Publisher's Note: Zinc is one of the hottest commodities in the market right now, and a company in Ireland is working on a groundbreaking exploration project.
The Outsider Club's Gerardo Del Real visited the site and talked with the CEO of Hannan Metals (TSX-V: HAN)(OTC: HANNF), Michael Hudson. Today we have the transcript of their talk about Hannan's unique history and future for you.
To your wealth,
Nick HodgePublisher, Outsider Club
Gerardo Del Real: This is Gerardo Del Real with the Outsider Club. Joining me today is President and CEO of Hannan Metals, Mr. Michael Hudson. Mike, thank you for having us.
Michael Hudson: Gerardo, welcome to Ireland.
Gerardo Del Real: Thank you, sir. Thank you, sir. We've talked in the past about your district-scale high-grade zinc package and how it's literally the right project at the right time in the right place, and I want to talk about why that is.
First off, I'd love for you to introduce Hannan Metals. Why the name Hannan metals?
Michael Hudson: Well, there's no better place to describe than where we are. We've got the amazing Franciscan Quinn Abbey behind us. 14th-century construction there. Built on an old Norman castle. This is where a lot of the English history is developed. Henry VIII has been here. Thomas Cromwell.
Amongst all that, something else very famous happened here in the mining space. A young man was born in 1840. Patty Hannan, Patrick Hannan. In this town, just very close to us, just right here. At that time in Ireland it was the ending of the mine, so what we're going to talk about soon is our project, but that was an old mine and one of the largest mines in the 1830s and 1840s in Ireland.
Then came the potato famine that many of your listeners will know about. It was a very hard time here in Ireland and they literally... There was more people in Ireland at the time back in the 1840s than there is today, so the population has never recovered from that whole time.
It must've been a very hard time. Mining had finished. It was very hard to feed the population, and by the time he was 20, Patrick Hannan, who was born here in Quinn, immigrated to Australia. He went on to find Australia's largest gold mine, the Kalgoorlie Gold Field, that's still in production today.
Gerardo Del Real: That's incredible.
Michael Hudson: He found that in 1893 and there's some fantastic stories there. Obviously, the accent, I'm an Australian. I couldn't help but with the association of Quinn and literally not too far below us here is our project.
This area forms part of our exploration project, so with Patrick being born here, with him finding Australia's largest gold field, what a wonderful explorer to name our company.
Gerardo Del Real: Absolutely. Now, we talked about Ireland being the right place. Many people aren't aware that Ireland is one of the top zinc-producing countries in the world. Can you talk a bit about that?
Michael Hudson: Yeah. Well, the places like behind us that people generally associate with Ireland, not zinc mining. There's been some significant mines here. Since, well, that early phase that I talked about, the 1840s, 1830s, then Ireland was thought to have nothing left until another Patrick, Pat Hughes, in the 1950s, went across and made his money prospecting in Canada. After going there initially to brick lay, he came back here to Ireland with the premise that there was more to find. He was very successful. In a few years, he found the Tara deposit and then went on to find Navan, which is still in production today and is Europe's large base metal mine.
There's been a very rich history. In fact, that idea of Patrick Hughes from the 1950s, that there was more to find, was very right because there's been no more zinc found in the world since those days on a per-square-kilometer basis than here in Ireland.
Gerardo Del Real: That's impressive.
Michael Hudson: Europe's largest zinc mine is still in production, and there's been many more mines opened and shut. It's where zinc is formed and is predictable to find, and the Irish have been very good at finding a lot of zinc.
Gerardo Del Real: Now, you mentioned that it's predictable to find, and that's important, and we'll talk about why that's important to this project. Before we get to that aspect of it, can we talk a bit about your background? Because you cut your teeth with zinc projects.
Michael Hudson: I did. I know zinc. I spent the first 12 years of my career starting in Australia, three years underground. One and a half kilometers underground daily working in a zinc mine.
Then I went and started exploring for zinc around the world. It took me to some fantastic places, to Pakistan, to Peru. I even came here to Ireland during the 1990s and Pasminco was the largest integrated zinc company of the day. We spent a lot of time looking for zinc. I knew a lot about Ireland, of course, and that's what led me back here.
Gerardo Del Real: Perfect. Now, we've talked about it being the right time. I believe we're clearly in a base metals bull market, and what an opportune time to have a high-grade district-scale land package in Ireland, right? Tell us about the project, Mike.
