By focusing on the potential to develop near-future zinc resources in Poland combined with the potential for new discoveries in Ireland, Rathdowney Resources has created an attractive package for investors. CEO John Barry explained the strategy to John O’Hanlon.
The story of zinc in the international press right now is all about surpluses in the global market. Prices have been holding up and production sustained, though they are expected to fall in the short term. But look a little further ahead, says John Barry, CEO of Rathdowney Resources, and it is apparent that zinc is worth investing in. As China and India start to produce and consume more cars and white goods, it will be in ever increasing demand over the next decade, he firmly believes.
And that opinion is shared by the backers of Rathdowney, which started life as Mayfly Resources, a company founded by Irish geologists to look for lead and zinc potential in Ireland. It very soon attracted the interest of Hunter Dickinson Inc. (HDI), a diversified, global mining company with a 25-year history of mineral development success, which invested in the company in 2007. By then Rathdowney had accumulated a portfolio of properties in Ireland covering more than 1,600 square kilometres.
Ireland is an important source of zinc, ranking as the world’s fifth largest producer of concentrates from its mines at Navan (the largest zinc mine in Europe), Galmoy and Lisheen, discovered between 1999 and 1998. John Barry is an Irish geologist who knows this area like the back of his hand, having been closely involved in early resource delineation at Lisheen. When getting his team together, however, he was delighted to secure Mike Mlynarczyk as chief geologist, who is Polish by origin though educated in Canada. It was always going to be a challenge to discover the next generation of zinc deposits, Barry explains, because the near-surface deposits ‘low-hanging fruit’ have already been discovered and new discoveries are likely to be concealed deeper beneath the surface.
With the 2008 global banking crisis the investment markets grew much more nervous—suddenly it was not such a good idea to be an early stage exploration company trading on the expectation of making significant discoveries. It was a time for quick thinking, says Barry: “We realised we needed some more advanced projects.” He and his co-directors and advisors quickly started looking for assets that could be brought to market in a shorter timeframe. “We assembled a group of highly respected international technical advisors, one of whom was Duncan Large, based in Germany, who had considerable experience in Poland. But Mike Mlynarczyk was our secret weapon!”
In October 2008, Mlynarczyk moved to the industrial Krakow. To the north-west lies the world class zinc and lead of Upper Silesia, and it was here that Rathdowney focused its attention, Barry says. “It is an historic mining district. Lead/zinc sulphide Mississippi Valley-Type deposits, commonly referred as MVT ores, have been mined there since just after the war; but the extraction of zinc/lead oxide ores—or ‘calamine ores’ locally referred to as ‘galmei’—actually goes back to the 12th century.”
The Polish state mining corporation has exploited lead and zinc historically in the area, starting with its Bolesław mine, then nearby Olkusz and then the Pomorzany lead and zinc mine also near Olkusz. Pomorzany was created in 1974 and is still in operation under the successor organisation ZGHB. It has produced 90 million tonnes of ore in what Barry describes as a large room-and-pillar operation, but the exciting thing about the existing set-up is that ZGHB also has a zinc smelter nearby, with a current throughput of 70,000 tonnes running at significant under-capacity. This means that, if the price is right, Rathdowney will be able to avoid transporting the concentrate it produces to smelters in other European countries.
The early stages toward obtaining the necessary licences were slow but sure. The mechanisms for granting exploration licences in Poland may be speeded up soon, but for the time being the system is demanding. “A lot of compilation and research needs to be done before you can even make an application,” says Barry. “It took about seven months to prepare the applications for the Ministry of Environment in Warsaw. But in May 2010 we were granted our first concession in Rokitno and in June the Zawiercie concession, and that has given us the green light to move forward with an intensive resource confirmation drilling programme in Poland.”
The Polish State Survey carried out drilling in the area until 1988, providing valuable geological and historical drilling information, but the fact that no core samples were retained means that the resources will have to be verified by further drilling on the part of Rathdowney. The good news is that the original surveys are thought to have considerably underestimated the amount of zinc to be found up to 200 metres below the forests and pastures of Upper Silesia. Rathdowney applies environmental best practices in its project activities and the company has retained Schlumberger Water Systems, one of the best hydrogeological water consultancies in the world. “People forget that though mines are involved in pumping out water from the ground they also discharge mostly clean water,” says Barry. “For each job in the mine we probably create three or four local jobs; additionally we will plan to provide a sustainable and inexpensive supply of water to Zawiercie.”
So Ireland and Poland are at quite different stages. In Ireland there are good chances of making a major new discovery. Rathdowney will drill-test some 40 exploration targets spread across six project areas in Ireland and any ‘hit’ could lead to a major discovery. “In Poland we have the opportunity to get to production quicker because we are starting off with a very substantial historical resource base,” says Barry. “We are doing resource confirmation rather than exploration there. Combining advanced projects in Poland with the ‘sizzle’ of a potential major discovery in Ireland gives a nice balanced offering for an investor.”
The market should also be encouraged by the fact that Rathdowney has grown entirely organically as an agile private company with the backing of HDI. The estimated budget for the 2011 drilling programme in Ireland and Poland is about C$13 million. Rathdowney plans to lists on the Toronto Stock Exchange Venture Exchange later this year, so investors will have 100 per cent exposure, he points out.
Barry would love nothing more than to confirm a new discovery in Ireland. The country has slumped from Celtic Tiger to debt-fuelled desperation in a short time, he says, and its minerals could help kick-start an economic revival. www.rathdowneyresources.com
