Osisko Metals’ Pine Point lead-zinc project in the Northwest Territories. Credit: Osisko Metals.
Osisko Metals’ (TSXV: OM; US-OTC: OMZNF) Pine Point project in the Northwest Territories has “all the ingredients you want for an outstanding base metals project,” says the company’s Chairman and CEO Robert Wares.
The past-producing zinc-lead project, located about 60 km east of Hay River, benefits from established infrastructure, including an onsite electrical substation that provides low-cost hydroelectric power, a network of paved roads to the former mine site, and haul roads that connect all the major deposits.
Hay River also has an airport and direct rail and road links to Edmonton, which would allow zinc and lead concentrates to be transported to smelters across North America and Asian markets via rail and bulk sea freight, notes Wares.
The mineralization at Pine Point occurs in shallow deposits and could be “easily mined using near-surface open-pit and underground mining methods,” he says.
However, the most striking aspect of Pine Point is its metallurgy, explains Wares. “Once in production, the project could deliver one of the cleanest, highest-grade zinc concentrates anywhere in the world.”
Metallurgical testing by Osisko Metals showed concentrates grading over 59% zinc, which is considered very high-grade by global standards, and “pretty much beats all the other zinc products currently available on the market, hands-down,” he says. “The concentrate also contains very low levels of deleterious trace elements, such as cadmium and mercury, so would not incur any smelter penalties.”
Zinc supply forecasts predict that the market will be increasingly dominated by concentrates that require blending due to the high levels of impurities. Wares notes that the type of high-quality concentrates produced at Pine Point will be “sought after by nearly all smelters and refineries.”
The economics of Pine Point are also “very encouraging,” says Wares, a geologist with over 40 years of experience in mineral exploration and development, who was responsible for the discovery of the Canadian Malartic bulk-tonnage gold mine, co-owned by Yamana Gold (TSX: YRI; NYSE: AUY) and Agnico Eagle Mines (TSX: AEM; NYSE: AEM), currently Canada’s largest gold producer.
A preliminary economic assessment (PEA) released last year for Pine Point envisioned a mine with a minimum life of 10 years, producing an average 327 million lb. of zinc metal and 143 million lb. of lead metal annually over its lifetime.
Mine site production and smelter costs are expected to average US$0.67 per zinc-equivalent pound over the life of the mine. This cost profile, according to Wares, would position Pine Point in the second cost quartile of global zinc producers.
Pre-production capital costs are pegged at $555 million, with $458 million budgeted for sustaining capital over the mine life. The resulting after-tax net present value is estimated at $500 million, based on long-term conservative prices of US$1.15 per lb. zinc and US$0.95 per lb. lead and using an 8% discount rate, with an after-tax internal rate of return of 29.6% and a 2.8-year payback.
“As base metals are now entering into a positive supercycle, I’m very bullish on zinc markets,” explains Wares. Under more bullish scenarios, he believes the project “could demonstrate even stronger economic returns and is well-positioned to benefit from higher long-term zinc prices.”
At a possible long-term price of US$1.25 per lb. of zinc and US$0.95 per lb. of lead, he notes that Pine Point would increase its after-tax net present value to $636.5 million and internal rate of return to 34.5%.
A supply gap of zinc in North America is also expected to occur over the next few years as zinc mine production drops by 35% between now and 2024, says Wares. “Several mine closures are coming up and the lack of new projects in the pipeline will not make up for the forecasted deficit, which will further establish the importance of Pine Point as a domestic supply of zinc.”
Currently, the primary use of zinc is in the galvanization of steel and iron for the construction and automotive industries, which accounts for over 60% of global zinc consumption. However, new markets for zinc are also opening, such as zinc-based hybrid flow batteries for power storage in renewable energy systems.
The global shift towards a green, sustainable economy, as well as a raft of post-Covid-19 infrastructure stimulus packages, will “dramatically increase global demand for base metals as well as sources of clean, high-grade zinc,” says Wares.
Osisko Metals continues to advance Point Pine towards production, with the completion of resource definition drilling, feasibility study, permitting and Impact and Benefit Agreements with indigenous communities, expected towards the end of 2024.
This year, the company plans to conduct an infill drill program to upgrade mineral resources to the indicated category. Current near-surface resources stand at 12.9 million indicated tonnes grading 4.56% zinc and 1.73% lead (6.29% zinc equivalent) and 27.6 million inferred tonnes of 4.89% zinc and 1.91% lead (6.8% zinc equivalent).
The company is currently undertaking hydrogeological studies to further de-risk the project, which could lead to substantial reductions in water management costs over the life of mine, says Wares.
“We expect to release an updated PEA in early 2022 that will likely include lower capital and operating costs”, he says, “and will go hand-in-hand with a new resource estimate that incorporates results from our 2020 and 2021 exploration and definition drilling programs.”
— The preceding Joint Venture Article is PROMOTED CONTENT sponsored by OSISKO METALS and produced in co-operation with The Northern Miner. Visit www.osiskometals.com for more information.