Firm closes deal to develop Pine Point
Mining investment firm agrees to C$100M for NWT zinc project North of 60 Mining News - May 5, 2023
Last updated 5/11/2023 at 2:36pm
Osisko Metals Inc. has finalized a joint-venture agreement with one of the world's leading mining and metals investment advisors that could propel its Pine Point project in Northwest Territories into becoming one of the top-10 zinc-lead producing mines in the world.
Inked in late February, the estimated C$100 million deal with Appian Capital Advisory LLP, a unit of Appian Natural Resources Fund III LP, won speedy approval from Osisko Metals' shareholders in mid-March.
Reporting completion of the transaction April 6, Michael Scherb, founder & CEO of Appian Capital, said the Pine Point project is "a highly prospective and strategically located project."
"The work of the Osisko Metals team to date is a credit to themselves. Appian looks forward to a collaborative partnership with Osisko Metals, the Pine Point team, surrounding communities and stakeholders to advance the development of the Pine Point Project," Scherb added.
The joint venture, Pine Point Mining Ltd., is intended to be a mutually beneficial and collaborative partnership to rapidly advance the Pine Point Project, said Robert Wares, Osisko Metals' chairman and CEO.
"This milestone agreement is a significant endorsement and daylights the considerable intrinsic value of Pine Point. The transaction allows us to leverage Appian's extensive mine development experience and includes a crucial investment of C$75 million into the project that will advance the development of Pine Point to a 'shovel-ready' status," he added.
The funding is expected to cover all costs, including final definition drilling, additional exploration drilling, feasibility, environmental assessment and permitting, including Indigenous engagements.
Coupled with Appian's significant cash payments to Osisko Metals and a C$5 million equity investment, the JV's terms will enable Osisko Metals to focus on developing other projects while avoiding excessive dilution to advance the Pine Point Project, Wares said.
Osisko Metals and Appian currently hold 74.7% and 25.3%, respectively, of Pine Point Mining's share capital.
More demand for zinc, lead
Located on the south shore of Great Slave Lake, between Hay River to the west and Fort Resolution to the east, the project has significant infrastructure: power on site, paved highway access, and 100 kilometers (62 miles) of viable haulage roads.
Pine Point was home to a former mine operated by Cominco (now Teck Resources) that produced some 14 billion lb (6.35 million kg) of zinc and 4 billion lb (about 1.81 billion kg) of lead from 64 million metric tons of ore over nearly 2 ½ decades, beginning in 1964.
Osisko Metals acquired the project in 2018 and completed a preliminary economic assessment in 2020 for re-establishing a zinc mine at Pine Point. The PEA provides solid indication that the extensive shallow mineralization remaining on the property can be produced and a long-lasting mine be developed.
The company updated the PEA in 2022 to reflect higher long-term prices for zinc and lead due to increased demand for the minerals driven by the recent transition to clean energy; increased mineral resources; cost escalations in capital and expenses, along with life-of-mine water management cost estimates from a completed hydrogeological model.
A proposed mine plan released in early 2023 included an 18% increase in tonnage to the mill that could catapult Pint Point to become a top 10 global zinc-lead producer with an annual average production of 329 million lb (141 million) zinc, and 141 million lb (about 63.96 million kg) lead over 12 years of mine life.
In reporting the updated PEA earlier this year, Wares said, "In the current inflationary context, I am very pleased that the PEA update still shows a very robust zinc project with viable economic metrics including an after-tax IRR (internal rate of return) of 25% and after-tax NPV (net present value) of C$602 million, as well as significantly increased resources."
"The new proposed mine plan, with 18% increased tonnage to the mill, could again make Pint Point a top-10 global zinc-lead producer with an annual average production of 329 million lb of zinc and 141 million lb lead over a 12-year mine life," he added.
The updated PEA was based on 15.8 million metric tons of indicated resource averaging 4.17% zinc and 1.53% lead; and 47.2 million metric tons of inferred resource averaging 4.43% zinc and 1.68% lead.
Potential for expansion
Pine Point also has high potential for mineral resource expansion, according to its developers. Zinc, which is fundamental to the green economy, is a critical metal and strategic sources with a secure supply chain are rare. Lead also supports the green economy. An essential mineral in wind generation and the longevity of solar panels, it also enhances recovery of critical metals while recycling electronics waste.
Zinc metal is produced from the mineral sphalerite, while lead metal is made from the mineral galena.
Pine Point historically produced among the world's cleanest sphalerite and galena concentrates, with low impurities, according to Osisko Metals, a distinction that sets the project apart from most current producers.
Until Appian has acquired an ownership interest of 60% in Pine Point Mining, or until a final investment decision has been reached, all funding of the Pine Point project will be made by way of cash calls issued by the board of PPML to Appian, the quantum and speed of which are determined at the sole discretion of PPML's board of directors. The four-member PPML board will include two directors from Osisko Metals and two directors from Appian.
Thereafter, additional cash calls, if required, will be satisfied by each of Appian and Osisko Metals on a pro-rata basis pursuant to approved annual programs and budgets as determined by the PPML board.
Initially, the board of Pine Point Mining will include Wares and Gordon Stothart from Osisko Metals, Adam Fisher, an independent mining consultant, and Geoff Cohen, senior advisor to Appian in North America, who will serve as chairman.
Pine Points management will include Osisko Metals President and Chief Operating Officer Jeff Hussey, who will serve as the unit's CEO, and Anthony Glavac, Osisko Metals' chief financial officer, who will serve the same role in the JV.
Successful mine developer
The Appian organization is a leading investment advisor to private equity funds that invest exclusively in mines and mining-related companies, with global experience across South America, North America, Europe, Australia and Africa and a successful record of supporting companies to achieve their development targets.
Appian Capital Advisory has brought more than 60 mines into production.
The organization's operating portfolio oversees 6,300 employees and a global team of 65 experienced professionals with presences in London, Toronto, Vancouver, Lima, Belo Horizonte, Montreal, Perth, Mexico City, and Dubai.
The Appian team, through its private equity funds, has a long history of successfully bringing mines through development and into production, having completed eight mine builds in the past five years.
CORRECTION (May 5, 2023): This article has been corrected to better reflect Appian's current assets, which includes the divestment of its interest in the Harte Gold project during 2022.