Kristie Batten: Why this new producer could be the next Adriatic

One of Australia’s top mining journalists, Kristie Batten, writes for Stockhead every week in her regular column placing a watchful eye on the movers and shakers of the small cap resources scene.

Recently listed Broken Hill Mines (ASX:BHM) is ramping up news flow and momentum as it looks to capitalise on the silver bull market.

BHM, previously explorer Coolabah Metals, relisted on the ASX in July after raising $20 million at 35c per share.

The company, which acquired the producing Rasp mine and Pinnacles asset in Broken Hill, has since traded as high as 70c.

BHM released its first material ASX announcement a week ago with the first assays from its 70%-owned Pinnacles project.

New results included 1.5m at 29.1% zinc equivalent or 806 grams per tonne silver equivalent from 86.2m; 7.3m at 21.4% ZnEq or 592g/t AgEq from 109.8m, including 3.2m at 37.3% ZnEq or 1031g/t AgEq; 1.5m at 17% ZnEq or 470g/t AgEq from 123.6m; and 17.1m at 10.4% ZnEq or 288g/t AgEq from 105.4m, including 7.8m at 13.3% ZnEq or 367g/t AgEq.

BHM executive chair Patrick Walta told Stockhead that while the results were excellent, they weren’t among the best seen at Pinnacles.

The company also reported a historical, but unreleased, hit of 1.9m at 56.4% ZnEq or 1565g/t AgEq from 106.4m.

Grades of up to 5.3g/t gold and 0.4% copper have also been returned in new and historical drilling.

Walta said there wasn’t really a comparable deposit in Australia, but it was similar to Adriatic Metals’ Vares deposit in Bosnia & Herzegovina.

Adriatic was recently acquired by DPM Metals for US$1.3 billion.

“The closest comp, in reality, in terms of a polymetallic deposit, is Adriatic,” Walta said.

“It’s got all the hallmarks of 2017, 2018 Adriatic when they were discovering it, and it eventually became a 25 or 30 million tonne resource.”

Building towards upgrade

Pinnacles already has a resource of 6 million tonnes at 10.9% ZnEq and an exploration target of 6-15Mt at 2-4% zinc, 3-6% lead and 40-125g/t silver.

BHM is targeting a resource upgrade in the first half of next year.

“We’re targeting the shallow stuff because we think we can upgrade the MRE, and then wrap the mine plan around it, and there’s no reason why we can’t start mining,” Walta said.

“It’s on a mining lease, on care and maintenance. It’s ready to go. We can just start shelling out the original open pit.”

The old-timers largely mined the silver but there’s a large zinc zone under the historical pit.

“We’re drilling along strike from that as well and that’s hitting the silver zone and then going into the zinc zone, so you’ve got some really big intersections there,” Walta said.

BHM will also start looking at an underground at Pinnacles, likely in 2027.

“We don’t know what the cut-off is where open pit becomes uneconomic, but it’s going to be more that underground is so much more economic,” Walta said.

“We’ll switch over to doing that at some stage, because you’re going to be hitting like 1000 grams a tonne silver and you can chase that grade down there.

“We know, just from historical hits, where that stuff is.”

Walta said it was important to note that Pinnacles was a near-term production story.

“There’s plenty of companies with really nice, sizable resource ounces of silver,” he said, adding that most were not close to production due to permitting and financing.

“We’re going to start making money out of US$44 an ounce of silver, so hopefully that might set us apart over the next six to 12 months.”

Rasp humming

The plan is to process Pinnacles ore at the “hungry” Rasp mill, only 15km away.

Rasp’s plant is designed to process 750,000 tonnes per annum but is only operating at around 40% capacity.

“[Rasp’s] Western Min orebody just kicks along like it has for 13 years,” Walta said.

“We haven’t done anything different since taking over, in terms of running Western Min.

“In the first half of this year, I think we produced 6% more metal than in the second half of last year, so it just ticks along as the little engine generating cash and all that sort of good stuff.”

BHM engaged Byrnecut to carry out around 1000m of underground development to enable access to the Main Lode, which should be completed any day now.

The Main Lode has a resource of 870,000t at 17.7% ZnEq across four high-grade areas, more than double the grade of Western Min.

“You’re talking really rich grades, and we’re literally 30m away from it, so in the fourth quarter, we’ll be mining,” Walta said.

“We’ll be starting to bring this Main Lode material in, which is two and a half times the grade of what we’re mining at Western Min, so you’re going to get this compounding effect of additional tonnes, but also higher grade as well, so we should start to really increase that metal output just from rasp and then pinnacles next year.

“Even though we’ve only been listed for eight weeks, the market’s kind of catching up on our story, but very quickly, we’re going to go from one orebody into one plant at 40% capacity to three orebodies into the one plant.”

News ramping up

BHM is planning almost weekly announcements for the next two months, which Walta believes will build momentum to the market realising the company’s value, particularly at a time when the silver price is rising.

Despite being a new story in a crowded market, Walta said BHM was attracting attention.

On a post-IPO roadshow, the company flagged to investors that it would be running a site visit in October.

“The demand we got, we’re now doing two site visits back-to-back in October, with plane loads from Sydney and Melbourne coming in, so we’ve got 40 people coming to site mid-October,” Walta said.

“Then we’re doing the same thing again mid-November, so there’s a massive amount of interest in it, which is natural.

“You’re talking about high-grade silver, Broken Hill, and you’re talking about production.”

Walta has had meetings with some of the larger superannuation funds and other funds.

“It’s kind of cool – people are interested, which is half the battle,” he said.

“Once they see it, they’ll get the value proposition.”