Starting off the month with a bang, Canada-based exploration company Zazu Metals (TSX:ZAZ) provided the results of a preliminary economic assessment (PEA) on its high-grade zinc-lead-silver Lik property, located in Northwest Alaska. It considers the open-pit potential of the Lik South deposit, but does not take the contiguous Lik North deposit into account.

In total, Zazu expects to mine 17.1 million tonnes of ore at an average grade of 7.7-percent zinc, 2.6-percent lead and 47 grams per tonne silver from Lik South. Average annual production should come to 234,000 dry tonnes of zinc concentrate and 55,800 dry tonnes of lead concentrate. Those figures “rank Lik South as one of the largest producers of zinc concentrate and one of the largest zinc mines globally,” as per today’s press release.

Also positive, the PEA states, is the fact that Lik benefits from existing state-owned infrastructure; at the moment, that consists of a “purpose built haul road and concentrate shipping road.” That’s significant, Dundee Capital Markets analyst Joseph Gallucci told Zinc Investing News in November 2013, because having “access to infrastructure, like a haul road, a port facility, is big capital cost savings. And obviously reduces initial CAPEX to get a mine up and running.”

On that note, the PEA estimates a total capital cost of $352 million, including a 20-percent contingency, for a 2-million-tonne-per-year mine and mill with an initial mine life of nine years. The development plan discussed in the PEA involves constructing a 5,500-tonne-per-day mill that will produce zinc and lead concentrate “using on-site crushing/grinding and sequential flotation methods.”

While today’s PEA doesn’t detail what’s next for Zazu and Lik, Gallucci said that the “big key with this project is that it’s not permitted at the moment.” Continuing, he commented, “Zazu has already completed a significant amount of work and collected lots of data in this regard. What remains is the bureaucratic US permitting process.”

The company should also be looking to develop a funding plan and has more work to do “on the metallurgical side to better establish [its] recoveries.” Longer term, expect to see Zazu work towards meeting its development expenditure targets to acquire 80-percent ownership of Lik from Teck Resources (TSX:TCK.B,NYSE:TCK).

Shares of Zazu are currently selling for $0.65 each.


Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. 

Editorial Disclosure: Zazu Metals is a client of the Investing News Network. This article is not paid-for content. 

Related reading: 

Zazu Metals: Shallow, High-grade Zinc Potential