Apr 3rd, 2020
Interview with Brandon Macdonald, CEO of Fireweed Zinc (TSX-V: FWZ)
It's been a tough year for zinc so far. Since prices peaked in January at $2,454/tonne following the signing of the Phase one trade deal between the US and China, zinc prices have plummeted down below the $2,000/tonne mark on the LME.
Zinc has an intriguing macro story, but in a world of COVID-19-induced instability, why should investors take the punt?
Fireweed Zinc, fresh off the back of announcing a C$1M private placement, needs to clearly articulate what it can offer investors. Fireweed Zinc began trading on the TSX Venture Exchange on June 1, 2017. The company engages in the acquisition, exploration, and development of zinc-lead-silver properties in Canada. The flagship Macmillan Pass Project is a zinc-lead-silver play in the mining-friendly Yukon territory of Canada. A PEA was published on the project in 2018, detailing what Macdonald describes as one of the largest zinc-lead resources in the world held by a junior: 11Mt indicated, 9.5Mt inferred at 10% zinc equivalent with exploration potential. However, timing is just as important as the quality of assets. Is this a case of right asset, wrong time? Considering Macmillan Pass has already collectively had C$100M put into it, investors might be getting cold feet when they find out Fireweed Zinc has a market cap of C$13M.
So, what was the plan on day 1? MacDonald's made the acquisition of the core of the Macmillan Pass Project (the Tom Project & Jason Project, then owned by Hudbay). He was aware the project is remote, but thought the logistical concerns didn't outweigh the potential. What was the predicted monetisation event? The primary intention was to pick up the zinc-lead-silver asset from Hudbay at a discount price, develop it, then sell it to a major. However, MacDonald has always been realistic that Fireweed Zinc may have to go into mine construction itself.
What do the numbers say? Macmillan Pass was acquired from Hudbay for C$1M plus 15% of Fireweed Zinc, in addition to a "modest work commitment" of C$1.5M. The company then purchased a neighboring property for 5% of Fireweed Zinc. Fireweed Zinc has raised C$20M, and it has put C$14M into the ground and the remaining C$6M into G&A. The company has very little left today. The burn rate is C$120,000 pm but this could get cut in half if the economic conditions demanded it. Macdonald is again honest: the project is exciting because it is big, but the holding costs are not trivial.
What's the plan for the rest of 2020? It's clear that Fireweed Zinc will really struggle to do anything meaningful this year, but MacDonald thinks that drilling off vein-style "stuff" at boundary, or seeking out areas with baryte, would cement the project's status as major scale.
This is undoubtedly a company with big potential. However, this is perhaps a great example of how timing is everything in the cruel and unforgiving sector of mining.
What did you make of Brandon Macdonald? Does Fireweed Zinc make you feel excited, nervous or both? What will the zinc price do this year? Comment below and we will respond.
Company page: https://www.fireweedzinc.com/
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