Red Rock Resources and Power Metal in Victoria – on the hunt for Fosterville-scale gold (RRR, POW)

Red Rock Resources’ (LON:RRR) joint venture in Victoria could be on track to discover Fosterville-scale gold, as its exploration of Australia’s hottest goldfields continues.

The discovery of Fosterville, the world’s highest grade and lowest cost gold mine, triggered huge interest in Victoria, which lies in southeast Australia. And now, Red Rock and Power Metal Resources (LSE:POW) have teamed up to focus on exploring the area further with their gold joint venture (“JV”) Red Rock Australasia. Red Rock has a 51.1% stake in the JV, and Power Metal the remainder.

Red Rock Australasia has applied for 30 licences in Victoria in total, covering around 2,300 square kilometres (“sq km”). In an interview with ValueTheMarkets, chief executive Andrew Bell noted that the JV’s entry into the area was timed perfectly, being followed by “a rush for all available land” by explorers and high-profile producers alike.

Asked if the Red Rock Australasia JV has the same potential as Fosterville, Bell noted the region’s considerable geological potential.

He also highlighted that the JV has targets “just waiting to be explored”, with two in particular that clearly “could be big”.

The chief executive also pointed to Fosterville’s extraordinary recent results, and its hunger to “find another Fosterville”:

“There must be other Fostervilles out there, or other rich deposits. And with the footprint we have in really good ground, we have as good a chance of finding them,” Bell said.

Bell said the JV’s wisdom lies in using old gold mines to find new ones, pointing out that it has “a lot of old workings” alongside targets based purely on geology and geophysics.

 

Past and future

Red Rock and Power Metals have major plans for Red Rock Australasia. Of the total licences applied for, the JV has been granted five – covering 279 sq km – while several of its other eleven licences are in the last processing stage.

Eventually, the JV partners plan to list core Red Rock Australasia assets through a Canadian public listing. This process is now well underway in parallel with other project work.

There is a strong mining history in Victoria, with a discovery in Ballarat in 1851 triggering a gold rush with around 6,000 diggers arriving every week. During the 1850s, an incredible one-third of global production came from the region.

Indeed, despite being Australia’s smallest state, Victoria has produced in excess of 2,400 tons of gold – an incredible 32% of all gold mined in the country – to date.

Production ceased in the 1920s for mines at the two centres, Bendigo and Ballarat ahead of a sixty-year hiatus.

But that all changed in 2005 when commercial mining started at Fosterville, located east of Bendigo, with a million ounces mined by 2016.

 

What next for gold?

Adding to Red Rock’s interest in Victoria is the gold price itself, which has been “very strong”.

Bell attributed this to extreme quantitative easing (“QE”) measures, which were introduced in the wake of the 2008 financial crash as a way to expand the monetary base while maintaining a low interest rate.

The chief executive commented on how difficult it has been for the US to stop issuing new credit through QE and begin reducing the central bank balance sheet in spite of its strength. Each time, Bell explained, markets were spooked and the policy had to be reversed. With even the US unable to achieve this goal, Bell does not expect others like Japan or the EU to fare any better.

Bell added that the pandemic has taken this “to a new level”, making it “difficult to imagine that there will not be inflation in the next two or three years”.

While the impact of inflation on the gold price in early stages might be ambiguous, Bell stressed that gold will ultimately “be seen as a safe haven and an inflation hedge” for “any prolonged period”.

Adding to this has been a lack of new gold discoveries, with not enough investment to meet foreseeable demands. Bell pointed out that, as the world gets richer, demand will rise. As such, if gold is “to hold its own as a percentage of assets”, its production must increase.

Bell acknowledged that some countries have been increasing production – with China in particular hitting around 380 metric tonnes in 2020. But nothing so far, he said, “has been able to replace the old position of South Africa, which, in the 1970s, was still producing 900 tons a year.”

Much of this was obscured by gold sale programmes conducted by central banks. However, as Bell pointed out, “non-traditional countries” have been “building up gold as part of their reserves”.

The chief executive asserted that, marginally speaking, there is an inclination among private investors and central banks to increase gold holdings. At a time when the gold supply is now increasing, this will put upward pressure on the precious yellow metal.

For that reason, Bell asserted that gold was not high risk and represents “a great insurance policy”. Not only that, but he believed it was “more probable than not” that gold will “go considerably higher”.

Red Rock and Power Metal have identified Victoria as just the right place for their exploration efforts, with its rich history and thriving present. Not only that, but they also have excellent timing – picking gold just as the element is set to rise. This could well mean great things for the early investor.

