project is huge — 506 square kilometers, which is big enough for multiple large systems to exist on the property — and is surrounded by a long list of world-class copper mines operated by some of the largest global mining companies.
In his time there, CEO Al Fabbro has seen it all: extensive geophysical work, sampling, drilling, collaboration with Rio Tinto to advance the property and even a change in the Zambian government that made the country an even more favorable mining jurisdiction. Copper production accounts for 75% of Zambia’s export earnings and mining is very much part of the fabric of the country.
Fabbro sat down with Proactive to talk about how hard work and patience may be about to pay off as strategic joint venture talks evolve with some high-profile suitors.
Midnight Sun is a Canadian junior surrounded by world-class mines run by majors. Who are the key players in the region?
In our immediate vicinity, if you threw a blanket over the top of us going 200 kilometers in any direction, you'd have about seven major ore bodies.
You’ve got First Quantum’s Kansanshi Mine, which is our neighbor (located less than 10 km away). Sixty kilometers to the west is a Dumbwa (one of Midnight Sun’s targets) lookalike called The Lumwana Mine, which is operated by Barrick. Then about 150 kilometers to the west you've got First Quantum’s Sentinel Mine, which contains a billion tons of 0.5% copper.
If you go north, you've got Ivanhoe’s Kamoa Kakula, with maybe 100 billion pounds of copper contained in a relatively small area. That’s about 160 kilometers from where we are as the crow flies.
This is a very prolific area. The deposits are big. Ivanhoe’s Kamoa Kakula runs up to 2.92% copper, Kansanshi is about 0.66%, Sentinel's 0.51% and Lumwana is about 0.55% or so — but they’re big.
How do deposits and mines in the Zambian Copper Belt compare to other global jurisdictions, such as Canada, the US and Chile? Are these porphyry deposits, or something altogether different?
It's mostly sediment-hosted deposits. They're different from porphyries.
In North and South America, 90% of the producing copper deposits are porphyry. They tend on average to weaken as they go north, so some of the best porphyries are in Chile and as you go up to Canada our rate goes down to about 0.35% or 0.4%.
But the average size of those tends to be 300 to 400 million tons, whereas in Zambia you get 1 billion tons of maybe twice to three times the grade.
Some of the seniors believe that all the easy porphyries have been discovered and that the next generation of porphyry copper deposits are going to be found at much greater depths, making them far more costly to develop. So, they're going to have to rely on production methods such as block cave to mine them or they're going to have to find some different way.
Zambia has the geology, and it has the people. There are excellent exploration geologists in Zambia, and it's a place we feel comfortable working.
It’s also maybe the best climate in the world. Temperatures range from 20C to 30C, you get three months of rain a year, and the rest is 25C and sunny. It’s a pretty pleasant place.
Talk to us about the geology at your Solwezi Project, and why it has your team excited.
The interesting thing about this ground is that there is almost zero outcrop. There's usually 30 to 40 meters of cover on this stuff. And the initial discoveries were all soil anomalies.
We bit the bullet and spent about $1 million to carry out geophysics, and we flew a big VTEM survey.
The results came back interesting but non-conclusive, and that’s when Rio Tinto made us an offer we really couldn't refuse at the point in time in our life. They did about three years worth of work on the property, which resulted in a vast database of results including geochem, geophysics and limited drilling.
Working on our own, we focused on Mitu and the Crunch Zone last year, drilled about 15 or 16 holes and got some really nice numbers.
We had proof of concept on where Mitu was striking. We had it originally going north-south, but it looked like it was going more northeast. We followed up on that trend and we got some success.
We've also got a separate license called Dumbwa, which is a 20-kilometer-long soil anomaly. It’s the richest soil anomaly any of us have seen anywhere in the world.
We drilled the high points in the soils, and we’d get 15 meters of 0.7% and 15 meters of 0.6%. I think the best total was 12 meters of 1.25%.
This is very valuable real estate.
What about the status of mines nearby? Acquisition activity is often driven by a “need for feed,” as mines with their own production facilities become less productive. Is that dynamic present where you are?
Barrick, after meeting with the government, has decided to go whole hog into Zambia, getting really aggressive and looking for acquisitions and exploration targets. Zambia has become a tier-one destination. The geology is fantastic, and it’s super underexplored considering the quality of discoveries made in the country.
Rio Tinto, which owns all the property to the south of us, has made Zambia their number one destination for copper assets. They want to do it through exploration and discovery, and they've been quite impressive over the last five or six years there.
Late last year, Rio Tinto made a quote unquote “discovery” on the southern end of Dumbwa about a kilometer onto their license.
Once that word got out, we've been inundated with expressions of interest to joint venture this property.
We were in Zambia when nobody else was. We stuck through thick and thin. The previous government had made some very aggressive proposed royalty changes that basically would have bankrupted the copper industry.
There was a change in government about two years ago, and a more pro-mining government has come in. They’ve devised a philosophy that mining has to be a win-win. It can't be a win totally for the country and it can't be a win totally for the mining company.
Finally, what are the next steps with your project? What activities are planned and what do shareholders have to look forward to in the final few months of the year?
We're in the middle of discussions with several strategics, looking at the possibility of joint venturing some or all of our property. These are expensive targets to explore and we're at a point now, we've been at it long enough, where we recognize our strengths, and we recognize our weaknesses.
Sometimes we have to call in better experts in the area than us that we think can get the job done in a more cost-efficient and timely manner.
Additionally, it appears that First Quantum's going to have a shortage of oxide copper material for their plant. There is some indication, particularly on our western license, that we may be able to find a sufficient source of copper oxide material that may help them out.
First Quantum’s Kansanshi Mine has one of the most efficient copper smelters on the planet, and one of the byproducts of an efficient smelter is sulfuric acid. So, they produce about 1 million tons of sulfuric acid a year.
And the best way to use sulfuric acid is to leach copper oxide ores and turn them into copper cathodes. They've been doing that effectively for life of mine, but now they're at the end of their oxide supply. If we could be fortunate enough to supply that for them, then I'm sure there could be a deal worked out.
We’re doing a scoping study right now that’s designed to figure out where's the best place to hunt for oxide copper on our licenses.
We would need probably 25 million tons of maybe 0.35% to 0.4% copper, and we think there's spots on our licenses that could provide a crack at that.
That’s one of the strategies we might work on where we could see some almost instant cash flow opportunities while we simultaneously fund the hunt for deeper sulfides through a strategic partnership.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
Follow him on Twitter @andrew_kessel