Variscan Mines has delivered a robust San José Mine Re-Start Study outlining an 11-year mine life and low capital costs, setting the stage for zinc production by 2028. The company is progressing funding and exploration to underpin a transition from explorer to producer.
- San José Mine Re-Start Study shows 11-year mine life
- Low pre-production capital of approximately A$33 million
- First concentrate production targeted for 2028
- Ongoing underground drilling at Udías supports resource growth
- Board and funding transitions underway to support development
San José Mine Re-Start Study Highlights Economic Viability
Variscan Mines Limited (ASX:VAR) has marked a pivotal moment with its San José Mine Re-Start Study, revealing a financially attractive and technically feasible pathway to recommence zinc and lead mining in Cantabria, northern Spain. The study, conducted to Scoping Study level, outlines a low-capital ‘starter operation’ leveraging approximately 1.6km of existing underground development, which significantly reduces upfront costs and accelerates the timeline toward production.
The study projects an 11-year initial mine life with strong financial metrics: a post-tax net present value (NPV₅) of around €38 million (A$67 million), increasing to €55 million (A$96 million) at current prices, and free cash flow estimated at €53 million (A$93 million), rising to €75 million (A$131 million). The payback period is forecast at approximately 3.8 years (3.2 years at current prices), with positive cash flow expected within 2.1 years (1.6 years at current prices). Variscan targets first concentrate production in 2028, contingent on securing funding, permits, and completing early works.
Exploration Drilling at Udías Mine Fuels Resource Upside
Parallel to the development planning, Variscan has resumed underground diamond drilling at the adjacent Udías Mine, aiming to extend mineralisation beyond the current Mineral Resource Estimate (MRE) and along strike toward San José. Early drilling results reinforce the interpretation of a large, continuous mineralised system, with mineralisation at Udías showing strong geological similarity to the San José Mine. This supports Variscan’s strategy of combining exploration with development, positioning the company to potentially scale up production and extend mine life.
The ongoing drilling program integrates historical data, face sampling, and 3D mine modelling to refine targeting and delineate priority zones. The extensive under-explored underground workings at Udías highlight significant upside potential, with mineralisation open at depth and along strike.
Corporate Changes and Funding Strategy Align with Development Goals
In a leadership reshuffle reflecting the company’s shift toward production, Executive Director Tom Kent, previously a Non-Executive Director and major shareholder, has taken on a more active executive role. The former CEO, Stewart Dickson, has stepped down but will remain as Acting CEO for up to six months during the transition, while the board searches for a new CEO to lead the next growth phase. This change follows the recent Variscan Mines Shakes Up Leadership announcement.
On the funding front, Variscan has signed a binding term sheet for a A$1 million unsecured convertible loan note facility to support exploration and development at Novales-Udías. The company is prioritising non-dilutive financing options such as debt, royalties, streaming, and offtake agreements to underpin the San José Mine restart. While the facility remains undrawn, it provides a financial cushion alongside the company’s cash reserves of A$225,000 and available financing facilities totaling A$1 million.
Callabonna Project Earn-In and Irish Zinc Negotiations
Variscan retains a 49% interest in the Callabonna Project in South Australia, where Chalice Mining is earning into Red Metal’s majority stake through exploration commitments. This arrangement is expected to accelerate exploration activities targeting IOCG-style mineralisation. The company’s interests remain unchanged under this earn-in agreement, as detailed in the Variscan Secures 49% Stake coverage.
Meanwhile, negotiations over an earn-in and joint venture agreement for the Midlands and Waterford zinc projects in Ireland remain ongoing after the previous agreement was not executed due to unmet conditions. Variscan is pursuing revised timing for this strategic opportunity, though the outcome and timing remain uncertain.
Financial Position and Exploration Spend
During the March quarter, Variscan spent $311,000 on exploration activities, primarily underground drilling, geological modelling, and technical consulting related to its Spanish zinc projects. The company reported no mining development or production activities during the period, consistent with its transition phase.
Cash flow from operations was negative $102,000 for the quarter, with investing activities (exploration) consuming $311,000. Financing activities contributed a modest $6,000, reflecting proceeds from option exercises. The company’s cash and equivalents stood at $225,000 at quarter-end, with available financing facilities providing additional runway estimated to cover nearly three quarters of current expenditure levels.
Bottom Line?
Variscan Mines is poised on the cusp of zinc production, but success hinges on securing funding and permits to translate a promising study into operational reality.
Questions in the middle?
- Will Variscan secure the necessary non-dilutive funding to advance the San José Mine restart?
- Can ongoing drilling at Udías materially expand the Mineral Resource to support production scale-up?
- How will the leadership transition impact the company’s execution of its development and financing strategies?