 

Author: Anna Farley

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, does not own a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, has been paid for the production of this piece by the company or companies mentioned above.

MiningMaven.com and MiningMaven Ltd are not responsible for the article's content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

Red Rock Resources poised for cobalt success amid EV revolution (RRR)

Red Rock Resources (LON: RRR) looks to be perfectly positioned at the moment when it comes to the electric vehicle revolution. This is particularly the case for its interests in the DRC, origin of more than half of the world’s cobalt.

In an interview with ValueTheMarkets, chair and chief executive Andrew Bell highlighted the excellent combination of Red Rock’s copper/cobalt joint ventures amid the push for electrification.

Red Rock has a controlling position in its projects, which cover potentially four copper/cobalt licences and one copper licence in the heart of the Katanga provinces, located within the Central African Copperbelt.

Around 60% of the globe’s cobalt resources come from the DRC. Not only that, but, as Bell explained, “50% of that cobalt comes from the areas around Kolwezi, including where we have one project”.

In terms of cobalt reserves by country, the DRC had 3.6 million metric tons as of 2020. Meanwhile, there is an estimated $24 trillion worth of cobalt, copper, gold, diamonds, and other mineral deposits untapped in the country, making it one of the world’s most in-demand mining destinations.

Specifically, the global electrification trend that is currently playing out is reliant heavily on both cobalt and copper.  

Indeed, right now, around 50% of cobalt produced worldwide ends up in rechargeable batteries, and when it comes to the total battery metals market, cobalt has the second-biggest volume share.

Meanwhile, copper is another major electric vehicle (“EV”) component used in electric motors, batteries, and wiring. The red metal is also used for EV charging stations, part of the infrastructure needed to make electrification possible.

This is all great news for Red Rock and its investors, because the JVs target both cobalt and copper. As Bell explained:

“The argument for copper is really good already. The argument for copper including electric cars is even better. Copper and cobalt are often found together, as in the parts of the DRC where we're exploring.”

Bell also pointed out the “government pressure” that is helping to push electrification forward. He highlighted that “a lot of money” is going into driving the change.

“Humans are so innovative that people will find cheaper and cheaper car batteries and this market will expand,” he added.

Evidence of this direction of travel is playing out everywhere.

For example, Norway is poised to ban the sale of fossil fuel-powered cars within just four years. The UK is to follow suit with a ban in 2030 and Japan in the mid-2030s. The EU is also proposing a crackdown in order to hit its legally-binding 2050 zero emissions target while China, too, is considering its own ban.

Likewise, over in the US, California intends a halt the sale of passenger cars and trucks that use gasoline by 2035. 

This will sit alongside broader US measures under the Biden administration’s American Jobs Plan. These include sales rebates and tax incentives to encourage the purchase of EVs. Further, the plan will also involve the creation of a network of 500,000 EV chargers by 2030.

Moving back to the JVs, and Bell said Red Rock is right now conducting exploration on one licence, which will involve drilling. “We have taken a greenfield project from zero to high expectations of an imminent resource with careful, economical, systematic, intelligent exploration,” he added

Bell also said the company was also “negotiating with other parties about assets that contain resources”. 

Alongside its position in the DRC, Red Rock also owns 25 million shares in its London-peer Power Metal Resources (LON: POW) along with a further 20 million warrants.

Power Metals is also exploring for key metals needed to fuel the EV revolution – including nickel, copper, lithium, and cobalt. As a result, Red Rock’s position adds further diversified exposure to the electrification trend and another string to its already-well-crafted bow.

With all of this combined Red Rock is perfectly positioned right now to capitalise on the EV revolution. It has electrification exposure just as the sector is booming, both regulation and incentives in place to encourage huge growth in the EV space.

On top of that, Red Rock also has gold exposure at a time when prices of the yellow metal are on the rise. While there was some premature optimism at the start of 2021, which led a few investors away from safe havens, reality has set in again. A resurgence of Covid-19 outbreaks, like one right now in India, remain a threat and make gold all the more enticing.

It is also worth considering the firm’s c.1% ownership of Jupiter Mines (ASX:JMS), a manganese producer in South Africa and a significant part of Red Rock’s investment portfolio since 2007. In the past two years, Jupiter has made a number of distributions totalling more than $200 million.

Red Rock is in the perfect position, with plenty of catalysts waiting in the wings that could trigger a significant re-rate from its current £10.2 million market cap. The Congo JVs alone stands to benefit not only from any strong drill results and production in the DRC, but also increasing demand from the EV space keeping prices high.

Author: Anna Farley

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, does not own a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, has been paid for the production of this piece by the company or companies mentioned above.

