Defining its nickel sulphide Lynn Lake Resource

Interviews

Transcription of Finance News Network Interview with Corazon Mining Limited (ASX:CZN) Managing Director, Brett Smith

Clive Tompkins: Hello Clive Tompkins reporting for the Finance News Network. Joining me from base metals explorer Corazon Mining Limited (ASX:CZN) is Managing Director, Brett Smith. Brett welcome to FNN.

Brett Smith: Thanks Clive.

Clive Tompkins: Can you start by introducing the company?

Brett Smith: Okay. Corazon is an Australian listed small cap exploration company, currently exploring for nickel sulphide in Canada.

Clive Tompkins: Thanks, so when did you list and what’s your market cap?

Brett Smith: Corazon was originally called Graynic Metals. It listed in 2005 exploring for gold and base metals in Western Australia. June/July 2010 the company located its project in Canada, a nickel sulphide project, changed its name to Corazon and we’ve been exploring that project as a focus ever since.

Clive Tompkins: And who’s on the Board and what’s the goal of the Company?

Brett Smith: Okay the goal of the Company is to take the Lynn Lake acid to production as soon as possible. On the Board are four geologists, as well as myself there’s Clive Jones as Non-Executive Chairman. Clive is a Director of Cazaly Resources but also involved with Bannerman Resources in Africa as well.
There’s also the two Non-Executive Directors include Adrian Byass and Jonathan Downes, they’re both directors of Ironbark Zinc. Ironbark are currently looking to develop what will probably be the biggest zinc deposit in the world, in Greenland. So technically a very capable Board and also corporately savvy, and we think it’s an ideal combination for where we are at Lynn Lake at the moment.

Clive Tompkins: Now to your key project Lynn Lake in Manitoba, Canada. What does it contain?

Brett Smith: Okay, Lynn Lake is a historical nickel mining area. It mined for 23 years, closed down in 1976 operated by one company Sherritt Gordon. There’re currently two companies that control the nickel producing areas. There’s Corazon and there’s a Canadian company called Prophecy Platinum Corp, who have a market cap of about CAD$135 million. Corazon is the largest tenement holder in the area and the jewel in our crown is the EL deposit, which is a satellite nickel deposit away from the main mining nickel area.

Clive Tompkins: And Brett what is the history of nickel mining in the area?

Brett Smith: Lynn Lake was discovered in the 1950s and mined for 23 years, produced about a million tonnes of nickel per year, average grade one per cent nickel, 0.5 per cent copper. So low grade by Australian standards when you look at the Kambalda, the high grade Nowra deposits, but these are large tonnage low cost deposits and were quite profitable even back then.
The EL deposit was the highest grade deposit in the Lynn Lake area. It produced 1.9 million tonnes at 2.5 per cent nickel and about 1.15 per cent copper with cobalt credits as well. So really a high grade deposit for that region. As I say, it’s an isolated intrusion. We believed when we looked at the project that the best place to find a high grade nickel deposit was under an existing high grade nickel mine, so that’s where we started.

Clive Tompkins: Thanks. So what has recent drilling revealed and what is the priority for the project?

Brett Smith: The priority for the project now is to prove the value of what we’ve discovered underneath the EL mine. The drilling has showed us that our concept that another high grade breccia should exist at depth, below the EL mine has proven to be true. The original miners had a concept that this breccia ended at depth. We believe it started at depth and has come up, and this drilling has proved that. So we’ve drilled nine holes to date into a target, a conceptual target, at depth. Every hole has had high grade nickel, high grade by Lynn Lake standards and every hole has indicated that we’re probably on the top of another breccia zone.

Clive Tompkins: Good, so when do you expect to announce an updated resource?

Brett Smith: We should in the next couple of weeks, be able to announce an upgraded exploration target and we believe we will be drilling from now till mid-2012. Towards that time, probably in May/June, we should be able to upgrade our resource then. But at the moment we are focussed on defining how big this breccia zone is with every hole still producing grade. We still haven’t found the end of where we’re going at depth, or to the south and we’re just moving out incrementally to understand the system.

Clive Tompkins: Now you recently raised $4.3 million to fund exploration. What is your commitment to drilling and how much have you spent so far?