Michael Hudson: Absolutely. It is a fantastic time. It is a zinc bull market. Only a week or two ago we were at 12-year highs with the zinc price. Zinc has a much more volatile history.
There's been a huge underdevelopment over the long term in zinc. This is not just a normal 10-year cycle where we see undersupply come in and more mines will come on. We're not seeing that now. The zinc remains in deficit, the supplier remains in deficit. There's been a lack of zinc exploration worldwide for the last 40 years essentially.
We're now putting into play our mines that have been sitting around for literally 80 years. They've been compromised because of metallurgical issues or difficulty in terms of location. Those new discoveries just have not been made in the zinc space, and that will lead to, I think... My prediction is that this deficit will continue for a lot longer.
It is controlled by a few players. The Chinese traditionally have controlled the excess supply coming to the market. Their environmental cleanup seems to have limited their ability to produce into this deficit.
Of course, Glencore took half a million tonnes off the market and have shown great restraint in bringing that on very slowly, so they also control the market greatly, but there is that fundamental reason there's been a lack of zinc exploration worldwide for a long time now.
Gerardo Del Real: Now, we know in the zinc space, with the zinc market it's controlled by the major players. You alluded to that. Any time that you're exploring a district-scale land package you need to check a few boxes. Location and infrastructure, obviously, are some.
Metallurgy, obviously, is a box that you definitely want to check.
Then scale, the potential for scale, because any mid-tier or major that wants to come in and take over a project isn't looking for a small project. I'd love for you to talk about the project a bit and talk about the infrastructure and the early metallurgical results that you've had some success with.
Michael Hudson: Okay. A very broad question. I can, suppose, start with the history of this project.
Patrick Hannan, we can go back to the history, was born here in the 1840s and the mine shut around that time - those Victorian age mines - but it was only 10 years ago that this discovery here was made, Kilbricken. It's one of Ireland's most recent discoveries. It was explored intensively with $25 million of cash spent in the ground drilling out what is Ireland's 10th largest resource to date.
It's had a lot of cash put into it by mainly Lundin Mining, who own the project, and we bought it from them in 2015. A very good start with a very good resource base.
There's approximately just over four million tons that have defined at high grades. When I talk about high grades, I mean 10% combine lead-zinc is what you really want to put a figure on as a high-grade deposit. We figure that we need to find, our modest first pass aim is 10 million tons at 10% to put us into an economic category. That's our aim on this project, so you can see we're 30% to 40% of the way there already, but this project is so much more, as you mentioned.
We have a good start over a kilometer and a half, where $25 million was spent, but if that's all we had in that area there'd be very little opportunity to get bigger than our modest aim to put 10 million tons and put some economics around that.
What the majors look for is our systems that will produce mines that can produce through multiple cycles. That means that they need to have lots of tons associated with them, and we're talking 10 million tons could produce.
There was a mine here that shut down a few years ago, Galmoy. That was an eight-million-ton system and that was a 12-year mine life, but we'd like to find mines that last longer and can produce a larger amount because that's really only how mining works. You must have the scale to produce over the long term and ride these cycles.
Our land package, that has large scale. We've got a very large chunk of Southwestern Ireland here that we're exploring. The scale is something like 20 kilometers of strike length that we've got beyond Kilbricken, and it's much more than that too because we've got to start thinking three-dimension.
Certainly, there's this project, even if something economic can be found in the short term it will be explored for decades to come. There's huge opportunity here. It's one of the last frontiers of Ireland that since the 1950s, I should say, exploration has just moved down here. There's been some big discoveries made around us. There's 100 million tons in historic resources and new discoveries that have been made within 40 kilometers of where we stand today.
Gerardo Del Real: Sure. Now, you mentioned that resource at Kilbricken, and it's a great start, but I want to talk a little bit about some of the details. The initial recovery, some of the testing that you've done on the metallurgical side. It's important because it's clean. Can we talk a little bit about that?
Michael Hudson: Yes. You had to ask that question to get it out of me.
Gerardo Del Real: Absolutely.
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Michael Hudson: My apologies. I got talking about the large scale. Even though we're talking about large scales, the details are always important. They're the things that throw out the red flags for projects.
Irish deposits, in general, produce beautiful concentrates. They're in demand. Smelters like having them. They're very low-iron, low in impurities. The recoveries are good and the grade is good. That's what we have here in Ireland also.
