Donner Metals: Extreme Leverage in this Canadian Zinc Play

by John Lee
www.donnermetals.com
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01/31/2008

Symbol: DON.V, DONFF.PK
Recent Price: C$0.390
Shares O/S: 44.8 M
Market Cap.: C$17 M
52 Week Range: $0.350 - $0.800



Donner Metals Ltd. is a Zinc explorer whose flagship Matagami project in Québec’s Matagami Mining Camp is a joint venture with giant Xstrata Zinc Canada (XTA.L).

The Matagami Mining Camp is a world-class mining district, with 18 known VMS deposits, including 10 past producers.  The area is host to historical production of 8.6 billion pounds of Zn and 853 million pounds of Cu and has established infrastructure including:  railways, paved roads, and a 2,600 t/day mill owned by Xstrata.

The development of new exploration techniques and concepts has led directly to numerous discoveries in the Matagami Mining Camp.  In 1957, as a result of the newly developed airborne EM system, the Matagami Lake deposit was discovered and within the next two and a half years, six more major deposits were identified.  Between 1985 and 1992, four new deposits were discovered, and in 1999 a new EM system was flown over the Matagami camp, which led to the discovery of the Perseverance deposits in 2000. The mill in the picture has been recently refurbished and will begin processing ore from the Perseverance zinc deposit in mid-2008 , which Xstrata has published a measured and indicated resource of 5.12 million tonnes of 15.82% Zn, 1.24% Cu, 29.00 g/t Ag and 0.38 g/t Au with a mine life of 5 years.

In the summer of 2006, Donner entered into an Option and Joint Venture Agreement (OJVA) for the joint VMS exploration of the Matagami Mining Camp of Quebec.  The Matagami Project has an area of mutual interest of 4,750 square kilometers and presently includes 3,350 mineral claims covering 841 square kilometers, surrounding the pictured Xstrata mill and Perseverance deposit.  



In 18 short months, taking advantage of Xstrata’s extensive historical database, Donner spent $9 million on exploration/drilling and made five new Zinc discoveries at the camp: Bracemac and McLeod.

Drilling Highlights

MC - McLeod
BRC - Bracemac



Drills continue to turn at Matagami so we will continue to see results at regular intervals. Donner’s goal is to come up with a high grade zinc resource figure in 2008. I can’t speculate on the grade and tonnage at Bracemac and McLeod, but if Donner keeps hitting the thickness and the high grade, Xstrata will surely take notice and make contingency plans and arrangement to get the Donner ore feed into  Xstrata’s mill which is scheduled to be starved for ore in just five years.

Labour and talent is hard to come by for the majors and Donner’s exploration success and discoveries are critical as they reassure Xstrata’s Matagami workforce that their job will be around for more than the planned 5 years.

Technically, DON stock raced to 60 cents in 2006 when the Matagami JV was announced. The stock rocketed to 80 cents in August 2007 when BRC-07-46 (19.75 meters: 22.95% Zn, 0.22% Cu) was announced. The stock is back all the way to the level before the Matagami project JV and heavily oversold resting on solid support at 40 cents. 

$9 million in expenditures later, with another $8-9 million planned for 2008, the company is trading with a $16 million market capitalization.

Additionally, Donner holds approximately 12.3 million shares of Knight Resources Ltd. (TSX-V: KNP), a nickel explorer with a large project in the Raglan area of Québec.

With a safe jurisdiction, a proven zinc camp location, high grade resource expansion, an Xstrata JV with a mill already in place, I can’t think of a surer Zinc bet in the exploration league than Donner at this valuation.  

	11/2007 - Junior Exploration Stocks Review (DON.V)