Hot market has juniors eyeing zinc oxides

With base metal prices at record highs, it’s hardly surprising that zinc oxide deposits, despite their reputation for difficult metallurgy, are making a comeback among junior miners.

It’s been three years since Anglo American (AAUK-Q) began producing zinc from the Skorpion deposit in Namibia, one of the largest zinc oxide (or, more accurately, “nonsulphide”) orebodies in the world.

The successful commissioning of the mine was a major milestone for the zinc processing industry. But because zinc prices were so low at the time, the significance of the breakthrough was soon forgotten.

Since then, prices have quadrupled to the US$1.40- to 1.60-per-lb. level, leading to a revival of several zinc oxide projects. Those with metallurgy similar to Skorpion, where most of the processing bugs have been worked out, will naturally have the best chance of success.

“It is much more difficult to find a suitable zinc oxide deposit than a zinc sulphide deposit,” says Joe Ferron, a hydrometallurgist and former vice-president technology for Lakefield SGS Research. “Suitable meaning you need the right minerals and you need the right gangue (uneconomic minerals contained in the ore).”

The only other significant zinc oxide deposit currently in production is the Padaeng deposit in western Thailand, which was the first of its kind to be developed as a mining operation when it opened in 1984. The mine is owned and operated by the Padaeng Industry Public Co., which trades on the Thai Stock Exchange.

Padaeng’s ore, dominated by hemimorphite, is hosted by a quartz-rich carbonate-clastic sequence and treated by acid leaching, filtration, and electrowinning. Whereas Skorpion is unusually large for a zinc oxide deposit, Padaeng has the advantage of being exceptionally high grade (29% zinc).

Skorpion was discovered by Anglo in the 1970s, but it wasn’t until 1997 that a small British company named Reunion Mining recognized the potential for processing the deposit’s ore using the same type of hydrometallurgical solvent extraction-electrowinning (SX-EW) technique that had been used in the copper mining industry — and at Padaeng — for years.

Reunion earned a 60% interest in Skorpion by outlining more resources, completing a bankable feasibility study and solving the metallurgical problems.

The breakthrough made Skorpion more attractive to Anglo and it swallowed Reunion in 1999 to regain a 100% interest in the deposit. In 2000, Anglo announced that it would proceed with the project at a capital cost of US$454 million and an estimated operating cost of US20 per lb. The mine now produces 150,000 tonnes of high-grade zinc annually from a resource of more than 20 million tonnes grading 11% zinc.

What may complicate matters for those looking to follow in Anglo’s footsteps is the uniqueness of the Skorpion deposit. Skorpion is not only unusually large, it is a rare example of a wall-rock replacement deposit derived from volcanogenic massive sulphides. The zinc ore is hosted by a mixed sedimentary and volcanic sequence. Ore minerals consist mainly of hemimorphite, sauconite and lesser amounts of smithsonite.

The advantage Skorpion has over some other zinc oxide deposits is that the zinc carbonate ore can be leached by acid directly, which increases recoveries and lowers operating costs because there is no need for flotation, according to Ferron.

Accha deposit

Vancouver-based Southwestern Resources (SWG-T, SWGGF-O) believes it has mineralogy similar to Skorpion at the Accha deposit in southern Peru. Work has been delayed by the rainy season, but the company plans to start drilling the deposit and running metallurgical test work in June as part of a prefeasibility study.

Southwestern says a review by consultants that were involved in the design and operation of Skorpion confirms that the mineralization at Accha is similar to Skorpion’s ore. The deposit is estimated to contain a resource (not compliant with National Instrument 43-101) of 9 million tonnes grading 9% zinc in a carbonate replacement-type deposit in Cretaceous rocks with mostly hemimorphite and smithsonite mineralization.

“We’re quite positive we can achieve similar economics to Skorpion,” says Timo Jauristo, vice-president of corporate development.

Part of the plan for development, he says, is to spin off Southwestern’s zinc assets into a new company focusing exclusively on zinc. These would include Accha, the nearby Minacassa project, and several other zinc oxide occurrences along the 30-km northeast-southwest-trending mineralized belt that hosts Accha in the north and the Yanque zone in the south.

Managed by some of the same people who founded Reunion Mining, London-based ZincOx Resources (ZOX-L) is considered a leader when it comes to zinc oxide deposits. The company recently signed an exploration contract with the Government of Yemen to mine and process zinc from the Jabali deposit.

Jabali was discovered in the early 1980s but, like Skorpion, it took years to crack the complex mineralogy. The deposit contains a resource of 12.6 million tonnes grading 8.9% zinc, 1.2% lead and 68 grams silver per tonne. The feasibility study suggests that the deposit can produce 70,000 tonnes of high-quality zinc oxide per year for 11 years with a capital cost of US$75.4 million.

In Mexico, Colorado-based Constellation Copper (CCU-T, CCUDF-O) is conducting a feasibility study on the Terrazas zinc-copper project, 45 km north of the city of Chihuahua.

A 2002 prefeasibility study demonstrated that Terrazas is amenable to low-cost production of zinc and copper via open-pit mining, heap leaching and copper and zinc recovery by SX-EW methods, but subsequent drilling resulted in the discovery of more mineralization, increasing target production significantly.

Zinc-copper mineralization at Terrazas is hosted in garnet skarn, a type of metamorphosed limestone, surrounded by marble and rhyolite. The resource contains measured and indicated oxide resources of 85.6 million tonnes grading 1.24% zinc and 0.32% copper.

Another drilling program scheduled for this summer will be a 12-hole, 10,000-ft. program designed to expand a high-grade (9%) zinc oxide mineralization and investigate the potential of deeper sulphide mineralization at the Gunman project owned by Vancouver-based Cypress Development (CYP-V, CYDVF-O) in northeastern Nevada.

Preliminary testing using acetic acid digestion on the Gunman oxide ore showed a high solubility, with smithsonite as the primary zinc-bearing mineral.

Previous drill programs conducted by Cypress (73.13%) and its partner Bison Exploration (26.87%) focused solely on delineating zinc oxides from surface to a depth of 250 ft. But Cypress believes there is potential for a significant, deeper zinc sulphide deposit based on intersections such as 15.2% zinc and 122 grams silver over 20 ft., at depths of about 350 ft.

And at the Torlon Hill zinc oxide project in Guatemala, Firestone Ventures (FV-V, FSVEF-O) recently completed a 22-hole program that extended the intersection of high-grade zinc oxide mineralization over a distance of 125 metres. Highlights include a near-surface 47-metre intersection grading 12.5% zinc, including 24 metres of 17.9% zinc, within dolostone breccia.

Firestone has an option to purchase a 100% interest in the 16-hectare Torlon property and has acquired the surrounding 1.34-sq.-km exploration concession.

If high zinc prices are here to stay, zinc oxide deposits will become more and more attractive as exploration and development targets. But investors should keep in mind that these types of deposits need to be exceptional if they are to compete with their sulphide cousins.

“Economically viable nonsulphide deposits will probably need to be large, have potential for multi-year production to offset the capital outlays for a hydrometallurgical plant located in an area of cheap power, and be of relatively high grade (more than 12% zinc) to offset the lack of byproduct credits (lead, silver) that sulphide de
posits typically produce,” writes Murray Hitzman in the June-July 2003 edition of Economic Geology.

—The author is a freelance writer specializing in mining issues, and principal of Toronto-based GeoPen Communications (www.geopen.com).