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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