Explorers dig deep for hidden treasures

Published on 9 November, 2008.  

The largest ever exploration project in Ireland is taking place beneath the fields of Limerick. John Reynolds sees what Minco is up to at Pallas Green

‘Exploration is the research and development of the mining sector,” geologist Peter Tyler enthuses as we drive down narrow, bumpy roads and farm tracks in deepest Limerick.

Tyler works for Irish mining outfit Minco and its Australian conglomerate partner Xstrata Zinc, which are involved in a joint exploration venture here. (Minco holds a 23 per cent stake, Xstrata 77 per cent.) Since 1998 they have spent about €11m exploring zinc-lead deposits in an area of about 40 sq km around the village of Pallas Green.

As we survey the landscape, it’s hard to believe the prize that he and his colleagues are busy honing in on under Limerick’s deep green fields is potentially Europe’s biggest zinc mine.

If it compares to nearby mines at Lisheen and Galmoy — which have brought riches to their owners — then, at current prices, there could be €2bn-worth of zinc here. If it’s bigger than Lisheen, it’s potentially worth about €4bn.

Minco executive chairman John Kearney, who started his mining career in Ireland 35 years ago, makes the guarded comment, “I wouldn’t like to put any kind of a figure on it at this stage. As long as we keep getting good results, we’ll keep drilling.”

He adds, “We’re looking for something that compares to Lisheen, and we’ve been working on this now for 15 years. Pallas Green could be a world- class mine.”

If the vision becomes a reality, the ore from here — typically in the form of zinc sulphide that contains about 50 per cent zinc — will be shipped to a smelter abroad, probably in China. The zinc would be extracted and purified, then be used to galvanise steel and iron, or make other alloys such as brass.

Getting to that stage involves a lengthy process that could take many more years, however.

“Some geologists go their whole careers without working on an exploration project as exciting and significant as this,” Tyler says.

Even before an exploration firm can start drilling, it needs to establish who owns the land — not an easy feat, given the antiquarian nature of our land registry system.

High labour and equipment costs in Ireland, and the strong euro, add to the challenges that confront those wanting to pursue mining and exploration projects here.

It costs €50,000 alone to deploy each drilling rig — Minco has 15 of them dotted around Pallas Green — and each has to be hooked up to a water supply, kept running with a generator that guzzles more than 10 gallons of diesel a day, and must be constantly manned in all weathers, five days a week.

In total, there are 42 drillers, technicians and geologists working on the project. Drill operator Jimmy Hogan — who has several decades of experience — and his colleague Bill Pullen are at the rockface, as it were, operating a drill rig in a muddy corner of a field near the villa.

At the business end of it, a heavy-duty diamond drill cuts through the rock up to 700m below the ground, while water is pumped in to cool the drill bit and the tubes it travels through. A cylindrical core of rock is then extracted, and logged according to depth and location.

There’s a small fleet of jeeps at the site office just outside Pallas Green, and it’s here that geologist Jana Rechner and her colleagues, supervised by Xstrata Zinc exploration manager Normand Dupras, input the information on the depth, location and mineral content into a computer database that enables them to model the makeup of the zinc deposit.

This data is also sent to a world-leading laboratory in Galway, where it’s analysed in more detail so that its density and all of its 46 elements can be calculated.

Each drill core section helps paint an increasingly accurate picture of where exactly the zinc lies beneath the ground, and how much of it is there.

At the moment the drillers are finding zinc content of about 12 per cent, and about 2 per cent lead. Over tens of millions of tonnes, this adds up to a sizeable deposit.

After this advanced exploration stage, the next step in realising Pallas Green’s apparent potential would be a feasibility study.

Getting planning permission to mine here is likely to be the most significant hurdle, as Minco’s biggest shareholder — Donegal businessman Tom O’Gorman — who has invested about €1.2m in the firm, knows only too well. In September his gold exploration venture, Mayo Gold, was refused planning permission for a small-scale “tourist mine” in Louisburgh, Co Mayo, because of local objections and the potential impact on tourism in the area.

Kearney claims that mining underground here would not be environmentally disruptive, on the surface at least, particularly due to advances in technology.

“We recognise the importance of, and we have, support at a local and national level,” he adds.

A working mine would create up to 350 high-paying jobs, according to Tyler, although the drillers working here at the moment seem to be relatively low paid. There aren’t many big employers in the area and, arguably, local firms such as engineering services would also benefit.

Dupras re-emphasises the company’s interest in the project, “We’re doing basic studies here in order to decide whether to pursue this project over the next five or 10 years. Nobody can say how long we’ll be here. It’s still speculative, but the better the results we get, the longer we’ll pursue this.”

Although the price of zinc has tumbled by about 75 per cent on the commodity markets since 2006, its current low price has more to do with the state of the financial markets than anything else.

The reality is that supplies of zinc are dwindling, Kearney says. Nevertheless, demand for iron, steel and other metals has plummeted even in China, which up until recently had been devouring shiploads of it.

The humble US one cent coin is made out of zinc, which suggests there are probably a few tonnes of it down the back of a lot of couches. So it seems something of a gamble that it’s easier and more viable to dig it out of the ground than out from Joe the plumber’s living-room furniture.

“The price collapse at the moment is disappointing. It’s causing pain and suffering to those currently in operation, but the underlying fundamentals show a projected shortfall of zinc in the next two to three years, so the medium- to long- term prospects are good,” says Kearney.

“Several mines, including Galmoy, are about to close and we’re not aware of any new ones coming on stream.”

In the current economic climate, there is a risk that banks might halt lending to exploration companies or demand harsher financing deals on equipment. Undeterred, O’Gorman is fearlessly bullish about Minco’s prospects.

“Although Xstrata is very well funded, Minco is perhaps better placed to move faster and take over all of the Pallas Green venture,” he says.

“Major companies are inclined to centralise things more. It’s possible they could pass the project over to Minco with an option to buy back in at a later stage.”

Its experienced board of directors includes Bert-Ove Johansson, a former chief of Tara, Europe’s largest zinc mine.

“The slowdown could be to our advantage,” O’Gorman adds. Also chairman of Midas Mineral Resources, which has rights to explore for gold and base metals across a 1,400sq km area, he is a firm believer that now is the time to increase exploration and drilling programmes while other firms might be slowing down.

Research and development can be expensive, as any sensible businessperson knows, but O’Gorman and his partners may yet prove that — in this case — it is the best way to ride out a downturn.

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