Shares of Peru-focused miner Tinka Resources (TSXV: TK) rose 25% in the afternoon on May 25 as the company announced investments worth $11 million from regional mining giants Nexa Resources (NYSE: NEXA) and Buenaventura (NYSE: BVN) in the firm.
One of the largest zinc producers in Latin America, Nexa will subscribe for 40.7 million common shares for proceeds of $9 million, increasing its total holdingto 71.3 million shares or about 18.2% of Tinka.
Buenaventura will subscribe for 9.7 million shares for proceeds of $2.2 million and will hold about 75.6 million common shares — about 19.3% of Tinka — upon the deal’s closing at the end of May.
“Nexa’s strategic investment in Tinka, and the co-investment by Buenaventura, is a strong endorsement of our globally significant Ayawilca zinc project and of Peru as an important long-term mining and investment jurisdiction,” the company’s CEO Graham Carman said in a press release.
Proceeds from the investment will be used to develop Tinka’s flagship Ayawilca zinc-silver project including exploration and infill drilling programs, metallurgical programs, and other technical and environmental studies.
“We look forward to kicking off our work programs at Ayawilca as soon as possible,” Carman said.
Tinka’s 100%-owned Ayawilca project is located about 200 km northeast of Lima in the Pasco region of central Peru. The project’s zinc zone has indicated resources worth 19 million tonnes grading 7.15% zinc and 16.8 grams silver per tonne for contained metal of 2.9 million lb. zinc and 10.3 million oz. silver. Inferred resources add 47.9 million tonnes grading 5.36% zinc and 20 grams silver for contained metal of 5.6 million lb. zinc and 30.7 million oz. silver.
According to a preliminary economic assessment filed in October 2021, the property’s zinc zone, which remains open in all directions, has the potential to be a global top 10 zinc producer, the company said.
Ayawilca’s tin zone lies beneath, and on the margins of, the zinc zone. The zone’s inferred resources total 8.4 million tonnes grading 1.02% tin for 189 million lb. of tin. According to a company security filing, Tinka hopes to capitalize on the rising prices of tin due to a shortage in “supply and strong demand” for tin in electrical circuits.
According to the project’s PEA, it is expected to produce an average of 155,000 tonnes of zinc annually over 14.4 years using bulk underground mining methods, which Tinka says would make it the largest zinc producer in South America.
At an 8% discount rate, the project would generate a post-tax net present value of US$433 million and an internal rate of return of 31.9% using metal prices of US$1.20 per lb. zinc, US95¢ per lb. lead and US$22 per oz. silver. The pre-production capex has been pegged at US$264 million.
Due to the rising price of tin, the company aims to reassess the metallurgical flowsheet and recovery of the tin zone deposit, which wasn’t included in the PEA. It also expects to begin resource expansion drill programs by the second quarter this year.
Nexa CEO Ignacio Rosado said in a press release that the company’s investment in Tinka is in line with its strategy of “believing in the promising fundamentals for zinc and its important role in the green economy.”
He added: “We believe the Ayawilca zinc project provides us a further option to grow, complementing our portfolio and allowing Nexa to secure its relevant position in the zinc market.”
At press time in Toronto, shares of Tinka Resources were trading at 17¢, up 3.5¢ or 25.9% within a 52-week trading range of 13¢ and 28¢.
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