An Austarialian mining company, Namibian Copper (ASX: NCO), has acquired two prime, advanced stage exploration projects that include Mogoraib River / Hambok project and Kerkebet Exploration Licences .
Mogoraib River is located immediately along strike and to the south of the Bisha gold and copper mine. Kerkebet River contains a new high grade gold discovery at Aradaib and is located along strike to the north of Bisha. Bisha is operated by Nevsun (TSX: NSU), is capitalized at C$779 million and is the largest mining project in Eritrea.
Mogoraib River contains the advanced stage Hambok copper-zinc project hosting a near surface JORC compliant Mineral Resource Estimate that includes 550 million pounds of copper and 1.2 billion pounds of zinc.
Capital structure post transaction:
- Share Price: $0.155
- Issued Shares: 150.0m
- Market Cap: $23.25m
- Cash: A$6.2m
ANALYSIS
Namibian Copper has been able to acquire the Mogoraib River / Hambok project at a very favourable price based on cost per resource tonne. Australian and Chinese companies have been able to close major mining deals in Eritrea and other African nations due to some reticence by some major North American companies.
This has been Namibian Copper’s gain enabling it to acquire the Hambok project. The story becomes even more compelling when considering valuations of other companies operating in Eritrea like Nevsun Market Cap: $779m, Sunridge Gold (CVE:SGC) Market Cap: $72m and South Boulder Mines (ASX: STB) Market Cap: $130m.
A 20,000 metre infill diamond drilling program is underway at Hambok that is evaluating the potential to extract shallow open pittable ore in the short term, and deeper sulphide ore for long term development.
Namibian Copper has entered into a conditional agreement with NGEx Resources (TSX-V: NGQ) to purchase a 100% interest in the Mogoraib River and Kerkebet Exploration Licence areas in Eritrea.
The deal will seek shareholder approval at a General Meeting to be held on the 12th of March, 2012, and confirm NGEx as the largest shareholder in Namibian Copper.
NGEx is a member of the Lundin Group that is a $5 billion dollar conglomerate consisting of 14 companies that has an impressive history of developing junior mining assets over the last three decades.
The Company is also developing the Ongombo Copper and Silver Project in Namibia, which is located along strike from the Weatherly PLC (LSE: WTI) operated Otjihase copper mine. Otjihase is projected to produce 3,366 tonnes of copper in 2011, and 7,000 tonnes in 2012 from total JORC Reserves and Resources of 1.6 billion pounds of copper.
SHAREHOLDING AND DEVELOPMENT FUNDING:
The Company has called a General Meeting to approve the purchase of the Mogoraib River and Kerkbet Exploration Licences for consideration that includes the issuance of 50 million shares, and payment of US$7.5 million to NGEx upon commencement of commercial mining operations at Hambok.
The Company currently holds cash of $1.2 million in its treasury and will issue new shares to raise an additional $5 million to cover an aggressive drilling and exploration program. More funds may be raised from 9.0 million options that have an exercise price of $0.20 and expire in September of 2012, providing up to $1.8 million.
NGEx are divesting Mogoraib River and Kerkbet to focus on their flagship Los Helados copper and gold project in Chile. NGEx will retain a dominant interest in the properties by becoming the largest shareholder in Namibian Copper with an interest of approximately 40% on conclusion of the transaction.
MOGORAIB RIVER:
The Mogoraib River Licence area covers 235 square kilometres and contains the Hambok Project which is an advanced stage copper and zinc volcanogenic massive sulphide “VMS” Project hosting a near surface JORC compliant Inferred Resource of 28 million tonnes grading 0.9% Cu, 1.9% Zn, and 6.3 g/t Ag, at a 0.75% Zn cut off. The resource contains 550 million pounds of copper, 1.2 billion pounds of zinc and 5.6 million ounces of silver.
