Roca Mines - molybdenum

    Roca: sneaking into production with a 75,000 tpd small miner permit
    Roca Mines Ltd (ROK-V: $0.34) is the sister company to Stikine Gold Corp (SKY-V: $0.35), a top priority bottom-fish buy recommendation in the $0.30-$0.49 that drilled a deep hole in 2004 that nipped the edge of Sullivan-style Sedex system next door to the world-class Sullivan deposit. Since peaking at $0.70 in late September when it hit its target Stikine stock has been consolidating in the $0.30-$0.40 while management completed a new downhole UTEM survey. Preliminary interpretation suggests that the massive sulphide zinc-silver mineralization is the western fringe of a large sulphide body that extends northward, and not the down-dropped northern fringe of the near-surface Sullivan deposit located south of the Kimberley fault. Stikine is drilling a wedge hole expected to intersect the sedex system 100 metres closer to its centre, but the critical test will take place later this year when the junior drills another deep hole aimed at the guts of the sulphide body. I continue to regard Stikine as a top priority bottom-fish buy, though this time around I do not think the market will care until it is given a high grade 10-20 metre interval which confirms that Sullivan Deeps is indeed a sister to Sullivan.






    Roca, which spent most of the $2 million it raised in June 2004 through a 10,000,000 units at $0.20 Canaccord short form offering on the Foremore volcanogenic massive sulphide play in northwest British Columbia, has toiled in the vociferous but small shadow cast by Stikine's Sullivan Deeps market play. Although Roca management is encouraged by the results of the 36 hole 5,900 metre drill program at Foremore, the market can barely stifle its yawn. What has started to catch the market's attention since mid November is the Max molybdenum deposit Roca optioned 100% in January 2004. Roca can earn 100% by paying $200,000 and issuing 600,000 shares in stages by Januaty 16, 2007, subject to a 2.5% NSR of which 1.5% can be bought out for $2 million.


    The Max deposit was originally called the Trout Lake deposit because of its proximity to a major trout lake called, you guessed it, Trout Lake. The property first received exploration in 1969 when Scurry Rainbow optioned it from a prospector. In 1975 Newmont optioned the property and formed a joint venture with Esso Minerals that drilled 32 holes from surface totaling 15,747 metres, drove 2,000 metres of underground development, and drilled 87 holes from underground totaling 22,151 metres. After spending $14.9 million and establishing a geologic resource of 49.7 million tonnes of 0.116% Mo at a 0.06% Mo cutoff, which included a 4.8 million tonne core of 0.29% Mo at a 0.15% Mo cutoff, Newmont stopped work in 1982 when molybdenum prices collapsed. Newmont maintained title to the property by making the final option payments and during the early nineties bought out Esso's 45% stake. Newmont let the key claims covering the deposit lapse in 1997 through some sort of screwup, whereupon they were promptly staked by a private company. Newmont completed reclamation work in 2003, which included plugging the portal and burying the old core. After optioning the central claims Roca drilled two holes in May 2004 to confirm reported grades, and in August 2004 Roca acquired the remaining Newmont claims and the exploration data set for a 2.5% NSR, of which 1.5% can be bought for $2 million, and 200,000 shares issuable upon a production decision. Roca has also agreed to be responsible for any further reclamation liability. The Newmont claims that overlap with the 6 km area of interest surrounding the core claims are also subject to that vendor's 2.5% NSR.






    As the diagram reveals the Max deposit is a deep porphyry system with pipelike extension whose ore will have to be extracted through underground mining. In 1982 Newmont came up with a 1,500-3,000 tpd underground mining plan that would have targeted a resource of 8,189,000 tonnes of 0.217% Mo at a 0.12% Mo cutoff. Newmont also conducted environmental studies on the valley below the portal whose wetlands drain into Trout Lake and concluded that a tailings dump upslope near the portal would not have a negative environmental impact. Roca will have to demonstrate that any mining plan will not impact the sensitive valley habitat. Terry Maccauley has reviewed the old Newmont data and produced a 43-101 compliant resource calculation which estimates a measured and indicated resource of 42,940,000 tonnes of 0.12% Mo at a 0.06% Mo cutoff, which includes a high grade core of 1,380,000 tonnes of 0.564% Mo at a 0.3% Mo cutoff. Roca has retained Hatch Associates Ltd to conduct a scoping study which will explore two development avenues. The first scenario would focus on the high grade core and take advantage of British Columbia's 75,000 tonnes per year small miner permitting system. Although this approach would produce only about 900,000 lbs of molybdenum per year, it has the advantage that it could be in production within a year and take advantage of high molybdenum prices. This scenario would involve finding a third party roaster, and because the Max concentrate has a minor copper content, it would have to be submitted to acid leaching before roasting. Hatch will also look at a larger scale 2,000-3,000 tpd mining scenario. Roca's immediate plans are to reopen the portal and conduct underground infill drilling to tighten the high grade resource.


