Barry FitzGerald: At Sky Metals you buy one tin project, get one free

“Garimpeiro” columnist Barry FitzGerald has covered the resources industry for 35 years. Now he’s sharing the benefits of his experience with Stockhead readers.

There’s been a known massive slug of tin-dominant polymetallic mineralisation sitting out the back of Bourke in north-west NSW crying out for some attention for more than 50 years.

That and a metallurgical breakthrough.

It’s called Doradilla and its owner since 2019, the Norm Seckold-chaired Sky Metals (ASX:SKY) , looks to have cracked the code to unlocking the project’s big-time potential thanks to current day tin flotation processing technology.

Garimpeiro last took a look at Sky in August last year when it was a 3.2c stock for a market cap of $18.8 million. It has since moved up to 7c for a market cap of $49.7 million, a valuation comfortably underpinned by its advanced Tallebung tin project in central NSW.

Sky is coming to an end of a four-month drilling program at Tallebung and results to date suggest there will be a big increase in the last inferred and indicated resource estimate of 15.6Mt grading 0.15% tin for 23,000t contained, once all the data is in.

It shouldn’t take long after that to give the market a feel for its production capability. Given Tallebung is particularly amendable to ore sorting to bump its grade by a factor of five times, the project is likely to be shown to be capable of making Sky’s current market many times over in years to come.

It’s early days at Doradilla in comparison but Sky’s metallurgical breakthrough could well see it emerge as a multi-decade tin producer, possibly with rare earths and other metals as part of deal.

The lowdown on Doradilla

Sitting in semi-arid goat country, Doradilla was first drilled in the 1970s. It’s part of a 17km linear skarn which hosts the Doradilla, Midway and 3KEL deposits – the famous (in exploration circles) DMK Line.

Big name tin miners past and present (including Renison, Aberfoyle, North Ltd and YTC Resources) had a crack at unlocking the DMK Line but had basically packed up and left by the 1980s when it was realised that simple gravity separation would not work.

Sky managing director Ollie Davies takes up the story:

“We’ve always been aware of the potential for the Doradilla project to host an extensive tin system, however our ability to progress this asset has been hindered by our ability to unlock the tin through a viable metallurgical processing route.”

“Now, through the application of a combination of conventional gravity, magnetic and new flotation process steps, we have achieved economic recoveries of up to 78% tin.”

“This is an exciting and very significant breakthrough which transforms the potential and outlook for this project. While our primary focus remains squarely on the Tallebung tin Project, where we are in the midst of a major resource expansion drilling campaign, Doradilla is clearly shaping up as a sizeable and very attractive pipeline development asset.”

Drawing on Doradilla’s historical database and its own work, and in light of the metallurgical success, Sky has been able to report a compliant “Exploration Target” of 10-15 million tonnes grading 0.32-0.42% tin for 32,000-63,000t of contained metal.

The target is based on a 2.5km section of Doradilla and there is another 2.5km of strike length on either side. So potentially at least, an already big exploration target could eventually be tripled.

The Doradilla breakthrough comes as the tin market remains as strong as you like. The metal was last quoted on LME at $US33,312/t (three month). So it remains more than three times the copper price.

The price jumps around depending on production news from operations in, shall we say, fraught locations around the world. Demand is super strong thanks to growing uses in solar panels and all the circuitry that needs to be connected to deliver AI.

New mine developments in desirable locations are few and far between and like other critical metals, China has what could be a called an unhealthy grip on the market.

Sky’s share price did not move on Monday when the metallurgical breakthrough was revealed. Fair enough, the market is being cautious.

But given Garimpeiro’s suggestion that the company’s market cap is more than covered by the Tallebung project, it seems likely it won’t be long before the market begins to reward Sky for unlocking Doradilla.