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North River Resources: resource rich in more than one way

As an investor in AIM listed companies, nerves of steel, patience and a high propensity for risk are normally a must-have pre-requisite particularly when the market is as volatile as it has been in recent times.

Therefore if directors are willing to invest their own money in a company it’s normally a pretty good indication that the company is in safe hands with a half-decent outlook.  Couple this with a cash-rich balance sheet and you have the initial makings of a possible investment opportunity.

These are the current circumstances of North River Resources (AIM: NRRP) the multi-commodity South Africa based development company.

NRRP has an extensive portfolio of assets comprising: gold and base metal assets in Namibia, uranium, gold and copper assets in Mozambique.

The company is relatively new to the market having listed on AIM just over 3 years ago. Despite joining in arguably the most tumultuous period in the markets history the company have progressed well, though virtually all of this progression has taken place in the last 12 months.

This period has seen NRRP transform from a purely exploratory company with no defined mineral resource to an identification and development company focused on various Sub-Saharan assets with significant mineral resources. In addition a shrewd management team have obtained the financial backing of Kalahari Minerals (AIM: KAH) who now hold a 44.9% interest in the group making them largest shareholder.

This transpired through NRRP acquiring gold and base metal assets off KAH through a share sale agreement. In simple terms this means NRRP assume ownership of KAH’s non uranium assets in Namibia and will work in tandem with KAH in exploration, development and production of them. In exchange KAH have received a 45% stake in the company.

This deal is beneficial to both parties though from North River’s perspective it means they have a significant interest in base metal reserves and a vast property with bags of potential for further mineral discoveries.

Furthermore their newly established partnership with KAH provides them with substantial in-country presence, plenty of local connections and support from a financial and economical viewpoint such as excellent local knowledge, a skilled development team and effective equipment/machinery.

Looking closer at the Namibian properties these comprise 4 main license areas, these are: the Dordabis Copper Licenses, the Witvlei Copper Licenses, the Namib Lead-Zinc Project and the Ubib Copper-Gold Licenses.

To date NRRP have delineated a JORC-code compliant resource of 1.74 million tonnes (Mt) grading 0.9% copper at the Koperberg prospect which is part of the Dordabis license.

At the Witvlei license, in-house evaluations have been carried out indicating a large potential for copper and KAH have indicated they expect to extract over 250,000 tonnes of copper metal from these 2 combined licenses.

The Namib Lead-Zinc project as yet does not have a JORC-compliant evaluation however previous in-house evaluations have returned very high grades of zinc, lead and silver. The Ubib Copper-Gold license is still being examined though previous evaluations have shown high potential for copper and gold.

To add to the current hive of activity the company are waiting to hear back from a bid they placed for a gold deposit in Namibia. Should the bid be successful, NRRP, using the financial strength of KAH, will work on getting the gold deposit to production as soon as possible to provide cash flow.

This is a good demonstration of the group’s new-found ability to act on attractive opportunities when they arise with the financial might of KAH supporting them.

Management have previously stated their intentions to grow the company in Sub-Saharan Africa through identifying and acquiring other assets and Namibia could be a good place to start from.

Namibia is most commonly associated with its prolific diamond industry though has since been recognised as a hot-spot for uranium, base metals and gold prospectors and is now the 5th largest uranium producing country in the world. With an economy that is heavily reliant on export of minerals and a country which is resource rich it seems NRRP have the perfect settings for expansion.

Outside Namibia the company has acquired other interests in Mozambique. This comprises 5 license areas targeting gold and uranium. The company are still at very initial stages with the Mozambique assets and are drawing up work plans for each license area.

North River Resources has all the makings of a potentially very profitable multi-commodity development and production company.  The company will almost certainly grow its resource base over the next few years, however, what makes North River unique from many other microcap exploration companies is its partnership with Kalahari Minerals, which should be an immense help in nearly everything they do within Southern Africa and is a luxury not experienced by the vast majority of junior mining companies.

Having completed a placing for £7 million in October 2009 the company is not only resource rich, but has ample cash to aggressively develop its existing assets.

It is early days yet for the company but the next few years will be very intriguing.

Disclosure: The author holds no positions in the company