After converting to nodes in order to render using Cycles I've no idea where to enable the z-transparency. I guess the image textures alpha channel needs to be pluged somewhere but I've no idea which node would be suitable.
The question is how could I correctly setup the nodes to have the same effect as when using z-transparency in BI?

The materials original settings for BI are:

Which renders like:

I had no luck with DarenWs suggestion:

