RESOURCEStocks: Your recent revised feasibility study reinforced the long-term earning potential/credentials, and asset value, of Citronen. What do you see as the most compelling aspects from a peer-comparison valuation perspective?
Jonathan Downes: I think that generally peer to peer is always hard from a valuation perspective because every project typically has distinctions. Nevertheless I consider that Ironbark has been overlooked due to the significant time spent securing the 30-year mining permit. The project is fully drilled out, engineered, permitted and located in a low sovereign risk jurisdiction with a large 100% owned resource.
RS: What are the standout points of difference in your value proposition at this stage?
JD: The scale of the project is probably one of the key defining points and the resource to date is limited only by the current extent of drilling. In production it would be one of the largest zinc mines in the world with over 5.2 million tonnes of defined zinc metal in resources.
RS: Presumably, valuation upside is another of the real distinctions. I’m struggling to see a bigger disconnect between a (revised) project NPV, and the value the market is putting on the company/asset. What do you put that disconnect down to, and what is going to turn it around?
JD: I am also surprised at the market disconnect – it is simply absurd. Some feedback I have received has been that the market needs to see more clarity and get more comfort around the financing of the project. The resource and study work has all been done by independent and credible engineering and construction groups, Greenland is a great jurisdiction to develop a project, and the zinc price is strong and forecast to remain so. We are making some solid headway into the financing and I believe it is going to be one of the situations when just one investor "stepping up" is required and then the vision will be realised, followed by the rest of the financing and a major revaluation of the company.
RS: What is the zinc-price ‘sweet spot’ for this project?
JD: The zinc sweet spot once operational is anything over the total projected costs of US$0.66/lb plus something to return to our investors. I am confident that we will see a healthy margin above this going forward.
RS: Where is there scope to further improve the economics of Citronen/what will be the focus of work to be done over the next 3-6 months?
JD: The level of engineering work and optimising has been substantial and we are confident that we already have a workable, industry proven and cost effective plan. To optimise this further may involve some further metallurgical testwork, which is currently ongoing, and some potential opportunities regarding reduced shipping costs. We are pleased that the project is currently robust. Work now is really focused on the project financing package.
RS: What were the main things to come out of the recent site visit you made with senior Greenland Government, and NFC, officials?
JD: The recent site visit was helpful in introducing the senior Greenland Government officials to the senior China Nonferrous (NFC) officials and building a relationship of trust. The main objective however was to provide site access to the NFC engineers to the project to finalise their feasibility study. This included core library inspections, visiting the proposed equipment sites, decline site and proposed tailings sites.
RS: What comments would you make about the outlook for next year, in terms of the impact continuing strength in zinc prices, and clarity on what’s in the supply pipeline, might have on Ironbark’s plans and valuation going forward?
JD: Going forward I am seeing a lot of credible research suggesting strong zinc prices so with our project at such an advanced stage I am confident we can achieve development in a rapid time frame. One of the more interesting aspects of the zinc market is just how little material is available to the industry in the reported zinc stockpiles and the war between smelters as the Chinese treatment charge rates fall to attract zinc concentrate from around the world.
It is a fascinating time in the zinc space.