Titan to restart Empire State mine

VANCOUVER — Titan Mining (TSX: TI) is fully funded to restart operations at the long-standing Empire State zinc project in upstate New York.

On Nov. 6, the company finalized a $52-million initial public offering (IPO) comprised of 37 million shares at $1.40 each. Shares have traded within a post-IPO range of $1.26 to $1.40, and closed at $1.32 per share at press time.

There are 100.8 million shares outstanding for a $135-million market capitalization.

Titan is part of president and CEO Richard Warke’s Augusta Group.

Titan’s flagship property sits near the town of Gouverneur in the Balmat-Edwards district, 145 km southwest of Ottawa, Ontario. It hosts four zinc mines that underpinned nearly continuous production between 1915 and 2008: Edwards, Balmat, Pierrepont and Hyatt.

Hudbay Minerals (TSX: HBM; NYSE: HBM) was the most recent operator, but it was forced to put the asset on care and maintenance after zinc prices plunged in 2008.

Titan has worked on the asset privately for the past 11 months and is targeting first production in early 2018.

At Titan Mining’s Empire State zinc mine in upstate New York, from left: Michael Kirschbaum, consulting exploration manager; Roger Lacerte, general manager; Keith Boyle, chief operating officer. Credit: Titan Mining.

“We plan to ramp up production from essentially where Hudbay left off. So we’re leveraging a lot of capital they had invested in the project, but never got to realize,” Titan chief operating officer Keith Boyle says during an interview.

“They had upgraded the hoists, the ventilation circuit and a good portion of the mine equipment fleet. The operation was shut down abruptly so the entire infrastructure is very well maintained. We’re taking advantage of two high-grade zones — called Mahler and New Fold — that they were preparing to mine when the operation went offline.”

Hudbay produced 81 million lb. zinc at the site between mid-2006 and August 2008.

Titan released a preliminary economic assessment (PEA) that envisions mining from four mineralized zones within the fully permitted Balmat area, which it has renamed Empire.

The company’s start-up activities will focus on higher-grade material from the Mahler, Mud Pond and New Fold zones.

Titan will restart underground mining in January at a rate of 800 tonnes per day before expanding operations to 1,800 tonnes per day within 13 months.

Infrastructure at the site includes a 5,000-tonne-per-day mill beside the mine shaft.

The company reports that the coarse grind of soft ore should permit the concentrator to hit design throughput and recovery rates relatively quickly.

Empire hosts sedimentary exhalative mineralization, which Titan says is unique due to the dominance of massive and semi-massive sphalerite, with only minor galena (lead and silver sulphide) and pyrite. The Empire property has 14 known zones of zinc mineralization that tend to occur in clusters.

The PEA considers measured and indicated resources totalling 2 million tonnes of 13.3% zinc, and inferred resources of 2.1 million tonnes of 13.4% zinc.

Hudbay operated Empire from 2006 to 2008 with head grades averaging 7% to 8% zinc, while Titan assumes grade reconciliation of 9.2% zinc.

Drillers underground at Titan Mining’s Empire State zinc mine in Gouverneur, New York. Credit: Titan Mining.

“The orebodies are what I call a number of ‘ribbons’ that have been folded, and dip at 30°C overall. Due to the waves there are steeper sections that lend themselves to long-hole mining,” Boyle says. “There are other parts that will require cut-and-fill — or room-and-pillar — mining to go along with it.”

Titan plans to improve head grades by designing tighter stopes; employing on-shift grade control geologist; and leveraging hand-held technology to help miners in following the resource model within each stope.

“We intend to have geologists to follow the mining faces and take photos for mapping purposes,” Boyle says. “The current software packages allow you to build 3-D models with the pictures, and that will be a major reconciliation tool for us to manage grade and dilution.”

The redevelopment will require US$10.7 million in preproduction capital, and allow Titan to produce 80 million payable lb. zinc annually over an eight-year life at all-in sustaining costs of US78¢ per pound.

The PEA estimates a US$150-million, after-tax net present value at an 8% discount rate, and a 121% internal rate of return.

The model assumes a sliding zinc price that peaks at US$1.45 per lb. in year two before declining to U$1.05 per lb. by year six.

“The first phase is extending the mine life and filling the shaft. So we’ll be focused on exploration in, and around, the existing infrastructure,” Boyle says. “Then phase two involves extension to the Mahler and New Fold zones, which are wide open. We’ve also got historic reserves within the infrastructure itself that we’re bringing up to compliance. There are also remnant pillars from past operations, which we’ll also look at under modern methods.”

Titan’s longer-term strategy is explore regionally on 300 sq. km of mineral rights it controls in the district for satellite deposits to feed the Empire State mill.

The company intends to re-evaluate a 2008 versatile time domain electromagnetic survey to find more exploration targets, and in time fly another airborne gravity survey.

Titan has budgeted US$4.3 million in near-term exploration, with priority targets including the Gap Zone between Sully and the Empire mine.

“The data vault has gotten just huge over the past hundred years, but a lot of it is still paper records. It’s probably similar to the quantity of data Goldcorp is wrestling with up in the Red Lake camp,” Boyle says.

“The first thing we’re doing is digitizing all this information so we can start building our geological models and identifying trends. There are also reams of regional data from exploration over the past few decades that has never really been compiled and put together, including a number of historic drill holes,” he adds.

“There’s technology today that will help improve productivity, which can change the way we look at economic material,” Boyle says. “We’re talking about robotic scoops, drills operated from surface and a lot of the innovation you’re seeing at underground mines today. That’s how we can get our costs down and transition Empire into a sustainable zinc operation for many years to come.”

Scotia Capital analyst Orest Wowkodaw initiated coverage on Titan in November with a “sector outperform” rating and a $1.80-per-share, one-year price target.

He argues the company is “uniquely positioned, with 100% of revenue derived from zinc — our preferred near-term commodity exposure.” Wowkodaw did caution, however, that Titan’s balance sheet could be “vulnerable to execution risk during the ramp-up next year.”