Brett Smith: Since we’ve started the project, say July 2010, we’ve spent about $4 million on exploration in the ground. Corazon have very little overhead, we’ve got two full-time employees, myself and a chief geologist. We share offices with other companies in Perth and we use consultants and contractors in Canada. So the majority of the money goes straight into the ground.
So we’ve spent $4 million on drilling, we’ve probably drilled 14 kilometres of core since then. Our commitment to drilling - if we have one rig going full-time on the EL deposit, we will spend probably $1 million to $1.5 million per quarter. Our commitment to date is to continue this one drill rig going until May/June 2012. If we have to put another rig onsite, if we have the capability to put another rig onsite that will shorten that time, but it will also provide us with a lot more information and get us to where we want to go sooner.

Clive Tompkins: Okay, so when would you like to be in production?

Brett Smith: Difficult to say. We hope by the middle of 2012 we know exactly what we are dealing with and we’ll be able to commit to a full feasibility drill out, and/or understand what the mining’s going to – what it’s going to take to get this thing into production. At this stage we’re focused on again, seeing how big it is and defining our resource, which should happen by the middle of next year. And from that point we’ll be able to say, yes this is the value of the asset and this is what we need to do.
We’re currently in the middle of doing mining studies, very high level mining studies. So they’re by no means indicative, it’s very hard to get accurate numbers when you don’t have a resource, but we’re trying to understand what is required. You know - is it going to be a decline, is it going to be a shaft, what’s the mining rate going to be? That’s the critical question for our Capex, Opex etc. etc.
Our gut feeling with the size of the deposit, the shape of the deposit that we’ll be looking at between say, half a million tonnes to a million tonnes per annum operation, and that’s based on what was done historically as well. But there’s a big range variation and it does affect costs and also profit. So at this stage, all we can use is those rough numbers, they’re not public, we don’t have a resource, so we can’t go any further than that.

Clive Tompkins: Brett what’s the situation with respect to infrastructure and processing facilities?

Brett Smith: The Lynn Lake Township was established for the mine. So we have a hydroelectric scheme 70 kilometres out of town that supplies the town with electricity. We have a tarred airstrip there, we have a hospital, we’ve got an all-weather road, dirt and bitumen to Thompson where there’s a nickel smelter operated by Varle. We have a railway line, it hasn’t been used since 2003/2005, it goes 250 kilometres to the south to Flin Flon where there’re zinc copper smelters.
So the infrastructure of the town is very good. There’s housing, there’s people, there’s small business and there’s a lot of equipment onsite that is not used for most of the year. So yeah, we’re very lucky with what we’ve got - the front and capital costs should be reduced because of this.

Clive Tompkins: Brett now to financials. How much do you expect the project to return based on what you know at this stage?

Brett Smith: It’s very hard to determine what the end result’s going to be. I mean we can throw numbers around now but they’re not based on fact. We continually try to compare where we are compared to our peers. We’re a nickel junior with nickel sulphide resources and we can’t think of any peers, so it’s quite difficult to say. At the moment the closest company would be Poseiden in Western Australia. They’ve got I guess, resources of 60,000 plus tonnes of nickel sulphide and an exploration target of plus 100,000 tonnes of nickel sulphide. Their market cap last time I checked was about $45 million to $50 million.
So that’s somewhere we’d like to head. We’re not there yet, we’ve still got a fair bit of work to do but we’re hoping by early/mid next year that there’s recognition of the value, and we can define and substantiate the value of this asset at Lynn Lake.

Clive Tompkins: Good. And what can you tell us about the nickel price and long term demand for nickel?

Brett Smith: I mean there’s a lot of speculation about metal prices, but we’re quite happy with where the nickel price is at the moment. It’s coming off a fairly big high but if you look at our cost production, we expect that to be quite low. The supply/demand graphs if you look at the forecast for nickel is going to be tight for some time. They’re relying on supplies from high pressure acid leaching laterite deposits to come online and to be as good as they say they’re going to be. This seldom happens, so we’re quite bullish about the nickel price going forward. We believe stockpiles are decreasing and there’s a tight demand/supply curve.

Clive Tompkins: Brett last question. Where would you like to see Corazon Mining 12 months from now?

Brett Smith: OK, definitely within the next six months we should have the direction of the project set. So we’ll understand what it’s going to return and where we want to take it. I’d say within 12 months we’re heading down the line of full feasibility and working smoothly into the production scenario. So that’s where I’d like to head as quickly as possible. Definitely the next six months are critical, understanding the value of the asset and pointing towards production.

Clive Tompkins: Brett Smith congratulations on your success to date.

Brett Smith: Thanks Clive.

Ends

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