The initial work that was conducted by previous workers showed basically no red flags here, all good. What we're doing now is doing a lot more work, so right at this moment literally we've got samples in the UK going to locked tight cycle tests that will demonstrate that in real-world scenarios, those results. Basically, we're there to validate the earlier work and advance the understanding, so no red flags so far.
Gerardo Del Real: Excellent. Now, you touched on something that I want to talk about, Irish-style deposits. They tend to be predictable and they tend to happen not in isolation. You tend to have clusters of deposits. Once you find an ore body, it tends to become a bit easier to explore for other ore bodies. Can we talk about that a bit?
Michael Hudson: Yeah, as geologists we like to put things in boxes. Irish-style deposits are a specific type of zinc deposit that form in carbonate rocks. They have very strong structural controls, so if we can define and understand the structures we're a long way to understanding the controls of mineralization and being predictable about where they can form.
Typically - well, it pretty much is always the case - we find pods. We don't find one massive body in these Irish systems. They form in clusters of maybe four, five, six, seven, eight bodies and on our website we show some good examples in our presentations there about some of the other examples here in Ireland.
Now, we've got two mineralized bodies that we've found. We call one the chimney and one the fort. Then we've got multiple targets defined by structure and geochemistry that show that this system has the potential to become much larger immediately around those pods.
Based on what we know, the other systems, there's very good science to believe that this will form multiple pods also, this system. We've already got two we know, but we think there's more.
Gerardo Del Real: Excellent. Now, you have a rig turning now?
Michael Hudson: We certainly do. We've had a rig turning ... One, if not more rigs turning for the last year.
Gerardo Del Real: Now, you also just recently completed a 41-line kilometer seismic survey. Can you talk a bit about that approach?
Michael Hudson: As we've talked about, the line went through this lovely village of Quinn. We ran 40 kilometers of 2D seismic, and seismic in the oil business has been around for 100 years.
It's a technique that's well understood and I think most people would associate seismics with oil exploration. Now, in mineral exploration, we work at different scales where the oil explorers are looking for kilometers and kilometers of aquifers and traps that can contain that oil or gas. We look at tension meters. Our mineralized body is a kilometer long by 200 meters wide by 10 meters thick, so it's a very different scale of target that we look for in our business.
That's one challenge and then the rocks that we're looking in are not unconsolidated sands and the like that the oil guys are looking in. Our rocks are actually what we call faster. Sound waves travel much faster through our rocks, so it creates a lot more technical challenges in resolving the signals. Which is all seismic is, the vibration and the vibration goes into the ground and bounces back off certain layers and comes and we read it.
Working at the different scale and with those different rocks, really, it's only been the last five years that we've had the computing power to deal with that amount of information, and data, and resolve it. It's opened up exploration here in Ireland.
I mentioned before Navan, or Tara mines, which is the largest zinc mine in Europe and one of the largest in the world. It's a plus-100-million-ton system. It's been mining for 40 years. They're still mining today. They ran some seismics only over the last few years.
Only over the last two years, and over the last year they made a new discovery. They found the key oil controls on that system. Despite having a world-class mine, 40 years mining, down here a kilometer or two away from the mine and 500 meters deeper they found the major part of the system, and they're drilling that now. They just put out a little bit of information, but that was unraveled through seismics. That's exactly what we're doing here.
We've got the ability to run seismics over this huge land package that we have here. Over the known mineralization, which helps us resolve and understand those structures that I talked about that are so important to understand in these systems, but to understand it at the much larger scale also. It's a game changer for exploration here in Ireland and for the industry as a whole globally, but it's very applicable to exploration here. We're looking quite deep here in Ireland, so it also shortcuts exploration, limits the amount of drilling that you have to do rather than blind drilling. Drilling's the most expensive part of our business, so it's a very efficient way of exploring, as well as allowing us to understand the mineralized system.
Yeah, we've just completed that survey, that data. There's so much data and so much specialization and skills required to process that data that it's coming out over the next few months. It literally takes a few months to look at all that data before we can start to use it really as we'd like to and put drill holes onto those major anomalies, targets, structures that we find from that seismic data.
Gerardo Del Real: Excellent. Now, in 2017, you were very successful in finding extensions to the known mineralization. I imagine 2018 you're going to doing exploration targeting?
Michael Hudson: Absolutely. We have a three-phase program here that's relatively simple to understand. The first phase was a big tick, and the first phase was to expand the known resource areas.
