Scotia on new drill results
Keeping Questions in Perspective – Discovery Remains Viable and Valuable, Note Today's Drilling
OUR TAKE: In our opinion, reasonable questions about the metallurgy of the Taylor deposit have, in some cases, devolved into unfounded speculation due to unsourced generalizations about base metal processing that prey on investors' unfamiliarity with relatively complex science and engineering practices.
KEY POINTS A recent Global Mining Observer article referenced manganese (Mn) levels of 1.3% in the company's zinc concentrate sample and paired it with the fact that some (but not all) smelters charge a penalty for this. Then, in our view, the author reached a poorly supported and irresponsible conclusion: that the concentrate would be rendered unsaleable and by extension the deposit un-viable.
Arizona Mining's numerous discussions with mining and smelting companies indicate its concentrate will be in demand due to its high zinc and low iron levels as well as very low to negligible amounts of toxic penalty elements such as arsenic and mercury. We do not yet know what the final Mn content will be in the concentrate pending the suite of samples being tested that include a wide range of ore grades from about 10% through 25% combined zinc and lead as well as high lead–low zinc, high zinc–low lead and high copper ores.
It is expected the Mn content will vary throughout the orebody (and thus the concentrate), with much of it occurring in the Mn carbonate and silicate minerals, rhodochrosite, and rhodonite likely in the upper parts of the deposit where the single sample comes from. Hence, an opportunity exists to reduce Mn by blending ore from various areas, and certainly the fully optimized flotation circuit based on Lakefield's tests should reduce Mn levels to desired levels. In the event Mn remains above a smelter's specifications, a penalty in the order of $12/tonne of concentrate could apply.
We believe the most important milestone for investors will be the results of the metallurgical testing scheduled for release ahead of the preliminary economic assessment at the end of Q1/17. However, we remain excited by today's drilling 335 m from the resource (see Exhibit 1), which highlights the record-setting size and quality of the Taylor discovery. This is another reason we believe major mining houses will keep signing CAs and keep watching the story with an eye to acquisition