Rox Resources is a well managed explorer with interests in nickel, gold and zinc within Western Australia. The next major milestone for investors is a revised JORC-compliant nickel resource at Fisher East.
| Corporate Details |  |
| Status: Advanced Explorer | |
| Size: Small Cap | |
| Commodity Exposure: Nickel | |
| Share Price: $0.049 | |
| 12-month Range: $0.025 – 0.063 | |
| Shares: 745m, Options: 29m | |
| Top 20: 20% | |
| Net Cash: $2.6m | |
| Market Value: $37m |
| Key Parameters | Rating (✓out of 5) | Quarterly Statistics |
| Management Quality | ✓✓✓✓✓ | Q2 2014 Exploration Spend: $0.670m |
| Financial Security | ✓✓✓✓ | Q2 2014 Admin Spend: $0.265m |
| Project Quality | ✓✓✓✓✓ | Exploration Spend 72%, Admin Spend 28% |
| Exploration / Resource Potential | ✓✓✓✓✓ | Q3 2014 Forecast Exploration Spend: $0.4m |
| Project Risk | ✓✓✓✓✓ | Q3 2014 Forecast Admin. Spend: $0.3m |
We introduced Rox Resources to our Portfolio during May after following the stock closely for several years via our Watch-list. Our decision was based on a desire to expand and strengthen our nickel exposure by including another high-quality, advanced nickel exploration play within our coverage. Rox ticks all the appropriate boxes by providing exposure to a large-scale nickel sulphide exploration project that’s generating wide intercepts, robust grades, along with a JORC-compliant resource that’s set to grow further.
Importantly, Rox is now beginning to generate growing market recognition with respect to its Fisher East nickel sulphide project in Western Australia. Whilst the focus of nickel investors in Australia recently has been on the burgeoning prospectivity of the Fraser Range province in Western Australia (via Sirius Resources’ spectacular nickel discoveries at Nova and Bollinger), the success of companies like Rox and Poseidon Nickel are generating renewed interest in more traditional Western Australian nickel provinces.
Rox’s share price over the past 12 months has remained somewhat range-bound between $0.03 on the downside and $0.06 on the upside. We believe this is likely to change however and that higher prices are inevitable, based on the consistently strong drilling results being generated from Fisher East, which reinforce the exciting regional exploration picture. As drilling we continued, we look forward to the next major share price catalyst, which will be the release of an enhanced JORC resource during H2 2014.
Recent Activity
Bonya Project, NT – Drilling Set to Commence
Although nickel is the company’s primary focus, there is more to the Rox story. The company this week announced results from a ground EM survey conducted at its Bonya project, situated 350km east of Alice Springs in the Northern Territory. The project lies adjacent to KGL Resources’ (ASX: KGL) Jervois copper deposit, which hosts a current JORC-compliant Mineral Resource of 13.5 Mt @ 1.3% Cu, 25g/t Ag.
Rox signed a Farm-in Agreement with Arafura Resources (ASX: ARU) during 2012 to explore the Bonya project. Rox can earn a 51% stake in the copper, lead, zinc, silver, gold, bismuth and PGE mineral rights at Bonya by spending $0.5M within the first two years. The company can then elect to earn a further 19% (70% in total) by spending a further $1M within a further two-year period. Once Rox has earned either a 51% or 70% stake, it can form a joint venture with Arafura to further explore and develop the area.
Three previously identified VTEM anomalies (03, 04 & 05) have been re-surveyed and the ground EM results have proven to be very similar to the original VTEM, with similar responses and interpreted conductive plates. One of the anomalies (BVTEM_04) has associated copper carbonate (malachite) staining on the outcropping rocks and a copper-in-soil anomaly, suggesting the presence of copper mineralisation below.
The targets are quite clearly related to a fold structure, with the old Bonya mine located in the nose of the fold (possibly along the fold axis), and the EM targets lying along strike along the flanks of the fold. An RC drilling program is scheduled to commence during late August to test these targets and if successful, other targets generated by the VTEM survey will be prioritised for drill-testing.
Fisher East Project, WA – High-Grade Results
Over recent weeks Rox has published a series of encouraging announcements related to RC drilling at its flagship Fisher East nickel sulphide project in Western Australia, specifically relating to high-grade assay results from the Musket prospect, which forms part of the overall Fisher East nickel sulphide project. Some of the best results from the current program comprise:
MFEC066: 3 metres @ 5.9% Ni from 189 metres down-hole, including 1 metre @ 14.8% Ni of massive sulphide from 190 metres down-hole
MFEC067: 17 metres @ 2.1% Ni from 161 metres down-hole, including 1 metre @ 8.9% Ni of massive sulphide from 161 metres down-hole
MFEC071: 4 metres @ 8.4% Ni from 178 metres down-hole, including 2 metres @ 14.7% Ni
MFEC072: 5 metres @ 8.4% Ni from 205 metres down-hole, including 3 metres @ 12.1% Ni and 1 metre @ 20.7% Ni from 206 metres down-hole
A further RC hole, MFEC074, drilled at the top of the main mineralised zone returned 1 metre @ 3.6% Ni from 142 metres depth; whilst hole MFEC073 drilled to the south of the mineralised zone did not return any significant result. Additional results from ongoing RC drilling at Musket, Cannonball and Corktree are expected over the course of the next few weeks.
