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SMRS: Balmat Mine’s IRR shows Importance of Zinc

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QualityStocks Member Level  Thursday, 04/14/16 02:19:35 PM
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SMRS: Balmat Mine’s IRR shows Importance of Zinc for Investor Health

It wasn’t until the middle of the twentieth century that the importance of zinc as a trace element for healthy human growth was recognized. Now, the recent Industry Guide 7 (IG7) report on the status of the Balmat Mine and its related infrastructure, commissioned by Star Mountain Resources, Inc. (OTC: SMRS), is showing that the metal is good for investor health, as well. The report, prepared by industry consultants Practical Mining LLC, concludes:

- The Balmat Mine and mill is in good condition and can be placed into production with minimal expense and time.
- The mill is capable of producing high grade zinc concentrate suitable for sale to smelters worldwide.
- The mine is well situated, being close to tide water and well connected by road and rail service.
- The mine is a low cost, fully mechanized operation.
- Mine equipment fleet has been carefully stored and is capable of exceeding the planned production rate.
- Upgrades to the mine ventilation system and modifications to the diesel equipment fleet will be required to meet more stringent Diesel Particulate Matter (DPM) regulation adopted since the mine was placed on care and maintenance.

An IG7 report is a disclosure notice required by the U.S. Securities and Exchange Commission for ‘Issuers Engaged or To Be Engaged in Significant Mining Operations’.

The IG7 report also estimated the internal rate of return (IRR) on the Balmat mine operation at 25 percent, which is a reassuring figure. The IRR is the rate at which future cash flows will have to be discounted to equal a net present value (NPV) of zero. By comparing the IRR with the cost of capital, the feasibility of a project, such as the Balmat operation, can be easily assessed. Return on Equity (ROE) data (http://dtn.fm/4SQat) published by New York University’s Stern School of Management shows the metals and mining industry with a ROE of less than negative 23 percent. The return on equity is the return required to entice investment in securities of a company and, so, is the cost of capital that company would have to pay in the securities market. What these numbers are telling us is that Star Mountain might have struck gold with its Balmat zinc mine.

Star Mountain Resources acquired the Balmat mine after entering into agreements with Northern Zinc, LLC and HudBay Minerals, Inc. that gave Star Mountain title to the Balmat Holding Corporation, including the St. Lawrence Zinc Company, LLC and its mining operations in the Balmat mining district of St. Lawrence County, New York. The Balmat mining operations cover an area of 2,699 acres of fee simple surface and mineral rights in three towns in St. Lawrence County. The majority of the property consists of the 1,754 acres in the town of Fowler, where the Balmat Mine, mill and tailings disposal facility are located. Nine parcels totaling 703 acres are owned in the town of Edwards, which includes the Edwards mine. The rest is the Pierrepont mine, which is located on four parcels totaling 242 acres.

Star Mountain Resources is said to be a junior minerals exploration company and, typically, such companies confine themselves to investigating and assessing discoveries of minerals. They focus on verifying reserves. If reserves can be proven, the property is then sold or leased to a major. However, Star Mountain Resources actually owns mines and is expecting an IRR of 25 percent from its Balmat operations. It may be time to stop calling the company junior. As Juliet says of her beloved Romeo in Shakespeare’s immortal play: A rose by any other name would smell as sweet.

For more information, visit www.starmountainresources.com

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