THE INSIDE STORY: A shopping expedition at the start of the year reinforced the quality of Rox Resources’ (ASX: RXL) portfolio of nickel projects.
Rox Resources’ financial position is one many of its junior exploration company peers would relish.
Thanks to some judicious project divestment strategies in 2017, Rox currently boasts a war chest of around $14 million in cash and receivables.
Such a strong financial position means the company can carry out extensive exploration programs while scanning the market for suitable new asset opportunities to build shareholder value.
However, kicking the tyres on a few possible project acquisitions revealed plenty about the projects it already owned outright – that they were as good, if not better than what was on offer.
“We spent a considerable amount of time looking at projects and we looked seriously at two or three projects that didn’t come up to scratch,” Rox Resources managing director Ian Mulholland told The Resources Roadhouse.
“The question we had to ask was would we spend money on that project versus spending money on what we already had, and the answer was, no.
“That’s not to say that something fantastic may not come up in the future – there’s just nothing worthwhile around at the current point in time.
“That’s why we have decided to increase our focus on our nickel projects.”
Rox Resources has two nickel sulphide projects in the Northern Goldfields region of Western Australia.
Rox discovered the Fisher East nickel province in December 2012 and has since made further open-ended nickel sulphide discoveries.
Mineral resources have been defined over the Camelwood, Cannonball and Musket deposits totalling 2 million tonnes at 2.5 percent nickel containing 50,000 tonnes of contained nickel with Indicated Resources accounting for 95 per cent of the total resource.
The company has completed a Scoping Study on this mineral resource, which concluded the project as being low technical risk and financially viable at ‘normal’ nickel prices.
Since completion of the study the ‘normal’ nickel price has enjoyed a ‘supernormal’ run from around US$4 per pound a year ago to currently hover around US$7 per pound at time of writing.
The second project is the advanced Collurabbie nickel-gold exploration project, also located Northern Goldfields and situated just 70 kilometres due east of the Fisher East project.
The Collurabbie project hosts the Olympia nickel sulphide deposit, with a JORC 2012 Inferred Mineral Resource of 573,000 tonnes at 1.6 per cent nickel, 1.2 per cent copper, 0.08 per cent cobalt, 1.5 grams per tonne palladium, 0.85g/t platinum.
The two projects offer attractive synergies as should both projects come into production, ore from Collurabbie and Fisher East could potentially be treated at the same plant.
“We are now focusing on our two nickel projects with the goal of increasing the Resource, while the nickel price is continuing to go up, to the point where we can make a decision on commencing a Pre-Feasibility Study over the next 12 to 24 months,” Mulholland said.
Rox has launched into a program of work at both projects designed to both discover new deposits and increase existing resources.
At Fisher East 2,100m of diamond drilling has been drilled to extend the Musket and Camelwood deposits by testing previously defined strong downhole EM anomalies, and at Corktree to test a very strong one-kilometre long EM conductor, detected from surface.
Additional aircore drilling at Collurabbie (5,000m) and Fisher East (1,200m) is continuing to define geochemical trends, from which the company will target deeper drilling to discover new nickel sulphide orebodies.
“We did a diamond drilling program at Fisher East during April/May this year, with the outcome of extending two of the project ore bodies by 150m in depth, but more importantly, we demonstrated that the systems continue,” Mulholland explained.
“While we are not necessarily proposing to drill those out as Resources, because they are quite deep, it does mean that once we can get into production we have an open system, at depth, which we will be able to access from underground.
“Our focus is going to be on doubling the Resource within the top 500 metres.”
Results received from this drilling were highly encouraging, including:
MFED080 at Musket
4.3 metres at 2 per cent nickel Ni from 701.7m, including 0.3m of massive sulphides grading 8.1 per cent nickel from 701.7m;
MFED076W1 at Camelwood
2.4m at 2.4 per cent nickel from 718.3m, including 0.2m of massive sulphides grading 5.2 per cent nickel from 718.9m; and
MFED081 at Camelwood
0.3m at 7.5 per cent nickel of massive sulphides from 288.8m.
The result at Musket held some significance in that it broadened the prospective area for drilling and indicated that mineralisation extends to at least 700 metres depth.
Added to this, the two drill holes at Camelwood indicated that target’s nickel sulphide system to be more extensive than currently contained in the existing resource.
“The drilling at Fisher East moved us another step closer to our continuing overall aim of making a new game changing massive nickel sulphide discovery through exploration, while we increase resources at known deposits and continue to assess development options,” Mulholland enthused.
“We now know that the nickel sulphide systems at Musket and Camelwood are extensive and offer significant potential to develop a large resource base.”
Rox firmly stamped its nickel focus by announcing its intention to spin out its Mt Fisher gold project into a newly established, 100 per cent-owned subsidiary, Helios Gold Limited via an Initial Public Offering.
The Mt Fisher gold project is located 270km north of Leonora, adjacent to the Fisher East nickel project, and contains a mineral resource of 973,000 tonnes grading 2.75g/t gold for 86,000 ounces of gold.
Ironically, Rox originally acquired the Mt Fisher tenements in 2011 for the gold potential the project area offered, however the discovery of nickel at Fisher East since that time has made it difficult for the company to give the gold assets the proper focus they merited.
“The IPO is basically a new set of funds dedicated to that project,” Mulholland said.
“It means we can use our substantial bank balance to focus on our nickel projects while we have new funds and a new team taking the gold project in a new direction.
“Trying to do both would ultimately mean that we would not give either the full attention they both deserve.”
Mulholland believes expanding the company’s nickel presence, with the commodity trending the way it currently is, is an ideal approach for it to take, especially given the quality of the projects it already has in its portfolio.
“Further expansion of our current portfolio really depends on whether we are able to locate projects that we consider good enough to spend our money on.
“Our strategy is to increase our nickel Resources to take advantage of the nickel price upswing, to get to the point where we can be making some development decisions.
“If other opportunities emerge along the way, we’ll look at them, but they are going to have to be a lot better than the projects we currently have.”
Rox Resources Limited (ASX: RXL)
…The Short Story
Level 1, 34 Colin Street
West Perth WA 6005
Ph: +61 8 9226 0044
Stephen Dennis, Ian Mulholland, Brett Dickson