The RC drilling program is being undertaken to define and delineate additional near-surface nickel sulphide mineralization. The additional RC drilling will add further tonnage to the overall project mineral resource and will assist in resource model planning for Musket. The intersection of significant grades of massive sulphides close to surface at Musket should significantly enhance overall project economics.
Rox also recently advised that it had completed the first-stage diamond drilling program (15 holes for 5,200 metres) at the Musket prospect. Significantly, the drilling has defined a coherent body of ore-grade nickel sulphide mineralisation that has been drilled to approximately 400 metres depth and importantly is still open both down-dip and along strike.
This diamond drilling program has added a substantial number of tonnes to the overall project mineral resource and Rox will quantify this with a maiden resource estimate for Musket.
The mineralisation at Musket is much thicker than the Camelwood deposit (JORC-compliant resource of 1.6Mt at 2.2% Ni), situated 2km to the north. In particular, the massive sulphide zone at Musket consistently shows grades between 13% and 19% Ni, whilst the matrix and disseminated zones are generally between 1.5% and 3.5% Ni
The Mt Fisher project covers a total area of 658 sq km within the North Eastern Goldfields of Western Australia and is endowed with nickel, gold and PGE potential. It lies just 40km to the east of the prolific Yandal greenstone belt and 100km east of the main Norseman-Wiluna greenstone belt.
The project consists of two tenement groups: the first group covering 485 sq km was acquired by Rox from Avoca Resources during March 2011; whilst the second group consists of an Option to Purchase a further area of 170 sq km (exercise price $3.5 million payable by 30 June 2014), including the Camelwood nickel sulphide deposit and the Mt Fisher gold mine.
The discovery of nickel sulphides at Camelwood by Rox during late 2012 has established the Fisher East area as a new nickel sulphide province within Western Australia. Significantly, the adjacent Norseman-Wiluna belt contains the bulk of Western Australia’s nickel sulphide mineral resources.
Rox has defined a nickel sulphide Mineral Resource of 1.6Mt @ 2.2% Ni at a 1.0% Ni cut-off for 34,600t of contained nickel, with approximately 40% within the Indicated and 60% within the Inferred Mineral Resource categories. At a 2.5% Ni cut-off the Mineral Resource comprises 520,000t @ 3.1% Ni for 16,200t of contained nickel, with approximately 47% in the Indicated and 53% within the Inferred Mineral Resource categories.
RC drilling by Rox during 2011 also defined a Measured, Indicated and Inferred gold Mineral Resource of 973,000 tonnes grading 2.75 g/t gold for 86,000 ounces of gold.
Three parallel structures at the Dam-Dirks prospect define a 7km long gold-in-regolith anomaly which is largely untested at depth, and which already hosts the 54,000 ounce Damsel gold deposit. There are numerous high grade drill results over the project area including 1m @ 187 g/t Au and 3m @ 67 g/t Au at the Moray Reef prospect where a high grade resource of 8,000 ounces grading 7.5 g/t Au has been defined. At the Mt Fisher mine a 25,000 ounce resource has been defined beneath the old open-pit.
Reward Project, NT – Drilling Set to Commence
Teck Australia Pty Ltd is planning an exploration program at the Reward project in the Northern Territory (Rox 49%, Teck 51%) where approximately 4,000 metres of diamond drilling is scheduled to commence during late August 2014. Teck has now met the expenditure requirement for a 51% interest and has elected to increase its interest in to 70% by spending an additional $10m ($15m in total) by 31 August 2018. Given strengthening interest in zinc, which has just hit a fresh three-year high, this work could not be better timed.
The drilling will mainly focus on the Teena prospect, where previous diamond drilling during 2013 returned significant intersections comprising 26.4 metres @ 13.3% Zn+Pb (including 16.2 metres @ 17.2% Zn+Pb), and 20.1 metres @ 15.0% Zn+Pb (including 12.5 metres @19.5% Zn+Pb). When combined with historic drilling, significant high-grade zinc-lead mineralisation has been identified for more than 1.5km of strike.
The Myrtle/Reward zinc-lead tenements cover an area of 670 sq km and are situated 700km southeast of Darwin, adjacent to the McArthur River zinc-lead mine. The Myrtle zinc-lead deposit hosts a current JORC-compliant Mineral Resource of 43.6 Mt @ 5.04% Zn+Pb, at a 3.0% Zn+Pb cut-off (Indicated: 5.8 Mt @ 3.56% Zn, 0.90% Pb; Inferred: 37.8 Mt @ 4.17% Zn, 0.95% Pb).
Summary
Fisher East is an exciting discovery, particularly as there had been no prior systematic exploration for nickel prior to Rox’s involvement. Results have reinforced the high-grade nickel potential, which are a direct result of the company’s disciplined and systematic exploration approach. We have no doubt that if Fisher East was situated within the Fraser Range province (which is the current exploration hotspot with which the industry is currently enamoured), then Rox’s share price and market value would be substantially higher. Later this month, activity at Bonya and Reward in the NT will provide further exploration interest. Accordingly, we maintain our Speculative Buy recommendation around $0.049 for those investors without current exposure to the stock.
