Zinc market an obstacle to Pend Oreille’s development

A feasibility study of the Pend Oreille base metal mine in Washington state concludes that RFC Resource Finance (TSE) can profitably develop the Yellowhead zone at a zinc price of US55 per lb.

Diluted mining reserves are estimated to be 3.5 million tons grading 1.3% lead and 9.1% zinc, which are sufficient for a 7-year mine life. The ore zone is open to the northeast and RFC believes the mine life can be extended. Existing reserves are accessible via a decline from the old mine workings. The study, which included development work in several ore blocks, verified the continuity of the orebody and recommended room-and-pillar mining at 1,500 tons per day.

The proposed mill design incorporates existing mill infrastructure and projects zinc and lead recoveries at 94% and 77%, respectively. It is estimat-ed that 75,000 tons of zinc concentrate grading above 62% could be produced annually, along with 8,500 tons of lead concentrate grading 65%. Concentrate contracts have yet to be negotiated, but the most likely destination is the nearby smelter in Trail, B.C., owned by Cominco (TSE). A railroad is situated within 3 miles of the mine site, so marketing to other smelters is also feasible.

Pre-production capital costs are estimated at US$33 million and RFC believes commercial production can be achieved 12 months after construction begins. Operating costs are expected to be US$27 per ton milled, yielding a cash cost of less than 42 per lb. zinc.

The current zinc market outlook is not favorable and it is unlikely that project financing will be secured or a production decision made until there is a change in the oversupply and market price of the metal. In the meantime, management plans to evaluate financing alternatives and consider concentrate contracts.

The mine is dewatered and environmental permitting is almost complete. Air emission permits have been received and water and waste discharge permits are in the final stages of being processed.

RFC is 46.8%-owned by Toronto-based Metall Mining (TSE).