MiningMaven.com and MiningMaven Ltd are not responsible for the article's content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

Red Rock boss Bell says firm in better position than ever to increase liquidity (RRR)

Red Rock Resources (LON: RRR) chair Andrew Bell said Tuesday the company was in a better position than ever to improve liquidity, paving the way for evolution to a mid-tier exploration and production firm.

 

In its half-year ended December 31, Red Rock’s total equity climbed a highly encouraging 20% to £16.7 million, after rising 54% over the previous six months. 

Not only that, but there was a £2.3 million increase in current and non-current assets over the half-year while liabilities dropped by £530,000. Red Rock has, since December, paid out £1.4 million to Kansai Mining.

“If we want to advance to become a mid-tier mineral exploration and production company, we need from here to give increasing importance to building and maintaining a high level of liquidity. We are in a better position to do so than we have ever been,” said Bell.

The value of Red Rock’s marketable securities and cash now approaches £4 million. This has been higher of late and is expected to rise by its year end in June thanks to dividends from Jupiter Mines, as well as Juno Minerals’ in specie share distribution and floatation.

The company’s value is also set to rise thanks to “the dynamism of Power Metal Resources”. Red Rock owns 25.0 million shares in Power Metal (LON: POW), as well as another 25.0 million warrants. The two are partners in the Red Rock Australasia joint venture (“JV”), which holds a major position in Australia’s highly lucrative Victoria goldfields.

Victoria is where Kirkland Lake Gold’s (NYSE:KL) astonishing Fosterville mine is located, the highest grade and lowest cost gold mine in the world.

Red Rock and Power Metal are planning an IPO for Red Rock Australasia. Bell expects this will crystallise the value of Red Rock’s holding in the JV to result in “a valuation uplift significant in relation to our market value”. The JV is split almost evenly, with Red Rock holding the slightly higher 50.1% stake.

Earlier this month, the JV obtained another two licences, bringing the total to five, with more expected soon. All licences so far are located in Red Rock Australasia’s high priority areas, where the JV is already developing its early drill targets. The 11 other JV licences are in the final processing stage.

Juno and Red Rock Australasia are not even the only upcoming IPOs in Red Rock’s portfolio, with Elephant Oil also poised for a market listing. Bell pointed out that if results from Juno’s passive seismic two years ago in onshore Benin are fulfilled “to any degree” then Juno could become one of Red Rock’s significant assets.

The company’s liquidity is improving already in its second half, with the company aiming to hit a £20 million cash and liquid investments target in the medium term.

Author: Anna Farley

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, owns a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, has not been paid for the production of this piece by the company or companies mentioned above.

MiningMaven.com and MiningMaven Ltd are not responsible for the article's content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

Loss for the six months amounted to £430,000, swinging from a £337,000 profit the prior year. This results from higher administration costs, including employment costs, as a partial result of Red Rock Australasia’s elevated activity level amid increasing land holdings plus preparations for exploration and listing.

Lower dividends from Jupiter Mining also played into the interim loss.

Big things ahead

Red Rock has a variety of exciting plans lined up. For example, the firm is preparing to drill short reverse circulation holes at its Luanshimba copper-cobalt prospect, located in the DRC, once geophysics is done and ground conditions allow.

Elsewhere, in Kenya, the company is finalising its drill programme to follow up a recently announced JORC resource while in Australia it has started active exploration with the first targets set for drilling later this year.

“We live in volatile times” said Bell, noting the need to prepare “for sieges as well as marches”. While there appear to be promising opportunities in all directions for Red Rock, there are also grounds for caution.

Bell explained that while this could be the time for “move up by an order of magnitude to a new level” thanks to exciting project and a strong market, it is important for Red Rock to keep its footing and not put “the hard won gains of the last year” at risk.

 

  1. Red Rock and Power Metals push forward at Victoria gold JV with two more licence approvals (RRR, POW)
  2. Market conditions favour Red Rock as it pushes forward DRC-based cobalt/copper project
  3. Red Rock Resources pushes forward at Kenyan gold project (RRR)
  4. Red Rock enters option over historic gold and silver assets in Slovakia (RRR)
  5. Red Rock Resources secures transformational licence renewal for 1.2Moz African gold project (RRR)
  6. Andrew Bell on why Red Rock Resources is positioned perfectly to progress from its £1.2m market cap (RRR)
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  9. Red Rock Resources says work in Africa will not be inhibited over the short-term (RRR)
  10. Red Rock Resources to push forward at prospective DRC copper-cobalt project (DRC)
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  12. Andrew Bell on the major upside potential at Red Rock Resources currently being undervalued by the market (RRR)
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