Midnight Sun Mining is a post-discovery stage copper-cobalt exploration company with a 60% interest in the Solwezi group of licences located in Zambia’s North-Western Province. The Solwezi licences consist of two individual exploration licences covering 506km² immediately adjacent to First Quantum Minerals’ (FQM) Kansanshi Mine – the largest copper mining complex in Africa, with resources greater than one billion tonnes. “Our philosophy was two-fold,” explains Midnight Sun’s lead director and acting CEO Al Fabbro. “First and foremost, we liked the jurisdiction of Zambia. Second, we liked the infrastructure already provided by FQM’s Kansanshi Mine. As a junior, it gave us optionality on the assumption that we made a discovery.”
A copper mining haven
Zambia’s mining industry has been an investor-favourite in Southern Africa since the industry was first opened to private venture in the late 1990s.
The twin pillars of peace and democracy have remained a near-constant since Zambia gained independence from Britain in 1964 and have been a key reason behind the country’s continued attractiveness as an investment destination, particularly in the mining sector.
The mineral prize that lies at the heart of Zambia’s investment appeal is copper, which is mostly found in the Central African Copperbelt straddling the border between the Southern region of DRC and Northern Zambia, where there is even a province named after the prolific Copperbelt.
Since the privatisation of the mining sector, Zambia’s copper production has skyrocketed from 300,000 metric tonnes per year to 800,000 at the end of 2017, making it Africa’s second largest copper producer behind only neighbouring DRC.
In fact, copper has a huge impact on the fortunes of Zambia as a country and its people, according to Fabbro. “Copper is the dominant industry here and accounts for about 85% of the country’s exports and the majority of its revenues.”
The robust Zambian copper industry has enticed a host of major mining companies to set up exploration projects in the Copperbelt, including the likes of Barrick Gold, Rio Tinto, Glencore, Ivanhoe Mines and FQM.
Many of these have gone on to build large-scale copper production complexes across the region, however rumblings of discontent have begun to emanate from these international mining houses after the Zambian government recently moved to increase royalty taxes on the mining sector.
At the start of 2019, the government raised its sliding scale for royalties from 4% to 6% and introduced a new 10% tax when the price of copper exceeds US$7,500 per tonne. Zambia also plans to replace value-added tax with a sales tax by April to help reduce a mounting public debt.
Speaking on the subject of tax, Fabbro explains that this type of action is common in all jurisdictions not just Zambia: “I live in British Columbia, Canada and it feels like our government changes the goal posts for the resource sector every week.
“It’s one the greatest challenges facing the mining industry. We are making investments with horizons of sometimes 40 years or more, but governments tend to change the goal posts depending on which way the wind is blowing.
“Having said that, I think the Zambian government fully understands how important copper is and they are starting to realise that if they encourage the development of new mines, they will generate much greater tax revenues than by changing what’s been successful in the past.”
The Solwezi licences
Midnight Sun remains unfazed by the recent legislative changes in the Zambian mining sector, instead placing increased faith in the Solwezi licences in North-Western Province, a region which has been christened the ‘new Copperbelt’ by many enthusiastic exploration companies.
The Solwezi licences are located within 10km of FQM’s Kansanshi Mining Complex, only 60km from Barrick Gold’s Lumwana Mine and concentrator and a further 120km from another FQM asset – the Sentinel Mine.
This glut of high quality copper mines in the region not only offers a strong testament to the glittering potential of the Solwezi licences, but also provides a strong infrastructure network that Midnight Sun can leverage off, as previously alluded to by Fabbro.
“There are some really nice mines in the immediate vicinity,” he says. “We’ve also been staked around by MMG and Rio Tinto based on our discovery, which shows there is a keen interest from majors on the ground we are working on. We think the land we hold is strategic and very prospective.”
After carrying out geochemical and geophysical surveys, along with air core, RC and diamond drilling campaigns, Midnight Sun identified five targets across the Solwezi licences: 22 Zone, Mitu, Dumbwa, Kifubwe and Khaziba. In the last 12 months, the company has predominantly focused on 22 Zone and Mitu.
At 22 Zone, Midnight Sun encountered multiple intercepts of high grade copper oxide in drill holes and made a significant drill discovery of 11.3 metres at a grade of 5.71% copper. However, Fabbro admits that to date this near surface mineralisation lacks continuity, which was also incidentally a feature of early exploration on the Kansanshi system.
“We’ve got some extremely high grade oxide holes at the surface, but the analogy is more like a buried Kansanshi. There seems to be a geophysical target down at 250 metres that looks very enticing and that’s likely going to be our next foray at 22 Zone.
“We would like to drill four 400 metre holes into the target to see what it looks and based on the results work from there. If it’s another Kansanshi, it’s a company maker,” he exclaims.
Meanwhile, the Mitu target has yielded a copper-cobalt discovery in ore shales to the far North of the known Mitu trend. Diamond drilling has encountered significant mineralisation including an 11.6 metres interval assayed at 3.44% copper and 0.067% cobalt. The Mitu discovery was made after a very subtle soil anomaly was detected by a geochemical survey.
“We got a couple of drill hits up there and stayed focused on the area, tracking the mineralisation. We’ve got what looks like several kilometres of strike, about 300 to 400 metres of potential dip and widths look to be about 10 metres. Based on drilling done to date we are seeing roughly 1% copper equivalent.”
While the company had been focused on the Northern part of Mitu, they have also uncovered a number of larger geophysical anomalies that could result in a much bigger deposit. “The geophysics has really told a compelling story. One of the priorities of this year is to test targets identified by geophysical surveys conducted during 2018.”
A big year ahead
Over the course of 2019, Midnight Sun will dive deeper into the geophysics at Mitu and select the three best drill targets in order to confirm the geophysics. If the geophysical results can be confirmed, then it will modify plans for progressing the target to suit the requirements.
“First and foremost, we need to understand the structural controls of the mineralisation at Mitu, and we don’t fully understand them yet. We thought at first it was the ore shales alone that controlled mineralisation, but recent results have shown there are other additional control factors.
“Once we learn and understand the structural control, we will be more comfortable at Mitu and I think the geophysics will really help. One of the first steps in proving an ore body is understanding the structural controls,” Fabbro reasons.
Midnight Sun has also identified a new potential zone located between Mitu and 22 Zone that looks very attractive, according to Fabbro. “We are going do some work there aimed at developing drill targets as a third priority behind Mitu and 22 Zone.”
Casting his eyes towards the horizon, Fabbro maintains a flexible stance on the prospect of Midnight Sun ultimately developing a copper mine on the Solwezi licences. “If we do get to a production decision, we recognise we would have to bring in a whole set of people with different skillsets, which is definitely achievable.
“However, our intention is to create an asset that a senior mining company would want to own. Ultimately our goal is to maximise the value to Midnight Sun and its shareholders, whatever form that takes.”
Returning to the present, Midnight Sun’s acting CEO concludes by reasserting his confidence in Zambia’s new Copperbelt region. “With a bit of luck, we could be the story of the year for 2019.” If the deposits surrounding the Solwezi licences are anything to go by, this could well be the case.