"The feas" before was for a small fraction of the size of the resource that will be in the expanded feas. It was for an underground mine on just the oxide zinc side. It was being done by 3rd party contractors, led by GTI, the same company that put Skorpion into production at $.35 zinc. The Silver Polymetallic side was going to be addressed in a future, separate feasibility study.
A new resource model, incorporating new drill results, more than doubled the amount of zinc on the oxide zinc side, making open pit mining the preferable approach: biz.yahoo.com
They could have continued forward and completed the feas on the underground oxide zinc plan this year, but given the new resource model, that wouldn't make sense.
With drill results indicating significant Silver Polymetallic mineralization on the north side, adjacent to the oxide zinc deposit, it made sense to suspend the underground mining feas and move forward with a much bigger open pit project that would include not only the more than doubled oxide zinc, but also the Silver Polymetallic side. Due to the potentially enormous size of the Silver Polmetallic deposit, combined with the additional in-fill drilling to get the increase in oxide zinc proven up to feasibility standards, they need to do significant drilling before completing the expanded feas.
With the financial markets in turmoil and zinc depressed, it's much better for MMG shareholders that the company is focusing on drilling up the Silver Polymetallic mineralization so that it can be included in the expanded feasibility study. The previous plan would have required going for financing much earlier on a project with economics not nearly as good as the new plan. The timing and economics on the expanded project should be much better, especially considering the approaching big zinc supply gap as many existing mines run out of ore, as well as the significant upside from the silver.
MMG has a huge advantage over high-cost juniors that have rushed to production, sometimes without a feasibility study (e.g., SRZ.to, BN.to). While those juniors in production are losing lots of money while depleting their reserves, putting into question their ability to survive until the approaching zinc supply gap, MMG is able to increase their resources and improve their economics via their efficient 5-drill, 2-shift program (at a fraction of the cost of other miners). They should have the premier zinc project in the world, many times the size of others, with extremely low production costs because of their huge economies of scale with open pit mining and more efficient oxide zinc processing.
As for timing under the new plan, they now have some flexibility as to when to stop the drilling and complete the feas. If the financial markets remain in turmoil, they can continue to drill at low cost (and they can scale it back if necessary) until the timing is better to complete the feasibility study.
With gold and silver benefitting from their safe haven status as the financial markets remain in turmoil, MMG shareholders will benefit significantly from the significant increase in Silver Polymetallic mineralization. Instead of completing the underground oxide zinc feas this year, with the Silver Polymetallic drilling far from complete, and likely getting bought out soon thereafter at a time when zinc is depressed and the financial markets are hurting, MMG can now incorporate the Silver Polymetallic mineralization in the expanded feas. MMG should now be considered much more of a silver company before likely buyout offers rather than giving away that upside. The previous plan would have left the silver side for a future feasibility study, so that side is now being addressed much earlier than before. |
