Consolidated Zinc (ASX: CZL) is a step closer to positive cash flow after it kicked-off mining at its 51%-owned Plomosas zinc-lead-silver project in Mexico’s north.
The start of mining follows Consolidated Zinc securing a toll treatment and offtake agreement with Mexico’s largest mining company Grupo Mexico.
Grupo will process the Plomosas ore in 2,500t batches a few days each month through its Santa Eulalia concentrator and transport it to its San Luis Potosi smelter.
In the first month, Consolidated Zinc will mine 3,000t of high-grade mineralisation. This will ramp up to 7,500tpm by the end of the year.
According to Consolidated Zinc, the agreement with Grupo allows it to begin producing within minimal start-up capital and begin generating positive cash flow more rapidly.
“Since joining the company, my focus has been on the transition of Consolidated Zinc from explorer to producer,” Consolidated Zinc chief executive officer Brad Marwood said.
“The board’s decision to commence mining, having secured toll treatment and concentrate offtake agreements is a low risk, fast return option that will see mining re-established for a low capital cost,” he said.
Consolidated Zinc is fully-funded to cash flow after securing a $1.25 million finance package via convertible notes issued to chairman Stephen Copulos and existing major shareholders.
Capital expenditure to cash flow is estimated at US$500,000.
“Toll treatment through a proven process plant provides benefits with efficiencies of scale and eliminates permitting and construction delays and costs,” Mr Marwood explained.
“We expect to bed down the operations quickly to enable ongoing exploration that will support production for the coming years,” he added.
Plomosas zinc-lead-silver project
Although its current stake in Plomosas is 51%, Consolidated Zinc retains an option to secure up to 100% of the project, via staged earn-in terms.
Plomosas has a current JORC resource of almost 1.18 million tonnes grading 16.1% zinc and lead, and 22 grams per tonne silver for 189,700t of contained zinc and lead.
The project was historically mined between 1945 and 1974 where more than 2Mt of ore was extracted.
Average grades for the mined ore were 22% zinc and lead and more than 80g/t silver.
Small scale mining has continued to the present with mineralisation remaining open at depth and along strike.
During channel sampling, Consolidated Zinc unearthed 2m at 19.1% zinc and lead.
“Recent exploration success has been significant and I anticipate that we will continue with more discoveries at Plomosas that will underpin Consolidated Zinc’s future,” Mr Marwood said.