Metalicity’s dual approach paying off
THE INSIDE STORY: With its world-class Admiral Bay zinc project expanding as it progresses its global lithium strategy with the support of a major Chinese lithium-ion battery player, Metalicity’s return-driven focus is paying off. By Mark Mentiplay
Metalicity’s (ASX: MCT) value-based approach towards project generation and acquisition has left it strongly positioned to take advantage of the forecast commodity price increases for key its metals, zinc and lithium.
In the second half of 2015, the Company finalised the opportunistic acquisition of the Admiral Bay zinc project in Western Australia, giving it control of Australia’s largest, and the world’s fourth largest, undeveloped zinc deposit.
Then in the final days of last year, Metalicity pulled the trigger on the first of a number of Pilbara lithium project acquisitions.
The company now boasts the largest landholding in the strategically important Pilgangoora and Wodgina lithium districts in WA.
Further north at Admiral Bay, a substantial amount of work has been completed since the project was acquired and the results have only served to enhance its reputation as one of the world’s key zinc development projects.
A resource upgrade last month saw a 30 per cent increase in the zinc equivalent (ZnEq) grade of the resource and doubling of the contained ZnEq metal.
The modelling also identified thick, higher-grade zones of zinc and lead mineralisation within the existing resources.
The scale of the Admiral Bay deposit is evident from the 15 kilometre strike extent of the inferred resource which now totals 170 million tonnes at 7.5 per cent ZnEq (4.1% zinc, 2.7% lead and 25gpt silver).
In addition, the project has an exploration target of 160 million tonnes to 210 million tonnes at a 7.2 per cent to 7.8 per cent ZnEq grade.
The new resource will be incorporated into a Scoping Study to be completed in mid-2016 which is applying a number of new techniques to the project to overcome the challenges created by the deposit’s 1,200m depth.
“Before we finalise the Scoping Study, we wanted to take a look at applying a new geological model, which we have updated by re-logging historical drill core from drilling carried out by CRA and Kagara between 1968 and 2008,” Metalicity Managing Director Matthew Gauci explained to The Resources Roadhouse.
“It’s a modern approach to assessing the Admiral Bay deposit and consists of the acquisition, compilation and interpretation of data that has, until now, been unavailable and being evaluated for the first time by experts with considerable experience in MVT systems.”
The expert Gauci is referring to is Dr David Leach, a globally recognised expert in Mississippi Valley Type (MVT) zinc-lead deposits, who recently completed a detailed geological study on Admiral Bay.
The study highlighted the potential for district-scale mineralisation, based on regional Canning Basin faults that act as major ‘plumbing systems’ bringing mineralising fluids from basement rocks in contact with sediment packages that act as hosts for zinc and lead mineralisation.
The outcomes of the study led Metalicity to recently apply for another six new exploration leases to extend its control of the Admiral Bay fault zone to 130km.
“David’s study shows potential for multiple Admiral Bay size mineral resources along the Admiral Bay fault zone so we have taken a dominant position in the region,” Gauci said.
The Scoping Study is evaluating the use of a 1,400m deep shaft to access the Admiral Bay deposit.
The potential to use this technique has been demonstrated most recently by Rio Tinto’s successful development of a far deeper 2,116m shaft at its Resolution copper project in the United States.
The flat-lying, stacked nature of the Admiral Bay deposit lends itself to conventional longwall mining and other alternative mining methods are also being considered, with the aim of reducing forecast mining costs from levels estimated by previous owners.
Admiral Bay benefits from being close to modern, established infrastructure and road transport routes, including the Great Northern Highway which is within 70km of the project.
Sealed containers can easily be transported by truck to one of two nearby ports already equipped for concentrate export — Port Hedland, 450km west, and Broome, 250km north.
Multiple power options include the West Kimberley gas project, the establishment of a solar farm and energy storage facility, and the potential to use onsite geothermal production.
In a move expected to make the project more attractive to potential Joint Venture partners, Metalicity finalised the acquisition of Admiral Bay and removed all future encumbrances, reaching agreement with the liquidators of former owner Kagara to clear all obligations with the payment of $750,000 cash and 23 million shares.
The deal brings the final sum paid by Metalicity for its 100 per cent-interest in the project to about $3.09 million in what represents a very cost effective entry price for such a large scale mineral endowment in a stable jurisdiction.
Metalicity is well-funded for its various work programs, holding about $6 million cash following the introduction of a new cornerstone shareholder in June.
Emerging lithium industry participant and key member of the China Battery Association, Shanghai Metal Resources, took a $3 million placement in the company, giving it a 10.1 per cent-stake, and signing a non-binding project development and off-take agreement.
The MOU contemplated the joint funding, development and acquisition of lithium projects, and off-take for 100,000 to 150,000 tonnes per year of lithium-spodumene concentrate.
Gauci said the agreement has validated its low-cost entry into the booming lithium exploration sector, as have the results of first pass field work completed at its Pilgangoora South project.
Geological mapping and sampling of the outcropping southern pegmatites at the Stannum prospect yielded grades of up to 2.45 per cent lithium and 200ppm tantalum with visible spodumene identified.
Stannum is adjacent to the Wodgina tantalum operations, recently acquired by Mineral Resources.
The work shows strong prospectivity over a strike of about 1.5km with an indicative width of 0.5km within an overall target strike extent of 5.5km, comparable with the dimensions of Pilbara Minerals’ nearby 80.2 million tonne Pilgangoora resource, flagged as the world’s second largest spodumene deposit.
Metalicity also has an 870sqkm holding at Greenbushes, south of Perth, which is in a similar regional geological setting to the world’s largest hard rock lithium mine, Talison Lithium’s Greenbushes mine, located 35km from Metalicity’s project.
The Greenbushes Regional lithium project area has had no systematic lithium exploration, but first pass field work by Metalicity has come up a healthy number of pegmatoidal veins and greisens for chemical analysis.
Phase-2 exploration has begun with follow up soil sampling and airborne geophysics that may include hyperspectral data over the project to help define further detailed exploration programs.
“We figure there are about 50 companies in the lithium exploration/development space we are in and believe we are well positioned amongst that group,” Gauci said.
“We’ve got the largest specific lithium landholding in Western Australia in probably the best lithium neighbourhood.
“All of which is not bad for a company that relisted in October last year.”
Metalicity (ASX: MCT)
…The Short Story
HEAD OFFICE
6 Outram Street
West Perth WA 6005
Ph: + 61 8 9324 1053
Email: info@metalicity.com.au
Website: www.metalicity.com.au
DIRECTORS
Andrew Daley, Matthew Gauci, Chris Bain, Mat Longworth
SHAREHOLDERS
Founders 13.8%
Management and Associates 10.4%
Shanghai Metals 10.1%