Denarius Metals Well Positioned to Ride Critical Mineral Wave
The senior management team at Denarius Metals Corp. (TSXV: DSLV, OTCQX: DNRSF), knows a thing or two about building mines, and has a track record of delivering several successful projects in countries like Venezuela and Colombia to prove it. Now it has its sights set on the Lomero project in Spain, where the focus is on high-demand critical minerals such as copper, zinc and lead.
Lomero fits the Denarius template to a tee. It’s a relatively low-risk property due to past exploration and production, and it sits in a jurisdiction that has an illustrious mining history – the Iberian Pyrite Belt.
The world-renowned Iberian Pyrite Belt is host to a number of high-profile projects in close proximity to Lomero, including the Sandfire Matsa project(ASX:SFR), and the Las Cruces venture run by First Quantum (TSX: FM). They are two of many projects that continue to validate the abundance and promise of this region.
Exploration work at Lomero is now well on its way, with Phase One and Phase Two drilling campaigns now complete. Phase One, which wrapped up in July of 2022, saw approximately 26,000 meters of drilling in 83 holes. The campaign helped to confirm historical data and firm up the project’s inferred mineral resource estimate at about 10.7 million tonnes containing copper, zinc, lead, gold and silver.
Phase Two targeted several higher-grade areas of the mine. Completed earlier this year, it included another 13,000 meters of drilling in 42 holes, which provided information that will now allow the company to complete an updated Mineral Resource Estimate in the third quarter of 2023. That data will then be used to generate a Preliminary Economic Assessment, which will enable Denarius to demonstrate the economic feasibility of this deposit to the market.
While Denarius has made significant progress in their efforts to advance Lomero, there is still work to be done to untap its true potential. During the later part of this year, the company plans to follow up on gravimetric surveys that identified possible extensions of the mine to the east and the west with a 6,000-meter exploration program. That should increase the project’s resource estimate when it is next updated. Denarius also intends to explore targets at depth, below the deepest part of the mine.
The Lomero project could also take Denarius down new roads by ultimately establishing it as a producer of critical minerals. “Similar to many other companies, we're looking at the potential of bringing in a contractor to do the mining,” said Mike Davies, the company’s CFO. “The other opportunity is how we will process the material? Will we do it ourselves onsite with a plant, or will we take it to another facility with excess capacity and let them process it? Those are questions that we'll answer as we get through this Preliminary Economic Assessment.”
Either way, the Lomero project could not have come at a better time. The evolution of electric vehicles and other electronic devices has brought critical minerals to the forefront, which in turn has greatly diminished the global supply of these resources. Adding to this supply concern is the world’s massive reliance on China and other unreliable producers. This has led governments across the globe to put a premium on developing homegrown sources of critical minerals. “In Europe we're seeing jurisdictions like Spain enact the EU Minerals Act,” Davies said. “The act is intended to help secure the homegrown resources needed for technologies such as renewable energy and battery power. So, projects like ours, which could be deemed ‘strategic’ because of the copper, zinc and lead it will produce, could get some access to financing, which is a key requirement as you move projects along.”
In addition to government subsidies, companies like Denarius are discovering new sources of financing in the form of off take agreements as companies look for long-term sources of material for their refineries. “There's a different market evolving for the kind of metals that we’ll be producing because of the growing demand,” Davies shared. “That now includes smelters that are looking for feed from around the world.”
Given the rise of these new markets, the Lomero project is opening Denarius to new possibilities. But it’s not the only project on its radar. The company’s 100%-owned Zancudo project is also getting its share of attention, albeit somewhat unexpectedly after Denarius suddenly assumed full control of it in 2022 when Iamgold was forced by its own challenges to walk away before completing its earn-in on the project. Zancudo is tracking to start production n 2024. The project is being advanced quickly in the hope it will provide the company an internal source of cash flow to help fund its other projects, including their flagship Lomero venture.
Zancudo, which includes another historic mine, is located in Colombia, a jurisdiction the Denarius team knows well. This venture is more traditional than Lomero given its large silver resource of over 10 million ounces. The project also has some gold and small amounts of zinc and lead.
Based on the progress at both the Lomero and Zancudo properties, Davies is feeling pretty good about the company’s capabilities and prospects. “We have a track record of finding mines. We've got a track record of raising the finances necessary to bring a mine into operation, and our team has demonstrated an ability to constructively incorporate surrounding communities in order to earn social licenses necessary to operate mines.” He added, “This is also a great entry point for investors given our valuation and where our share price is relative to our peers.”
If Lomero and Zancudo continue to advance as expected,investors will be gratified they took advantage of this opportunity.
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