For a junior miner the challenge is not “Keeping Up With the Joneses” it’s “Getting On With the Joneses”.
Zinc One (Z.V) is best pals with it its neighbours in Peru. The CEO Jim Walchuck has a track record of harmonious community relations. That may sound like soft news – but it isn’t.
Before we explain how to make money in the zinc sector – let’s remind ourselves why every commodity investor should pay attention to social dynamics. And why failure to do so can rip an ugly hole in an investment portfolio.
The goodwill of the local community is as important as mineral grades.
Mining creates gigantic facial scars. “Locals” oppose mines for environmental, cultural and emotional reasons.
We don’t live in Latin American and can’t speak to their problems. The vast majority of “anti-mining” protestors in the west are hypocrites. They drive cars, use electricity. If their child requires brain surgery – they will not – in a swell of environmental outrage – swat the titanium scalpel out of the surgeon’s hands. They want the benefits but not the sacrifices.
From an investment perspective, the hypocrisy is immaterial. Anti-mining protests can – and do – kill mining projects.
Newmont Mining (NEM.NYSE) spent 10 years developing the Conga copper and gold project in Peru. Local opposition was so intense, Newmont eventually walked away from its $5 billion investment.
In, Romania, Gabriel Resources’ (GBU.V) stock plummeted 95% after it faced massive street protests. GBU is now suing the Romanian government for $5.7 billion.
Closer to home, members of Maliseet First Nations have built a protest camp at the site of the Sisson mine in New Brunswick. “There’s nothing that would make us approve this mine,” declared one protestor.
These are economically sound projects primed to spit out billions of dollars in cash. But without the goodwill of the neighbours – life becomes untenable.
“Getting on with your neighbour” requires talent and skill. James Walchuck, the CEO of Zinc One, has a long track record of success in this area.
A former Mining Manager for Barrick in Tanzania, Walchuck built a high-grade underground mine and achieved 2 million man-hours without a lost-time accident. That endeared him to the locals.
We worked with Walchuck on potash project in Canada. The company was partnered with a native band. Walchuck and the Chief were close collaborators. He was respected as a straight shooter in the community.
On July 27, 2017 Zinc One announced that it has entered into a five-year surface access agreement with the Comunidad Campesina de Yambrasbamba (Community of Yambrasbamba) in Peru – permitting surface access for exploration and development work on the Bongará Zinc-Oxide Mine and Charlotte Bongara Zinc-Oxide Project.
It appears that once again, Walchuck has won the locals’ trust, convincing them that he can build a safe, environmentally responsible mine that will benefit the shareholders and the local community.
Do you know what we like about trust? Can’t buy it. Gotta earn it.
The press release states: “With the Surface Access Agreement signed, Zinc One will immediately commence the process of updating the environmental baseline study within the framework of the current Environmental Impact Assessment (EIA)”
The EIA is a critical part of the drill-platform permit applications, which are planned to be filed during Q3. Zinc One’s upcoming drill campaign is expected to begin in August 2017.
The neighbouring Charlotte Bongará Zinc-Oxide Project has multiple near-surface, high-grade zinc-oxide drill intercepts that included 29.5% Zn across 15.5 meters, 26.1% Zn across 12.5 meters, 29.7% Zn across 11.5 meters..
“Reaching an agreement with the Yambrasbamba community is a major milestone for Zinc One and the Bongará Zinc-Oxide Mine Project,” stated Walchuck, “The Yambrasbamba community has previously seen the full gamut of mining – from exploration to construction to operations to remediation.”
The Bongará Zinc-Oxide Project was in production 2007-2008 before it was shut down due to the global financial crisis. The mine has zinc grades greater than 20%, all from at or near the surface, and recoveries over 90%.
As an investment opportunity, here is the background music: there is a global shortage of zinc. Two of the world’s largest zinc mines have run out of ore (Australia’s Century mine, and the Lisheen mine in Ireland). China has also shuttered 26 zinc mines in Hunan province due to environmental breaches.
“We are grateful to have such a supportive community and, if the project moves ahead as we expect,” stated Walchuck, “then we see the building of the Bongará Zinc Oxide Mine Project as a win for the community, government and company shareholders.”
That sounds like a good neighbour.
FULL DISCLOSURE: Zinc One is an Equity Guru marketing client. We are confident in the asset, the geology and the people.