OntZinc cuts new zone at Balmat

OntZinc‘s (OTZ-V) first exploration drill hole into the Northeast Fowler Trend has cut a 2.8-metre interval averaging 19.5% zinc and 6.2% lead, beginning at a depth of 412 metres.

OntZinc says the hole confirms the presence of ore-grade mineralization over mineable widths in the target area.

The Northeast Fowler trend is located in the same stratigraphic and structural setting as the Fowler ore body, some 1.2 km up plunge. The Fowler ore body previously produced some 6 million tonnes of ore grading 9.6% zinc.

OntZinc estimates that the Northeast Fowler Trend has the potential to host around 3 million tonnes of ore grading 15%-18% zinc, based on its similarity to the Fowler ore body and lower-dilution mining methods.

Follow-up drilling to test the up-plunge extent of the Northeast Fowler mineralization is underway.

The Northeast Fowler Trend is situated about 397 metres vertically below the Mahler ore body, which is fully developed for mining. Recent underground drilling on extensions of known mineralization there is highlighted by two 3.8-metre intersections averaging 24.5% and 24% zinc, respectively (T.M.N, Apr. 12-18/04).

Reactivation plans at the Balmat mine call for production to be ramped up to an equivalent annual rate of 100 million lbs. of zinc-in-concentrate per year between August 2004 and July 2005. Thereafter, annual production is expected to average 110 million lbs. The plan utilizes only 50% of the operation’s mill capacity. In the long run, the company will look to prove up additional reserves sufficient to bring the mill up to its full capacity of 200-220 million lbs. annually.

To that end, the company intends to have Quantec carry out a geophysical survey to augment ongoing underground drilling. The surveying will focus on prospective, little-explored ground located between the Hyatt and Balmat mines.

OntZinc subsidiary St. Lawrence Zinc Co. is currently completing mine layouts and budgets for narrow vein, minimum dilution mining, and estimates run-of-mine zinc ore grades at Balmat in the 12-13% range.

So far, OntZinc has raised about $5.3 million via an offering of units at 18 per unit; the company hopes to raise $10 million in all. Each unit comprises one OntZinc share plus half a warrant. One warrant is good for one share at 20 per share for two years.

Of the proceeds, OntZinc recently applied $2 million to complete its acquisition of the Gay’s River mine (also known as the Scotia mine) from Australian-based lead and zinc producer Pasminco. Pasminco retains a 2% net smelter royalty. The balance of the proceeds will be used to fund the revitalization of Balmat, the Gays River mine near Halifax, Nova Scotia, and other potential mineral right acquisitions in southwestern Ontario.

St. Lawrence, which owns and operates Balmat, already has in place a concentrate working capital facility worth up to US$10 million under a sales representation and concentrate financing agreement for the mine.

OntZinc has also lined up RMB Resources, a South African-based financial institution, to arrange a US$10 million debt facility with a member of the First Rand Group. The financing is conditional on due diligence by RMB, approval by the Lender’s Credit Committee, and OntZinc and St. Lawrence directors.

Balmat, formerly held by St. Joe Minerals, produced about 30 million tonnes at a grade of 9.5% zinc between 1930 and 2001. A resource and reserve audit in January 2003 put the project’s reserves at 1.8 million tonnes grading 11.94% zinc, including 643,000 tonnes of 12.77% zinc in the Mahler zone.

At the Scotia mine, OntZinc is looking at either completing ongoing technical work aimed at determining the economic viability of developing the zinc-lead deposit to production, joint-venturing the project or selling it outright.

In the boardroom, OntZinc’s chairman and chief executive Clifford Frame recently retired. The well-known Frame was the head of Curragh Resources when a methane explosion at the Westray coal mine in Nova Scotia killed 26 miners in 1992.