Climbing metals prices give Polymetals’ Endeavor a boost

With the prices of lead, zinc, and silver gathering pace, Polymetals Resources (ASX:POL) has flagged a 28% increase to the economics of its soon-to-be-restarted Endeavor mine in New South Wales. 

Endeavor sits in the Cobar Basin, north of the township of Cobar in central-west New South Wales. 

Polymetals, which has a $40.19 million market capitalisation, says in light of the price boosts, the project’s pre-tax net present value has increased to $257 million from the $201 million estimated in last year’s mine restart study, while the internal rate of return has increased to 120% from 91%.     

Silver peaked at $42.86 per ounce yesterday (10 April 2024) from $37.89 on 17 March 2024, according to ABC Bullion — a level not seen in over a decade — while both zinc and lead saw sizeable increases to roughly $4,224 and $3,258, respectively, according to Trading Economics.

Zinc has seen a steady increase from its last low of around $3,600 per tonne in March, while lead has risen from roughly $3,070 at the start of the month.  

Speaking to Mining.com.au, Chairman Dave Sproule says global zinc prices have been depressed for several years now, and interestingly, the global usage of zinc is 45,000 tonnes per day. 

“And the current global stockpile is 45 ,000 tonnes. So there’s not a lot of zinc in stockpile. The depressed prices have led to a number of mine closures globally and that has created a shortage of supply of zinc,” he says.

That does two things. One, the increasing zinc price significantly complements the financial aspects of the restart of the Endeavour Mine. But secondly, what happens with shortage of supply of zinc is that global smelters or any base metal concentrate for that matter, when there’s a shortage of supply, they reduce their treatment charges and the treatment charges make up a very large portion of your input costs. 

So although we haven’t currently reset our economics based on the reduced treatment charges. We’ve only used the increased metal prices. The metal price increases have substantially increased our NPV and internal rate of return and the reduction in treatment charges will significantly enhance that as our stage one mine life gets up and running.”

Sproule notes last year’s mine restart study showed the high value and optionality of the project, which hey says will only improve with the accelerating silver, zinc, and lead prices currently in swing.

“A reduction in zinc supply is now evident which has reduced global concentrate treatment charges by +40% which will have a significant positive impact for zinc producers,” he explains.   

At Endeavor, ongoing optimisation of the current mine plan has also identified a sizeable amount of additional mineable ore sources which could potentially be included in an updated ore reserve.  

The first three years of planned production at Endeavor includes mining the silver ore from the Upper Main Lode, which contains more than 5.1 million ounces of silver. 

“Our near-mine exploration is also progressing very well with follow-up drilling of the Carpark prospect planned to commence during the quarter,” Sproule adds.

Meanwhile, the company has secured continued operational funding from an entity related to Sproule, which will allow the company to close on its various corporate initiatives in the near term.  

Discussions surrounding project financing and a potential strategic partnership are ongoing. 

Polymetals also noted this morning that it’s making progress in the replacement of the $28 million environmental rehabilitation bond for Endeavor, which the company said “links positively to advancing project financing discussions with debt providers and strategic partners”.

An update to the bond solution is scheduled for on or before 30 April 2024.   

Write to Adam Drought at Mining.com.au

Images: Polymetals Resources
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Written By Adam Drought
Born and raised in the UK, Adam is a sports fanatic with an interest in Rugby League and UFC/MMA. When not training in Muay Thai and Brazilian Jiu Jitsu, Adam attends Griffith University where he is completing his final year of a Communication & Journalism degree.