ASX-listed base metals explorer Red Metal has brought in larger rival MMG to help advance its Mallapunyah zinc project in the McArthur Basin region of the Northern Territory.

MMG is well known for its operation of the now closed Century zinc mine in North West Queensland and more recently for its commissioning of the large Dugald River zinc mine, also in Northwest Queensland.

MMG approached Red Metal (ASX:RDM) about the potential partnership, Red Metal boss Rob Rutherford said.

Red Metal shares over the past six months. Source:
Red Metal shares over the past six months. Source:

“They are active in that part of the world and we’ve got a pretty good ground position there,” he told Stockhead.

“They like the geology and the potential there and so that’s what they’re pursuing over the next year or so.”

MMG Exploration Pty Ltd can earn 70 per cent of the Mallapunyah project by advancing it through to the completion of a bankable feasibility study within seven years.

Exploration at the Mallapunyah project will target zinc-lead-silver deposits similar to the giant McArthur River and Century mines as well as sedimentary-hosted styles of copper mineralisation.

The project is located near the McArthur River mine, operated by heavyweight Glencore, and the Teena project owned by Canadian major Teck Resources.

The closing of MMG’s Century mine, where mining ceased in late 2015, as well as a couple of the bigger zinc mines in Ireland is contributing to a global supply shortage.

“It’s reflected in the price at the moment,” Mr Rutherford said. “So that’s why everyone is pretty keen to go looking for zinc and that is why we couldn’t get a better partner in terms of MMG with their experience at Century and commissioning Dugald River recently.”

During the option period MMG can vest a 60 per cent interest in the project by spending $4 million within the first five years and electing to advance the project towards feasibility.

MMG, which has committed to a yearly spend of $250,000, will now work to finalise the granting of the title through the Northern Land Council.

The process is expected to take around six months before MMG can get on the ground and start work.

Red Metal had cash in the bank of around $1.7 million at the end of the September quarter and raised a further $1.9 million via a share placement in November. The company expects a cash burn of around $625,000 for the final quarter of the year.