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Constantine Metals may have a 50mln tonne zinc project at Palmer, with Japanese zinc company backing to get it into production

Constantine Metals has a broad portfolio of assets in Alaska and Ontario
Constantine Metals may have a 50mln tonne zinc project at Palmer, with Japanese zinc company backing to get it into production
OVERVIEW: CEM The Big Picture
The Palmer zinc project is now at a crucial stage

The next 12 months will be a crucial, and very exciting period in the development of Constantine Metal Resources LTD (CVE:CEM), according to Vice President, Exploration Darwin Green.

“While the Alaska Palmer polymetallic project is our flagship property and making great forward movement at this time, we also have a portfolio of gold assets in both Alaska and in the heart of the Timmins Gold Camp in Ontario – all great projects,” he says.

WATCH: Constantine Metal Resources expecting busy 2019 after two resource updates to close 2018

“Because Palmer has reached that critical mass that you hope to attain for any project, Constantine wants to focus its energy, human and financial resources on Palmer. To that end, we’re looking to spin out our gold assets to realize the value for shareholders that they might not necessarily get with the gold projects embedded in Constantine and to allow the gold projects to develop with their own team and financial resources.”

What’s more, a new gold project has been added to the existing portfolio of assets in Alaska, broadening the scope and increasing the potential upside of the new vehicle that Constantine intends to offer to investors this year.

So, with that potential spin-out simmering in the background, the recent focus has been on Palmer, where drilling results continue to confirm the attractiveness of the project, and a recent update put the resource at 4.68mln tonnes grading 11.7% zinc in the indicated category, with a further 5.34mln tonnes at 9.9%.

“So, we’re now over the 10mln tonne mark, having increased our overall resource significantly with the update in December 2018, and to us, that signifies a whole new outlook for the company and for this project,” says Green.

“The resource is still open to expansion, and it’s really a whole district that we control so there are obvious opportunities for additional discoveries and to further increase the overall mineral resource here. But there’s enough here now to start applying some economics to this deposit.”

A second deposit discovered roughly 3,000 metres from the first will now be incorporated into the economic modelling, with a preliminary economic assessment scheduled for the first quarter of 2019.

Green expects this study to highlight not only the attractiveness of the mineralisation at Palmer, but also the economic advantages of its location.

“In Alaska,” he says, “on the Pacific coast, we’re the closest base metals project to the Central Asian smelting market. We’re on a year-round paved highway and we have access to an ice-free deep sea port. There is already tremendous infrastructure around us.”

While Green acknowledges that the terrain is rugged, the Constantine team is well used to working in such an environment. Looking at the actual mining of the resource in this terrain, there are certain physical and financial advantages.

“We can come in on the valley floor,” explains Green. “We can drift and mine upwards. This translates to lower up-front capital requirements. We can gain lateral access to lower cost ore and use gravity to our advantage, mining from the bottom up and dropping the ore down for removal. We’re not hauling ore upwards out of the ground."

All of which means that the capital expenditure to get Palmer into production is likely to be more reasonable than most projects that would go into production in this type of mountainous terrain.

READ: Constantine Metal Resources announces issuance of stock options

Green ticks off the factors one by one.

“Our grade is high,” he says. “At 3.5% copper equivalent or 11-12% zinc equivalent. We have good road access. We can get our concentrate to market. We have good metallurgy, and Alaska understands mining extremely well. It has one of the biggest zinc mines in the world at Red Dog.”

There’s also the Pogo mine and the Fort Knox mine, to name a couple of other major mining undertakings in the state-wide neighbourhood, and as a result of all this activity, the permitting system is good.

So, what’s next?

Well, Constantine Metals has roughly C$4 million in cash, and that’s more than enough to cover the completion of the PEA.

But this is a company that wants to move fast.

“In the first half of 2019, we’re looking to raise C$10mln to drive an underground access to the lower part of the resource,” says Green.

“That ramp will allow us to drill off the lower part of the deposit and generate data. It will allow us to come up through the valley floor and convert the lower half of the orebody from inferred to indicated. It’s also a platform to keep chasing the deposit at depth.”

Japanese commodities company's interest​

That’s an intriguing remark, and gives some insight into the company’s longer-term game plan with Palmer.

“It has the potential to see a 10-plus year mine life as it stands,” says Green.

“But it walks and talks like a 50mln tonne resource. We’re very confident there’s a lot more, and we want to make the market more aware of the significance of what we have here.”

But if it’s true that the market is taking its time to acknowledge the size and scope of the potential here, others have been quicker off the mark.

Japanese commodities company Dowa Metals and Mining Co LTD has taken a 49% interest in Palmer, meaning that there’s already some heavyweight funding support for when the project moves into the full-blown development stage.

Green doesn’t think that Dowa is likely to move to take over Constantine Metals as a whole though.

“They’re quite happy,” he says. “What they want is the zinc concentrate, which they will get on arms’ length commercial terms.”

It’s an intriguing proposition, and one that looks set to capture more and more attention as major milestones are passed. Next stop, the PEA.

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