Assays, permits spur BMC’s $1B zinc-copper KZK project

BMC Minerals’ (ASX: BMC) has hit the ground running this spring, with drills cutting high-grade massive sulphide mineralization in the Krakatoa zone at its Kudz Ke Kayah (KZK) zinc-lead-copper project in Yukon and positive permit developments from governments.

Hole K26-560, the first to test Krakatoa, returned 25.1 metres grading 180 grams silver per tonne, 9.7% zinc, 1 gram gold, 0.3% copper and 3.4% lead from 327.5 metres depth, BMC reported Monday. Krakatoa is adjacent to the main ABM deposit at KZK, located about 260 km southeast of Whitehorse.

“The intersection in K26-560 reinforces our belief that the Krakatoa Zone hosts thick, high-grade mineralization that extends beyond our current ore reserve – exactly what we were targeting,” BMC CEO Michael McClelland said in a release. “This increases our confidence that Krakatoa may have meaningful potential to contribute additional tonnes to the mine plan, extending the life of the KZK project.”

Government green lights

The strong results, from the company’s 20,000-metre drill program this year that aims to grow resources and reserves, came one week after the Yukon and federal governments issued positive decision documents to develop KZK.

The documents followed previous decisions in 2022 and 2024 and the Yukon Environmental and Socio-economic Assessment Board’s recommendation to approve the project in 2020.

BMC shares closed at A$2.74 apiece on Tuesday in Sydney, for a market capitalization of $468 million. The stock has traded in a 12-month range of $1.91 and $3.47.

Indigenous opposition

But KZK faces ongoing challenges from Indigenous groups associated with the Kaska Nation. Last week, the Ross River Dena Council expressed disappointment over the governments’ decision and said the project is in the wrong place and shouldn’t be allowed to move forward, CBC reported.

In previous challenges, the First Nations claimed the federal and Yukon governments didn’t address their concerns over the mine’s potential impacts on wildlife – particularly caribou migration – and the environment.

BMC Chairman Steven Michael said in a statement on April 13 that the decision allows the company keep advancing through the permitting process.

“We will continue to work towards our ultimate goal of building and delivering a successful, long-life project that delivers real and sustainable benefits to Kaska First Nations, while also delivering significant, long-term value to our shareholders and all Yukoners,” he said.

BMC plans to acquire the Quartz Mining Licence and water licences and aims to make a final investment decision on the project in late 2027. 

Confirm historic grades

Hole K26-560 at Krakatoa was between two holes drilled in 2016 that returned similarly high grades, with hole K16-369 intersecting about 8 metres at 102 grams silver, 12.2% zinc, 0.8 gram gold, 1.5% copper and 0.5% lead from 385 metres downhole.  Hole K16-363 returned 20.8 metres grading 218 grams silver, 8.6% zinc, 2 grams gold, 0.3% copper and 3.7% lead from 323.2 metres depth.

While Krakatoa isn’t included in the reserves for KZK, it is part of the 2025 resource that hosts 18.3 million indicated tonnes at 148 grams silver, 6.3% zinc, 1.4 grams gold, 0.9% copper and 1.9% lead for 87 million oz. silver, 1.1 million tonnes zinc, 827,000 oz. gold, 164,000 tonnes copper and 346,000 tonnes lead.

Inferred resources total 800,000 tonnes grading 143 grams silver, 7.2% zinc, 1.2 grams gold, 1% copper and 1.7% lead for 4 million oz. silver, 58,000 tonnes zinc, 30,000 oz. gold 8,000 tonnes copper and 13,000 tonnes lead.

Probable reserves

ABM hosts 15.7 million probable tonnes at 138 grams silver, 5.8% zinc, 1.3 grams gold, 0.9% copper and 1.7% lead for 70 million oz. silver, 915,000 tonnes zinc, 666,000 oz. gold, 136,000 tonnes copper and 266,000 tonnes lead, according to an estimate from 2023.

As for KZK, it ranks among Yukon’s standout zinc projects. While Fireweed Metals’ (TSXV: FWZ; US-OTC: FWEDF) Macpass project hosts a much larger resource totalling 56 million indicated tonnes grading 5.49% zinc for 6.7 billion lb. of contained metal, KZK is more developed.

A 2023 feasibility study gives KZK a pre-tax net present value (at a 7% discount rate) of $835 million (C$1.1 billion), a pre-tax internal rate of return of 42% and a mine life of nine years. Pre-production capital costs for the open-pit project are pegged at $492 million and the payback period at two years. The study was based only on ABM’s reserve estimate.