September 06, 2011 http://minesite.com/news/donner-metals-powers-on-towards-first-production-from-bracemac-mcleod-in-2013Donner Metals Powers On Towards First Production From Bracemac-McLeod In 2013By Alastair Ford“We’re on schedule to begin production in January 2013”, says Andrea Magee of Donner Metals. How times change! Donner is no longer the exploration story of old, plugging away up at the Matagami camp in Quebec, hoping for zinc drill hits impressive enough to justify the next fundraising, or for enough zinc resource to tempt local bigwig Xstrata into a long-term commitment. No, several mining industry awards later and Donner’s Bracemac-McLeod zinc-copper-silver-gold discovery is now more than a year into the development stage, moving steadily towards a planned production rate of 2,500 tonnes per day. These days, Xstrata makes much of the running, but it makes perfect sense that it would. Xstrata’s Perseverance mine is one of the more prominent existing projects in the neighbourhood, but it’s due to run out of ore at around about the time Bracemac-McLeod is scheduled for start-up. And Bracemac-McLeod is situated just six kilometres away from Xstrata’s 2,600 tonnes per day Matagami mill complex, which as a result of the decline of Perseverance will soon have a significant shortfall of ore to make up. To say that everything fell into place nicely for Donner is perhaps to do a disservice to the amount of work both Donner and Xstrata have put into Bracemac-McLeod, but there’s no doubt fortune has favoured the project in terms of timing and location.Various arrangements regarding funding will play out over the next 16 months between now and first production, but in simple terms Donner needs to raise just C$10 million before June next year. Currently there’s C$10 million in the treasury, following a recent C$3 million placement. A C$25 million funding deal with Sandstorm Resources, the company which also part-bankrolled the development of the Rambler Mine in Newfoundland & Labrador, will help to see Donner over the line. Xstrata, clearly, has no such funding complications. But nor has it attempted to squeeze Donner out of the project, as majors are sometimes wont to do. In fact, the working relationship has been described as “wonderful” by some in the know, and word is that Dave Patterson, the company’s long-standing and resilient chairman, and frequent presenter at our London Minesite forums, is has been known to inform those in the Donner office at large how lucky they are to be involved in such a project. Still, it’s not done and dusted yet. Construction of the ramp down into the Bracemac-McLeod deposit is now well advanced, but there’s some way to go. “We’ve already done 1,800 metres of 2.3 kilometres”, says Andrea Magee. “We’re well on schedule with that.” And as that work continues, there’s the question of the mine life to consider. At the moment, the measured and indicated resource at Bracemac-McLeod stands at 3.73 million tonnes at 9.6% zinc, 1.26% copper, 28.25 grams per tonne silver, and 1.06 grams per tonne gold, and supports a four-year mine life. But rigs are turning rapidly on the Donner ground, as Dave Patterson and his team aren’t going to leave it at that. The first port of call will be the existing inferred resource at Bracemac-McLeod, which amounts to an additional 2.63 million tonnes grading 8.9% zinc, 1.3% copper, 38.8 grams per tonne silver, and 1.1 grams per tonne gold. There’s also, according to the company literature, “excellent exploration potential immediately surrounding both mining reserves and mineral resources”. So well and good Bracemac-McLeod is not yet completely drilled off, and should support mining for a good while beyond the current official number.But Bracemac-McLeod isn’t the only deposit in play. Over to the west the PD1 deposit is currently the subject of a feasibility study, which is due for completion at the end of the year. If that study allows for a favourable construction decision to be made, the rate of production for the wider project should increase to 3,000 tonnes per day, according to Andrea Magee. And further afield, there’s also the small matter of the rest of the 4,573 square kilometres which the company has under licence, much of it jointly with Xstrata. The company has set aside C$4 million for exploration this year, and although some of that will include additional underground drilling from inside the Bracemac-McLeod ramp, there will also be plenty of opportunity to look further afield.And Xstrata won’t mind that at all. As Andrea Magee says; “They’re not strangers to this, but they are a development company.” With Donner acting as proxy explorer on Matagami, though, Xstrata has a clear and exclusive first mover advantage over any of its competitors. Still, one question remains: whither zinc? Some in the zinc space have noticed an increasing interest from fund managers and other sophisticated investors, although there’s no doubt that retail investors are still feeling lukewarm towards the metal, to say the least. But if the boffins at the top of the financial system are on the move, it’s a clear sign that they reckon supply is likely to get tighter. Even without that positive outlook, there’s plenty of headroom at Bracemac-McLeod. The feasibility study for the project used US
.80 zinc, US$2.50 copper and US$1,000 gold, prices which compare favourably to the current US
.99 for zinc, US$4.11 for copper and US$1,874 for gold. That’s even in the face of some of the most woeful economic news we’ve seen for some time, so if and when recovery comes there should be even more to cheer about. At the current C
.24, Donner’s shares are trading at more than double where they were two years ago, although down on where they were just 12 months ago. But there’s always a lag in the run-up to production, and if the zinc market does pick up just at the time Donner and Xstrata send out their first product from Bracemac-McLeod, the uptick in the share price ought to be very handsome indeed.