Variscan Mines’ Scoping Study for the San José Mine restart in Spain reveals strong economics, low upfront capital, and an 11-year mine life, setting the stage for zinc and lead production from 2028.
- 11-year mine life with zinc and lead production
- Low pre-production capital requirement of approximately €19 million
- Utilisation of existing 1.6 km underground development reduces costs and timelines
- Projected free cash flow of €53 million after tax
- Funding strategy prioritises non-dilutive options and off-take agreements
Background and Project Overview
Variscan Mines Limited (ASX:VAR) has released a comprehensive Scoping Study outlining the restart of its former San José Mine located in Cantabria, northern Spain. The study confirms the economic viability of recommencing underground mining operations focused on zinc and lead, leveraging the mine’s existing infrastructure and mineral resources. The San José Mine forms a key part of the broader Novales-Udias Project, a historically productive zinc district near the world-class Reocin Mine.
The restart plan envisions an 11-year mine life with a modular processing plant designed to produce zinc and lead concentrates. First concentrate production is targeted for 2028, with concentrate trucking planned to the nearby San Juan de Nieva smelter, operated by Glencore, approximately 175 km away.
Economic Highlights and Capital Efficiency
The study reveals attractive financial metrics, including a total revenue forecast of €186 million and a free cash flow after tax of €53 million. The net present value (NPV) at a 5% discount rate stands at €38 million, with an internal rate of return (IRR) of 45% and a payback period of 3.8 years. These figures are underpinned by a low pre-production capital cost of approximately €19 million, which is significantly lower than comparable zinc projects globally.
Key to this capital efficiency is the utilisation of the existing 1.6 km of underground development, which reduces both the time to production, estimated at around 2.5 years, and capital expenditure by roughly 50%. The operation’s low sustaining capital expenditure and capital intensity further enhance its economic appeal.
Technical and Operational Approach
The mining method proposed is primarily longhole open stoping, supplemented by airleg mining in less accessible zones. The mine design strategically leverages the existing portal and underground infrastructure, minimising the need for costly new development. The processing plant will incorporate ore sorting and flotation circuits, optimised through metallurgical testwork to achieve high recovery rates for zinc and lead.
Importantly, the study applies only about 50% of the existing Mineral Resource Estimate (MRE) for the San José Mine, indicating significant potential for future scale-up. The mineralisation is hosted in a low-stress, competent rock mass environment, which supports stable underground operations with minimal ground support requirements.
Permitting, Funding, and Market Strategy
Variscan has made substantial progress in securing the necessary permits, with the mine site already leased and approved for mining and processing activities. Early works are planned for 2026 to de-risk the project ahead of a Final Investment Decision (FID).
Funding discussions will prioritise non-dilutive sources such as debt, royalties, streaming, grants, and commodity off-take agreements. The company has appointed Square Resources as exclusive marketing manager to facilitate concentrate sales and support financing efforts. The project benefits from a supportive local community and regional government, with no known environmental or social license issues.
Outlook and Strategic Implications
The San José Mine restart represents a pragmatic, low-capital entry into zinc production for Variscan Mines, providing a platform for future growth. The company highlights potential to expand production by incorporating adjacent deposits such as the Udias Mine and exploring the wider Novales-Udias land package. While the study is at a Scoping level with inherent uncertainties, the robust economics and existing infrastructure position Variscan well to advance towards feasibility and production.
Bottom Line?
Variscan’s San José Mine restart offers a compelling low-capital zinc-lead opportunity, but securing funding and advancing permits remain critical next steps.
Questions in the middle?
- How will Variscan secure the approximately €19 million funding required, and on what terms?
- What are the timelines and risks associated with obtaining final permits and completing the Early Works?
- How might zinc and lead market price fluctuations impact the project’s economic viability and expansion plans?