Consolidated Zinc Limited: Teething Problems at Plomosas but Looking for a Better 2H

Business model
Consolidated Zinc is a junior minerals company with current production and cashflow from its 100% owned Plomosas mine located in Mexico and holding significant exploration tenements around the highly prospective Santa Eulalia mining district. We note the company is progressing exploration activity on trend from its current operations. The company’s strategic plan to optimise economic returns at Plomosas through debottlenecking run of mine operations and producing concentrates through its purpose-built processing plant.

Commissioning issues impact 2Q, performance is improving
As a transition year we expect mine and plant performance to improve over the remainder of 2021. Mining and processing rates are targeting 200tpd by end-2021, so there is significant productivity to be captured in the next 6 months or so. Reported mine EBITDA is small but positive. On a holistic basis, operations should be considered around cash neutral at this time and perhaps a base-case indicator. The current metrics point to the financial opportunity that can be unlocked through delivery of the organic growth strategy. Exploration continues along trend to the north-west of the mine and in particular the Mina Mexico Prospect, where historical mining data points to high grade Zn opportunities. Management is planning to complete mapping and survey activity in 3Q ahead of drilling evaluation later this year. Successful exploration can underpin a material expansion of operations...but delivery of Plomosas to nameplate is the priority.