We drilled along the extensions, along strike, up dip and down dip from the known mineralization. Every hole that we drilled hit, including some of the most spectacular results we received in the first few holes. Some of the highest grades I've seen in my career, and I've seen a lot of zinc, and I've never seen holes up to 73% lead over three meters. That is quite incredible.
Gerardo Del Real: The regulators didn't believe the numbers, right? They had to call you multiple times to verify the numbers were correct.
Michael Hudson: Yeah. The stock was halted on the basis that they didn't believe that this type of mineralization could form with that amount of lead in the rock, but it certainly does. The result was validated over a few hours when he had a discussion with them. We've not only intersected those very high grades, we've expanded the resource over hundreds of meters. Phase one, resource expansion, tick. But that won't make the difference to this project ultimately alone.
We need to find more of these pods that we talked about. More of these mineralized bodies. That's where we're drilling now and where some of the older seismics ... There's been some seismics run by previous operator Lundin over the last few years, and we're using that data now to target some of our drilling within a kilometer or so of the known mineralization. That's looking for those additional pods.
Phase one, immediate extensions over hundreds of meters. Phase two, within kilometers of the known zone, and then we've got 35,000 hectares, phase three.
That's where our seismic looked at this. We've got what we call the Clare Basin here. We're in County Clare and we've got the Clare Basin that has these host rocks that form the zinc mineralization. With the seismics that we've run now over this whole basin scale, we're literally peeling apart the geology and really understanding that first time.
It is groundbreaking in a geological and exploration sense. We've got great hopes that it will help us to find the next Kilbricken deposit. That could be within tens of kilometers of where we're looking. They're the three different scales that we're looking at.
Gerardo Del Real: We were on site yesterday and earlier today as well. I was struck by the infrastructure. We're literally 15 minutes away from the airport, paved roads, power running through the property. Can you speak to that a bit?
Michael Hudson: Sure. There's different parts of the world you can explore, of course, and there's many zinc deposits in the world that are bigger and more tons than 10 million tons at 10%, but you must have that infrastructure to be able to develop any project. Here in our Ireland, our threshold can be lower, so we can find something smaller that can be very economic and very profitable as opposed to being in the middle of some more isolated part of the world. There are the benefits of exploring here without a doubt.
There's no shortage of skilled labor. We don't have to set up remote camps. We have power, of course, within anywhere of the site. There's roads. The greatest challenge is to work with the communities and let them know what we're doing and so they understand what we're doing here exploring. At the greatest degree, we have a huge amount of support here in this community and we're very thankful for that.
Gerardo Del Real: Social license is critical, and I think the recent seismic survey speaks to that. Can you talk about that process and how involved that was, and frankly, the great job your team did with that?
Michael Hudson: Well, we do have a great team in Ireland. Even though I'm talking to you about here, there's much smarter people and better people behind me that are operating on this project who have been working on the project for a long while too, and not only technically understand the project, but know how to work, and live, and breathe with the local people. I think the seismic is a great example of just that social license to operate, and to work, and to integrate with the local people. We had 40 kilometers of roads that we surveyed and every house along every part of that 40 kilometers, we knocked on the door, spoke to the people, dropped the brochure in, and everyone knew what to expect. Because it literally looked like, as I've said to you before-
Gerardo Del Real: Aliens had landed. Right.
Michael Hudson: Aliens had landed. There's antennas every five meters, and there's big trucks shaking the ground, and you don't want people to have surprises. You want people to understand what we're doing.
Gerardo Del Real: Sure. Can you talk about the market cap? You mentioned that 25 million had been sunk into the project. I think you spent approximately five million now, so we're talking nearly $30 million. Where are you today market cap wise?
Michael Hudson: Well, we're not at that. Here's the opportunity, I suppose, we're at 12 million market cap today. We've been pretty much range bound over the last medium term around the 10 to 15 million dollars Canadian.
Gerardo Del Real: Well, you've said it's the right project and the right place at the right time. That means you've got the right management team. Mr. Hudson, thank you very much.
Michael Hudson: Thanks, Gerardo.
Gerardo Del Real: Appreciate it.
For the past decade, Gerardo Del Real has worked behind the scenes, providing research, due diligence. and advice to large institutional players, fund managers, newsletter writers, and some of the most active high-net-worth investors in the resource space. Now, he is bringing his extensive experience to the public through Outsider Club, Junior Mining Monthly, and Junior Mining Trader. For more about Gerardo, check out his editor page.