Oz does about-face on road-port

The Bathurst road and port project is back on the table, representatives from Oz Minerals told delegates this past week at the Nunavut Mining Symposium in Iqaluit.

Without a road and a port, the company's zinc-copper project at Izok Lake makes little financial sense and can't provide a good return on investment, said Andrew Mitchell, the development manager for Oz.

And if Oz were to build its own 300-km road to the Kitikmeot coast, along with a port, the company would have spent $635 million, even before shelling out another $535 million to build the mine.

Comparing the mine's relationship to the port and road to the "tail wagging the dog," Mitchell said the mine is basically a port and road with a mine at the end.

Dropping prices for zinc and lead are behind the rethinking of the mine's road and port options. Zinc has fallen from a high of $1.47 a pound in 2007 to 55 cents this year.

Last year, before the global slump in metal prices kicked in, Zinifex Ltd., which then owned Izok Lake, spurned the BIPAR project and opted to build its own road to Grays Bay on Coronation Gulf.

That came as a severe blow to BIPAR backers, who need Izok Lake to make the port-road scheme viable.

BIPAR promoters effectively withdrew from the project when they asked the Nunavut Impact Review Board to suspend its environmental review of the project last August.

But Oz, which absorbed Zinifex in a merger last year and now owns Izok Lake, has jumped back on the BIPAR bandwagon.

At the same time Oz, which is staggering under enormous debt, is now in talks to sell all its shares to China MinMetals for $1.8 billion.

If this sale goes ahead, Oz would continue to operate as a subsidiary, Mitchell said, but with a much-improved, "debt-free" cash situation.

Still, the company won't take on the $1.25 billion cost of developing Izok on its own.

"Oz Minerals has to reduce costs and will cut back budgets globally," Mitchell said.

The company plans to look for new gold reserves around its mothballed Lupin Mine to make investment in Izok Lake more attractive. At the same time it will work with other partners to revive the Bathurst road and port project.

When Zinifex dropped out of the Bathurst road and port project it came as a blow to the Sabina Silver Corp.'s Hackett River project, 75 km southwest of the community of Bathurst Inlet.

The port on Bathurst Inlet – a development promoted by the Kitikmeot Corp. and Nuna Logistics – is located only 35 kilometres to the south of the Bathurst Inlet community.

The $270-million port facility would include the construction of a dock, 18 large fuel storage tanks, a 211-km. road to Conwoyto Lake, a 1,200-metre airstrip and two camps for about 200 workers.