Ironbark Zinc Ltd (ASX:IBG)’s Citronen Zinc Project in Greenland has become the first standalone project application worldwide to qualify for the privileged 402(A) support status under the US Government’s recently introduced China and Transformational Export Program (CTEP), administered by US EXIM Bank.
This follows Ironbark’s positive Bankable Feasibility Study (BFS) announced in July 2021 highlighting robust economics, with the 3.3 million tonnes per annum Citronen Project estimated to deliver a post-tax free cash flow of US$1.46 billion at a zinc price of US$1.30 per pound.
Indicative Timeline 2021/22.
402 Program
The “Program on China and Transformational Exports”, also known as Section 402, was added to the EXIM Bank Charter via legislation passed in late 2019.
The program sets EXIM a goal of reserving not less than 20% of the agency’s total financing authority (US$27 billion out of a total of US$135bn) “…to support the extension of loans, guarantees, and insurance, at rates and on terms and other conditions, to the extent practicable, that are fully competitive with rates, terms, and other conditions established by the People’s Republic of China or by a covered country, that aim to:
- Directly neutralise export subsidies for competing goods and services financed by official export credit, tied aid, or blended financing provided by China or by other covered countries; and
- Advance the comparative leadership of the United States with respect to China, or support United States innovation, employment, and technological standards, through direct exports in ten transformational export categories.”
“Provides further momentum for achieving our goal”
Ironbark managing director Michael Jardine said following the 402(A) eligibility: “The strategic importance of Ironbark’s Citronen Zinc Project to US interests is implicit in today’s world first confirmation of 402(A) eligibility.
“Our original US EXIM application for funding broke new ground for Ironbark in its quest to see the Citronen Zinc Project developed and today’s announcement provides further momentum for achieving our goal.
“I must stress that while our funding application is still in the process of being assessed by EXIM, today’s announcement is encouraging, particularly with Zinc being recently added to the US Geological Survey’s Critical Minerals List."
Jardine added: “Some two years ago now, the new Board of Ironbark Zinc embarked upon a strategy to increase shareholder value by advancing the development of the Citronen Zinc Project.
“This has resulted in a comprehensive revision and update of the Citronen Feasibility Study to bankable status, the granting of outstanding environmental permits, the buyback of the life of mine production royalty, the appointment of Bacchus Capital Advisers, the recent addition of new Board members, and of course, our decision to pursue US EXIM project development funding.
“We have achieved a great deal, and, regardless of the outcome of our loan application with EXIM bank, our company is now very much better placed to shape our future.”
Bankable feasibility study
In July this year, Ironbark released Citronen’s BFS, setting out a series of key metrics for the northern zinc deposit.
Modelling a 3.3 million tonnes-per-annum operation, the study outlines how a zinc hub at Citronen could deliver US$1.46 billion in post-tax free cash flow.
The project bears a post-tax net present value of US$363 million, a 15.2% internal rate of return and requires US$654 million in capital expenditure.
Ironbark believes Citronen can produce 2.5 million tonnes of zinc over its 20-year mine life, averaging 130,000 tonnes every year.
It has already established two key offtake agreements for the zinc deposit — both with major shareholders.
Trafigura Ltd is in line to offtake 35% of Citronen’s life of mine production, while mining giant Glencore PLC (LSE:GLEN) is out for another 35% (comprising 10 years of zinc production and life-of-mine lead output).
Glencore and Trafigura represent the world’s largest and sixth-largest zinc metal producers, respectively.
Key findings from the BFS.
At the time, IBG managing director Michael Jardine said: “The 2021 BFS update is the culmination of an intensive reassessment of the development plan for the Citronen Project.
“It is a pragmatic and grounded view of the asset that highlights the potential for Citronen to be developed into a significant producer of zinc metal over multiple pricing cycles.
“This study worked through several challenges that required creative thinking, disciplined decision making in terms of trade-offs and a willingness to reconsider some long-standing assumptions about the project.
“For these reasons, I am much more confident today than I was 12 months ago about the depth of understanding we have and the solutions that are proposed."
“There are few known large, near-surface SEDEX zinc ore bodies that still await development, and even fewer located in low sovereign risk countries such as Greenland.
“Once built, Citronen will be a multi-decade mine underwritten by the strength of the company’s existing offtake agreements.”
Citronen’s resources and reserves
Ironbark has established a 48.8 million tonnes ore reserve for Citronen, founded on an 84.7 million tonnes mineral resource estimate (MRE).
Specifically, the MRE is reported to contain 4.7% zinc and 0.5% lead. Full details are outlined below:
Zinc market outlook
Ironbark continues to advance the Citronen property as the zinc market gains ground.
Fastmarkets analyst James Moore and reporter Ana de Liz commented in October that the outlook for zinc demand appears upbeat.
“While central banks globally are in the process of dialling back their pandemic stimulus packages, we expect policy to generally remain accommodating.
“Vast fiscal spending on infrastructure will feed through to the zinc market. And while zinc demand often correlates with traditional infrastructure expansions in road and rail, zinc will also play a strategic role in new-energy infrastructure.
“We also expect some pent-up demand from the automotive sector next year, after the semiconductor shortage forced automakers to defer and delay production this year.
“Persistent forward selling above $3,000 per tonne has been acting as a barrier to higher prices, but we believe prices will gradually strengthen, particularly if investors start to anticipate end-of-life mine closures scheduled for 2022-2023, which will tighten refined metal availability in the coming years.”
Milestones continue to be executed.