2019.08.12 – Zinc Industry: Visit To WLF’s Pickett Mountain Deposit

$ 499 + HST

KEY INVESTMENT INSIGHTS

The Pickett Mountain deposit’s maiden January 2019 NI 43-101 resources are 4.08 mmt at 20% zinc-equivalent with 10.6% zinc and also lead, copper, silver and gold values.  It is one of the highest grade zinc or volcanogenic massive sulfide polymetallic deposits in the world found in the past several decades.

Its small size and high grade are advantages in environmental permitting.  It will ship 33.5% of the mill throughput as 21% in a zinc concentrate, 7% in a copper and 5% in a lead concentrate.  It will dispose of about 50% of the mill tonnage as paste backfill into the underground workings.  It will only need to dispose of 17% of its throughput as dry stack tailings.

We estimate its capital costs may be up to $150 mm and its revenues $400/t or about  $150 mm per year.  It is possible with good cost controls or execution that the pretax profits are near $200/t or 50% or more of revenues.  After tax annual profits could be over 30% of the investment.  There is a reasonable chance that a larger mining company buys out Wolfden Resources for the Pickett Mountain deposit after it is permitted.

We visited the project because we are interested in zinc markets.  Global refined output has fallen each year since 2016 by about 7% cumulatively.  World steel output grew about 17% in the same four years.  Visible zinc inventories have fallen to about 1.1% of annual global zinc demand that is near 14 mmt annually.