Kria Resources completes PEA for Halfmile Lake

A preliminary economic assessment of Kria Resources‘ (KIA-V) Halfmile Lake zinc-lead property in Canada’s eastern province of New Brunswick forecasts an internal rate of return of 16.4%.

The project’s pre-tax net present value ranges from $587 million at a 0% discount rate to $139 million at an 8% discount rate.

The Halfmile Lake property in northeastern New Brunswick is about 60 km southwest of the town of Bathurst and 40 km from Xstrata‘s (XSRAF-O, STA-L) worldclass Brunswick 12 deposit, one of the largest zinc deposits in the world.

“We’re a small junior and this is a pretty significant project for us,” Mike Hoffman, Kria’s president and chief executive said in an interview. “When we optioned it from Xstrata Zinc it was a little too small for them.”

To achieve full production, capital expenditures are expected to reach about $215 million. Over the life of the mine capital expenditures are anticipated to total about $324 million. (A 25% contingency was included in the capital cost estimate.)

The study predicted a mine life of more than 20 years with payback in the eighth year of operation.

Halfmile would likely be a 2,000-tonne per day underground mining operation using a combination of cut and fill (75%) and longhole (25%) mining methods.

The PEA used a mill capacity of 2,000 tonnes per day.

Operating costs were estimated at roughly $62.49 per tonne milled.

Average metal prices and metal recoveries (over the life of the mine) used to calculate the PEA were US80¢ per lb. for zinc (89.72% metal recovery rate); US$1.91 per lb. for copper (60% recovery rate); US56¢ per lb. (72.07%); and US$10.59 per oz. silver (48.56%).

The Halfmile deposit has indicated resources of 6.26 million tonnes grading 8.13% zinc, 2.58% lead, 0.22% copper and 30.78 grams silver per tonne using a 5% capped zinc equivalent cut-off grade. Its inferred resource is 6.08 million tonnes grading 6.69% zinc, 1.83% lead, 0.14% copper and 20.51 grams silver per tonne at a 5% capped zinc equivalent cut-off grade.

The economic assessment highlighted the potential to improve the financials of the Halfmile project by, among other things, reducing the bulk concentrate production to only ship lead, zinc and copper concentrates. Average world smelter terms were used in the PEA and there may be potential to lower smelter charges, the company believes, particularly with Xstrata as a local smelter to minimize shipping costs.

Kria is also studying the economics of combining Halfmile Lake with its Stratmat property. The two deposits are about 20 km apart and the company believes tonnage from Stratmat could be used to maximize mill productivity at Halfmile. This fall the company plans to start work on a preliminary economic assessment of Stratmat.

Stratmat, which previously had an open pit operating on the property, has an inferred resource of 5.52 million tonnes grading 6.11% zinc, 2.59% lead, 0.40% copper and 54.21 grams silver per tonne using a 5% zinc equivalent cut-off grade.

Kria believes Halfmile Lake and Stratmat represent the largest and highest grade, undeveloped deposits in the Bathurst mining camp. The properties have been explored by Xstrata Zinc and its predecessor companies at intervals since the 1960s and during the 1980s and 1990s when the Heath Steele and Stratmat mines were in production.

“There was a lot of work done at Noranda and Xstrata on both of these properties and they spent over $100 million in the 1990s,” Hoffman said.

As far as the outlook for zinc prices are concerned, Hoffman said he is fairly confident that prices are going to get better. “We’re in the same boat as everybody else but it appears stockpiles are going down and there are some very large operations like Brunswick that are going to be shut down.”

At presstime Kria was trading at 26¢ per share. The company has a 52-week trading range of 8¢-$1.30 per share and has 41.97 million shares outstanding.