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SMRS Strengthens Cash Position as Zinc Prices Continue

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QualityStocks Member Level  Wednesday, 03/23/16 11:41:51 AM
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SMRS Strengthens Cash Position as Zinc Prices Continue to Surge

Earlier this week, Star Mountain Resources, Inc. (OTC: SMRS) filed a form 8-K with the U.S. Securities and Exchange Commission regarding a promissory note issued by its wholly-owned subsidiary, St. Lawrence Zinc Company, LLC, in the aggregate principal amount of $500,000 payable to the Development Authority of the North Country, a New York public benefit trust. Payments of accrued interest associated with the loan are set to commence on April 1, 2016. Repayment of the principal amount, as well as all accrued and unpaid interest, is due on or before April 1, 2017. In the filing, the company states that the proceeds of this loan will be used for general working capital purposes.

By strengthening its cash position, Star Mountain will look to capitalize on the recent rise in zinc prices. As previously discussed in an article on QualityStocks (http://dtn.fm/DI2Od), zinc was hampered last year, in large part, by China’s economic slowdown, which seriously impacted global demand. However, with global mine depletion and severe production cutbacks tightening supply, prices have rebounded strongly. Year to date, the mineral has rose more than 27 percent since bottoming in early January (http://dtn.fm/8E7hd), closing at $1,869.75 on March 20, and zinc has shown no signs of slowing down. In fact, according to analysts with Goldman Sachs, zinc currently has “the strongest bull case” of the metals market (http://dtn.fm/5Bg0O).

Star Mountain originally entered the zinc mining business last November, when, despite slumping commodity prices, the company’s management team closed on the acquisition of Northern Zinc and Balmat Holding Corporation, including St. Lawrence Zinc Company, LLC and its mining operations in the Balmat mining district of St. Lawrence County, New York. This move demonstrated the foresight of the company’s management team, as outlined in an article on the QualityStocks blog (http://dtn.fm/jlP9k).

“We continue to evaluate the current zinc market and the best strategy to move forward with a production plan and schedule,” Joe Marchal, chief executive officer of Star Mountain, stated in a recent news release.

In February, the company’s investors received more positive news when an Industry Guide 7 (IG7) Mineral Reserve Report for the Balmat mine property supported Star Mountain’s initial reserve estimate, reflecting roughly 585,000 tons of proven and probable reserves with a 9.2 percent grade zinc that could generate an estimated $80.8 million in revenue over an initial 2.5-year mine plan. The report also reaffirmed the company’s confidence that the property could sustain production as part of a larger, 8.5-year mine plan moving forward.

“We believe the findings in the IG7 report are very positive and reaffirm our confidence that the geological and engineering conditions reflected in the long production history of the Balmat mining operation can be sustained well into the future beyond the initial 2.5-year plan,” continued Marchal.

Having previously announced intentions to proceed with zinc recovery in a timely manner, Star Mountain’s recent efforts to strengthen its short-term cash position should come as no surprise. With zinc already climbing above Goldman Sachs’ 12-month target price and recent news that China is expected to eliminate an estimated 500,000 metric tons of high cost zinc smelting output capacity by the end of the year (http://dtn.fm/8vMho), the time appears to be right for Star Mountain to push forward in capitalizing on its promising mining operations. Look for the company to leverage the expertise of its proven management team and a strengthened cash position as it progresses toward recommencement of mining operations at the Balmat Mine in the near future.

For more information, visit www.starmountainresources.com

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