Zinc of Ireland negotiates option to acquire lead zinc processing plant for fraction of build cost
Hey! Looks like you have stumbled on the section of our website where we have archived articles from our old business model.
In 2019 the original founding team returned to run Next Investors, we changed our business model to only write about stocks we carefully research and are invested in for the long term.
The below articles were written under our previous business model. We have kept these articles online here for your reference.
Our new mission is to build a high performing ASX micro cap investment portfolio and share our research, analysis and investment strategy with our readers.
Click Here to View Latest Articles
European base metals explorer Zinc of Ireland (ASX:ZMI) has secured an exclusive 18 month option to acquire a 650,000 tonnes per annum lead zinc processing plant for a consideration well below what it would normally cost to build a plant from the ground up.
The plan was originally commissioned at the Galmoy project which is located on the Rathdowney mineralised trend, indicating that it is geared to process similar ore to that being targeted by ZMI. In fact, the Gilmoy project is located only 70 kilometres from ZMI’s Kildare project.
In 2011, the plant was sold and relocated from Ireland to Darwin where it remains in storage. The Heads of Agreement negotiated regarding the 12 month option to acquire the plant requires ZMI to make a payment of $100,000, with the potential for a six-month extension for a further payment of $50,000.
This will provide ZMI with ample time to conduct due diligence including engineering and logistical studies.
Upon exercise of the option the consideration to be paid is $6 million in cash and $2 million in ZMI’s shares based on the 20 day volume weighted average price at the time of the option being exercised, or $2 million in cash at the sole discretion of ZMI.
Potential planned acquisition ties in perfectly with drilling program and potential resource definition
Given ZMI is undertaking a second phase of drilling which could potentially lead to the establishment of a mineral resource at its Kildare project, the timing is perfect.
On this note, ZMI’s Managing Director, Peter van der Borgh said, “The option to acquire the Gilmoy plant complements our drilling plans, which are aimed at delineating a resource in the near term, as well as testing completely new greenfield targets where we believe there is outstanding discovery potential”.
Van der Borgh highlighted the fact that the project is a real development opportunity and that the group’s looking forward to advancing it to the next stage at a time when zinc market fundamentals are strong and there is considerable investor interest in new projects.
This is important if ZMI elects to exercise the option on the plant, perhaps prompting a capital raising.
Acquisition of plant has financial, logistical and timing benefits
While the financial benefits of paying circa $8 million for a plant that would cost circa 20 times that amount to build from the ground up are obvious, it is also worth noting the logistical advantages it provides.
When ZMI embarks on the necessary studies required to determine the financial viability of the Kildare project it will have a clear picture of the upfront capital expenditure component.
This not only assists the company in making its own internal decisions, but with the prospect of a fairly defined capital expenditure component known upfront it is much easier to progress project financing.
This will prospectively position ZMI in such a way that it can transition from explorer to producer in a more timely and efficient manner. The derisking of projects invariably moves share prices and the process usually occurs in a number of stages through studies, permitting, financing, construction and maiden production.
By providing itself with an option to purchase the Gilmoy plant, ZMI has just ticked one of the most important (and most expensive) boxes well ahead of project development.
General Information Only
S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.
Conflicts of Interest Notice
S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.
Publication Notice and Disclaimer
The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.
Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.
This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.
