Every great success is made up of smaller successes, and it’s those smaller victories that ultimately lead to a win.
Red Rock Resources (LON: RRR) is right now enjoying a slew of these kinds of small and cumulative successes across its portfolio, and the latest reports from Kenya and Australia have gone a long a long way to proving this once again.
In Kenya, exploration in the historically underexploited Eastern Licence of the Mikei Gold Project is proving fruitful as new targets are identified along strike from the existing Resources.
Meanwhile, at the Victoria Goldfields in Australia, the company has unearthed workings and areas that can be drilled later this year.
The drilling for cobalt and copper in the Congo has been completed, and the company, which was sufficiently confident to build a camp before drilling at Luanshimba, has gone quiet as it awaits final results from the lab. Now, Red Rock is using the period before it announces exploration results to complete some long lead time license transfer paperwork before it announces exploration results,
Here, Red Rock’s chairman Andrew Bell walks Mining Maven through the significance of his firm’s latest update and Red Rock’s ambitions.
If the firm can indeed make a discovery at one of the “really exciting” targets Bell describes, then a considerable re-rate from its current sub-£10 million market cap could be just around the corner.
Victoria joint venture unearths “enticing targets”
From Australia comes an exploration update from joint venture (“JV”) subsidiary Red Rock Australasia (“RRAL”) – an entity owned 50.1% by Red Rock and 49.9% by Power Metals Resources (LON: POW).
Victoria was the site of a gold rush back in the mid-1800s after a discovery in Ballarat in 1851 resulted in a riot of activity in the state. At one point, an astonishing one third of the world’s gold production came from Victoria.
While production dwindled after that, interest returned in 2005 when commercial mining started at the Fosterville mine and the State Government started to produce a series of geophysical studies. Fosterville was subsequently bought by Kirkland Lake Gold (NYSE:KL) and is now one of the highest grade and lowest cost gold mines on Earth.
Since Kirkland’s success, explorers have returned to the area, seeking their share of the riches on offer in Victoria.
The latest news reveals the JV’s success so far in the state – with critical steps including the discovery of workings, well-developed adits, and shafts at the O’Laughlins prospect, located in already granted license EL 007271.
Given the lack of prior reports or indications of historical grade so far in the literature, it looks like this will be the first modern day exploration in these once-forgotten workings since the 1860s.
Bell outlines the extent of the discovery here:
“We think that we have a channel with two distinct lines of mineralization with old workings along them, production from which is unrecorded. But you can see a lot of money was put in the 1860s, and we think there’s possibly another similar channel in the middle and there may be shearing or cross-cutting faults.”
As Bell explains, the structures could even turn out to be an offset to the east of the Ballarat trend going through the Ballarat mine.
With safety requirements now complete, RRAL’s geologists are re-entering the old workings at O’Laughlins. There, they’ll investigate how much gold mineralisation was historically exploited, and the nature of that mineralisation.
The re-entry programme also includes the additional underground excavations and shafts located in the immediate area, with the hope of better understanding the lode systems. The aim is also to improve targeting ahead of scheduled diamond drilling.
Bell says the company has identified “some really exciting, enticing targets”. Specifically, there are two or three areas where the plan is to “book the drills to start diamond drilling at the end of November or beginning of December”.
As Bell comments:
“We think that the prospects now are quite good, that we’ll be able to piece together good-grade resources around old mines workings, which would together potentially support a processing plant.
“With each announcement, and with each piece of news we come out with, we are laying out a little more of the picture of what we potentially have, and what the next steps can be in exploration and drilling.”
It’s these individual pieces of news that go into making the investment case for Red Rock. When put together, they reveal a company undertaking active exploration in some of the most prospective regions on the planet.
Multi-million-ounce potential at Mikei
Strengthening its investment case further, Red Rock also posted an update on the Mikei Gold Project in Kenya.
The company revealed that it has completed 115 line km of induced polarisation (“IP”) surveying in the Masurura area of the Eastern licence. What’s more, because it has its own geophysics team and equipment, Bell highlighted that the firm was able to do so with great efficiency.
Explorers use IP surveys as one tool to identify gold deposits, along with additional metals like copper and silver. The chargeability map generated from this IP survey coincides well with the presence of artisanal miners, as well as the soil geochemical contours already delineated. The map also coincides with shallow historic drilled assay intercepts.
Red Rock’s survey recorded a total of four important anomalous areas in Francis 2, Francis 3, Lake Bush and Lake Bush Banded Iron Formation. Today, work continues and will focus on prioritising targets and locations for a 2022 drill programme.
Mikei is a powerful project, covering “nearly 250 square kilometres along a Greenstone belt with 24 good targets”, as Bell says. This belt is the next along from the parallel North Mara mine – operated by Barrick Gold (NYSE: GOLD).
North Mara lies 30km away, over the border from Mikei in Tanzania. Both projects are on the northern part of the Tanzanian Craton, which crosses into Kenya.
As Bell explains, North Mara is what Barrick calls a “tier one asset”, putting it among their top mines with production at “nearly 200,000 ounces a year”.
Bell goes on to add that:
“In the last seven or eight years, North Mara has gone from looking like a declining mine to one which, having produced 3 million ounces since 2002, has another 5 million-plus ounces of resource and reserves – including underground at higher grades than we were seeing a few years ago.
“Ultimately, I think when we look back on it, we will say that was a 10-million-ounce mine.”
The latest Kenya release also mentions that drilling continues in the Western licence at Mikei, though has been interrupted by an equipment breakdown.
Red Rock is bringing in an additional compressor so as to improve penetration and recoveries where graphitic shales around the water table level have impacted drill performance.
Bell is enthusiastic about the drilling in the Western licence, noting:
“We’ve already begun to be able to model something underground and say where the higher-grade zones are, and how we think the structure works. Each new hole we drill can be positioned to give us more information in relation to what we already have.”
So, there’s the promising existing drilling in the Western licence, and then there’s the potential in the Eastern licence as well – as shown in these new IP survey results.
If the Eastern and Western licences reveal what the company thinks they might, Bell says, the potential is huge.
“If we find something there, then we could start talking about a target of not just one or two million ounces, but potentially three or four million,” says Bell, “but the ground will not give up all its secrets quickly, or cheaply”.
With so much on offer, then, it’s imperative to look not just at individual releases, but to put them in context and focus on the bigger picture.
“Making progress all the time” – Red Rock’s efforts continue to bear fruit
Shares in Red Rock are up 8% since September began. At the same time, the shares remain below their heights back in February – making this an affordable point to buy.
There tends to be this tendency among exploration investors to wait to for a single moment of victory, of triumph, the long-awaited result.
But this short-sighted outlook prevents investors from taking a company in as a whole, and understanding its merit. It puts people on the back foot, waiting for something big to happen instead of taking action.
In Bell’s words:
“It’s been quite difficult to get across the fact that we are in three jurisdictions – Congo, Kenya and Australia – actually drilling this year.
“Even when we’re not announcing ‘today we had dramatically good drill results’ we are still making progress all the time. We’re doing things that add to the story. Not everything we do is going to produce an instant headline, but we’re building the picture. You have to focus out on the big picture. We are currently working in three countries with three projects which we believe can deliver three mines.”
The case for Red Rock is compelling enough when taken in these small updates, but is stronger still when taking the span of the company’s history into account.
As newsflow builds – with drilling in so many jurisdictions in this year alone – the chance to get in on the ground floor is unlikely to last.
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.
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