Red River Resources (ASX:RVR) has enhanced the outlook for a strong maiden resource at the Far West extension area of its Thalanga zinc project in Queensland after intersecting zones of massive sulphide mineralisation in two new drill holes.
The mineralisation was characterised by abundant visible sphalerite and chalcopyrite and has been submitted to a lab for analysis.
Assays for the two holes are pending as inventory definition drilling at the target continues.
The addition of new resource at Far West's up-dip extension is expected to have a material positive impact on the overall economics of the broader Far West operational area as well as Thalanga overall.
Recent drilling results at the target have 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).
Other assays have indicated the presence of high-grade massive sulphide mineralisation equating to up to 33.3% zinc equivalent.
Far West, which represents one of three major operational zones of Thalanga, 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.
This tonnage figures prominently in Thalanga's global inventory of 2.3 million tonnes at 1.2% copper, 2.3% lead, 6.9% zinc, 0.2 g/t gold and 53 g/t silver.
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.
That Red River continues to intersect massive sulphides at the Far West up-dip extension area is highly encouraging and improves the outlook for the upcoming maiden resource.
Potential price catalysts as this program unfolds include the pending assay results from the latest holes, ongoing drilling, the resulting resource definition and the re-evaluation of Thalanga economics based on the expansion.
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.
C1 cash costs have been estimated at US$0.18/per pound of payable zinc after by-product credits.
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