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Superior Lake Resources - Exploration target defined as study nears completion

Sep 2018

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Summary - Exploration target defined as study nears completion

Superior Lake Resources has announced a brownfield exploration target for its Superior Lake zinc project (‘the Project’) in Canada.  Highlights of the announcement include the following.

  • The brownfield exploration target ranges between 2.1 and 5.2 million tonnes at a grade of between 13.3% and 15.4% zinc.
  • The study focused on near-resource areas that can potentially be added quickly to the near-term mine life.
  • The exploration target excludes greenfield exploration potential.
  • The restart feasibility study is almost completed.

Analyst comment: while the initial resource (2.15 Mt at 17.1% Zn) underpins near-term potential at the Project, the exploration target highlights its long-term potential. Even with a low exploration target of 2.1 million tonnes, the size of the current resource is doubled. As shown in the images above, the exploration target is close to the existing resource and mine infrastructure. Thus, if those targets are successfully converted into a resource there is a strong probability they will also be converted into the mining inventory, thereby extending the Project’s mine life.

It is worth remembering that this exploration target takes into account only the brownfield potential, excluding the vast greenfield potential that has remained unexplored for more than 20 years. We look forward to initial exploration work at the Project, which is likely to commence later this year.

Site trip:we recently visited the Project in Canada and were impressed by what we saw. A standout feature was the significant surrounding infrastructure, which we believe will reduce the initial capital cost and facilitate future development of the Project. We will be releasing a virtual site trip video of the Project in coming weeks.

Capital Raising:  despite difficult equity markets in the junior resource sector, Superior Lake Resources recently completed a $5 million placement, at a 6% premium to the closing share price. Since then (24th August), the share price has rallied another 42% in anticipation of the upcoming restart study for the Project.

Valuation: We maintain our assessment of Superior Lake Resources as a SPECULATIVE BUY, and will review this following the release of the restart feasibility study.