Red River Resources To Enhance Zinc Metrics After High-Grade Hits

Jan. 11, 2016 4:36 PM ET
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Red River Resources (ASX:RVR) has heightened anticipation about the potential of an upcoming resource definition at its Thalanga zinc project in Queensland with the discovery of high-grade mineralisation in recent drilling.

The latest assays from Thalanga have confirmed the presence of high grade massive sulphide mineralisation, which equates to up to 33.3% zinc equivalent.

Standout intersections included 2.8 metres at 2.4% copper, 2.8% lead, 6.9% zinc, 95g/t silver and 0.4g/t gold (19.9% zinc equivalent) as well as 2.6 metres at 1.6% copper, 3.5% lead, 10.6% zinc, 91 g/t silver and 0.4 g/t gold (21.4% zinc equivalent).

These results will form part of a maiden resource estimate at the project's Far West Up Dip Extension area, where a new hold is being drilled today.

The shallow nature of the disseminated, semi-massive and massive sulphide mineralisation is encouraging as is its location up-dip of the current Far West resource boundary.

Mineralisation was encountered only about 120 metres up-dip and 120 metres along strike from the current Far West resource boundary.

The new drilling follows closely on work last month which established zones of massive and semi-massive sulphide mineralisation at Thalanga with abundant visible sphalerite, chalcopyrite and galena.

Project potential

Since 1975, total recorded production from Thalanga has exceeded 4 million tonnes at 1.6% copper, 3% lead, 9.3% zinc, 0.4 g/t gold and 77 g/t silver.

The mine was shuttered in 2012 but rejuvenated by Red River last year with plans to restart production at an annual rate of 21,400 tonnes of zinc, 3,600 tonnes of copper, 5,000 tonnes of lead, 2,000 ounces of gold and 370,000 ounces of silver in concentrate.

This plan contemplates a five-year mine life with a short timeline to production and low pre-production costs of only A$17.7 million.

Projected NPV is $84 million, an IRR of 61% and with strong LOM average free cash flow of $25 million per annum - this would fund development of Far West and Waterloo underground mines.

Initial Capex is low at $17.7 million and C1 cash cost is US$0.18/per lb payable zinc (after by-product credits). The low C1 cash cost is a function of the high-grade polymetallic nature of the deposits and comparative Opex.

Although a maiden resource remains pending in its extensional target area, the Far West operational zone currently holds resources of 1.1 million tonnes grading 1.7% copper, 1.9% lead, 5.8% zinc, 0.2g/t gold and 49 g/t silver.

Thalanga's global inventory stands at 2.3 million tonnes at 1.2% copper, 2.3% lead, 6.9% zinc, 0.2 g/t gold and 53 g/t silver.

Analysis

The latest high-grade intersections at Thalanga confirm Red River's expectations at the Far West extension target, setting up a likely increase in resource in this significant potential production area.

The definition of new resources at the Far West Up Dip Extension is likely to have a strongly positive impact on the overall economics of Thalanga, which already benefits from low projected C1 costs thanks to its high-grade nature.

With more drilling results pending and a new resource estimate planned, Red River is set to deliver strong news flow in the near term, which could translate into substantial price catalysts for the A$18 million-cap explorer.

Proactive Investors initiated coverage on the company last month with a Speculative BUY rating, noting that Thalanga is now significantly de-risked for near term production of zinc.

Proactive Investors is a global leader reporting financial news, media, research and hosts events for listed emerging growth companies and investors across four continents.

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