Hambok is contiguous with and situated 15 kilometres from the Nevsun (TSX: NSU) operated Bisha gold mine. Bisha is a large precious and base metal-rich VMS deposit that contains 0.43 million ounces of gold, 11.5 million ounces of silver, 821 million pounds of copper, and 1.4 billion pounds of zinc. The deposit is configured in three distinct layered zones that include a 35 metre thick surface oxide zone, overlying a 30 metre thick copper enriched supergene zone that progresses at depth into a primary sulphide zone containing both zinc and copper, which is open at depth.
Bisha produced 379,000 ounces of gold in its first year of operations and projects 190,000 to 210,000 in 2012 from open pit operations. Nevsun has reported issues with the over estimation of available oxide ore resources to feed the process plant, and this provides an opening for potential sale of near surface oxides from Hambok to keep the oxide circuit fully supplied and running beyond 2012.
NGEx currently holds 100% ownership in both Mogoraib and Kerebet through a subsidiary company known as Sanu Resources which also owns a complete Eritrean database including extensive geological, geochemical, and ground geophysical data for both base metals and gold.
Sanu has an exploration office that is located in the Eritrean capital of Asmara that is staffed with and experienced management and local exploration team, and maintains an exploration base and core sheds within the project area. NGEx has agreed to transfer all of these assets to Namibian Copper on completion of the agreement.
Sanu Resources is currently completing a 20,000 metre diamond drilling infill program at Hambok that is aimed at upgrading both the resource status and grade of mineralization. This will be followed by metallurgical studies and completion of a Preliminary Feasibility Study prior to the end of 2013.
This drilling program will also evaluate potential for near surface oxide ore of the type that is found at Bisha. This ore might be suitable for near term treatment at the Bisha oxide circuit in the event of any production shortfall, or to extend the economic life of the process plant as Bisha switches over to processing deeper sulphide ore.
A recent airborne VTEM/magnetic survey has defined at least 18 drill-ready targets that are located within Mogoraib River Licence for an ongoing exploration and drilling effort aimed at defining further ore resources.
Previous drilling at Hambok outlined mineralisation within fine grained pyrite lenses with variable amounts of copper sulphides and sphalerite. The sulphide body strikes north by northeast over a distance of approximately 1 kilometre, and dips 60 to 70 degrees to the east and has a mineralised vertical extent of over 400 metres.
The mineralisation has simple mineralogy with low iron sphalerite, chalcopyrite, pyrite and no deleterious elements, and is relatively coarse grained, which typically means easy liberation of economic minerals. Grades and mineralogy are very similar to the primary sulfide zone at the Bisha Deposit where feasibility studies predict about 85% recoveries from primary ore. The mineralisation is hosted by competent metamorphic rocks, and dilution is unlikely to be a problem.
Hambok is located within the same Arabian-Nubian shield that hosts the Jabal Sayid deposit containing 1.2 billion pounds of copper that is being developed by Barrick (NYSE: ABX) as an open pittable resource at a cost of $400 million. Equinox Resources acquired Jabal Sayid in 2010 for A$1.2 billion prior to the Barrick acquisition.
The development of Bisha and Jabal Sayid highlight the exploration upside within the shield and potential for Namibian Copper to develop into a significant producer of base and precious metals.
KERKEBET RIVER:
The Kerkbet River Exploration Licence is located 50 kilometres to the north of Bisha and contains discoveries at Koken which consists of a string of gossans that are exposed at surface over a strike length of 4.5 kilometres; and at Aradaib where a “Bisha style” high grade gold discovery has been outlined over a strike length of approximately 300 metres. Highlights include ARD-03 with 13.3 metres at 3.3% Cu, 5.6% Zn, 1.8 g/t Au, 33 g/t Ag, and including 1 metre at 5.23% Cu, 0.26% Zn, 7.07 g/t Au and 133 g/t Ag.
Sanu completed high resolution electromagnetic VTEM, magnetic and radiometric surveys over the licence area that defined several moderate to strong EM anomalies in areas of deep overburden and helped to better define the potentially mineralised trend at both Koken and Aradaib.
The Company completed follow up ground reconnaissance that included mapping and trenching on the best VTEM targets, and has identified drill targets for testing in upcoming drill programs.
—————————