    Following a recent private placement financing of 1,750,000 units at $0.30 through Canaccord and Bolder Roca will have about $1 million working capital. In late November Frank Giustra's Endeavor Financial took down most of a 2 million units at $0.25 private placement. UK based RAB Capital, which has also been a big investor in Stikine Gold, holds just under 20% of Roca's issued stock. On a fully diluted basis Roca has about 48.4 million shares out, which gives its 100% owned Max project an implied value of only $16 million, about a third that enjoyed by Adanac's Ruby Creek project. Roca's Scott Broughton is an engineer by profession, and although the company still talks highly of its Foremore VMS project, I suspect that in 2005 the Max molybdenum play will become the top priority, particularly if MolyMania takes hold in the market.

    MAX Molybdenum Project


    Weitere Infos zum MAX Projekt!



    Key Points
    MAX is a large moly deposit hosting advantageous tonnages of high-grade resources
    Existing production-sized underground workings allow for ready access
    Small-scale mining of the high-grade zones could be started soon
    Engineering and preliminary economic assessment is underway for two scenarios
    Global demand for moly products has increased dramatically in 18 months
    Long term moly outlook appears robust based on many factors
    Roca's Focus
    Maximize value by rapidly advancing two concurrent production scenarios;
    CASE A: Fast-Tracked production of the high grade zones to get moly concentrate to market by late 2005, subject to a BC Small Mines Permit application
    CASE B: Market larger scale project concepts to senior operating companies looking for size potential and potential long term moly production


    MAX Molybdenum Project 43-101 Technical Report


    Overview


    Roca has acquired a 100% interest in the MAX Molybdenum Project, located approximately 60 kilometres southeast of Revelstoke, British Columbia.


    The MAX Molybdenum project is distinguished among molybdenum projects by its significant drill-measured, high-grade resource within the large deposit. Roca's definition of "high-grade" is mineralization that could produce head grades in excess of 1% MoS2. Most of the world's other deposits are characterized by larger tonnages of generally much lower grade mineralization.


    MAX has been the subject of a significant exploration and engineering program conducted by Newmont and Esso in the late 1970's and early 1980's. As a result of their $15 million effort the project boasts a large production-size access adit and a comprehensive geological, engineering and environmental database. Despite the extent and quality of the previous work, the project was never put in production.


    The immediately accessible high-grade resources at the MAX present a tremendous opportunity for the MAX to deliver molybdenum concentrates in the near-term and at high market prices. Roca intends to maximize this opportunity and is working hard to achieve permitting and engineering towards a production decision in 2005.


    Fast-track Mining Opportunity


    The high-grade zones and existing access at MAX provide an unrivalled opportunity for fast-tracked production from the site while the BC Small Mines permitting process (pending application) could allow for noteworthy cash flow from the delivery of moly concentrates to market at currently high prices.


    Having acquired the historic Newmont/Esso dataset for MAX, Roca is taking a different approach to the deposit from previous operators who focused exclusively on large tonnage mining scenarios that generally take years to permit and build. Roca recently retained internationally respected, Hatch Associates Ltd., to conduct independent engineering studies and preliminary economic assessments for MAX Project. Hatch will initially prepare cost estimates and financial models for a CASE A: Fast-track mining and milling operation of approximately 500 tonnes per day. Based on recent resource estimate by T.N. Macauley, P.Eng. the measured resource at a 0.5% MoS2 cutoff is approximately 1,010,000 tonnes grading an outstanding 1.01% MoS2. At the proposed small scale rate this may result in a 6 to 10 year mine life.


    In order to further accelerate the production decision, Roca has concurrently prepared an application for a British Columbia "Small Mines Permit", a fast-tracked application process that would provide approval for production of up to 75,000 tonnes of ore per calendar year. Historically, small mines permits are receipted within six months of properly prepared applications to the province.


    Like gold, molybdenum concentrators are 'scalable' meaning that a small plant will have the same operating characteristics and scaled down costs as a large plant. This is not applicable to many other metal concentrator plants where a minimum size is driven by the economics of the required process equipment. Roca is also evaluating the sale of such concentrates directly to buyers from the mine site versus shipping the product to a secondary facility for roasting, a process that converts molybdenum disulphide concentrate into molybdenum oxide.


    Small scale equipment and plants are also more portable and readily available than larger plants, reducing delivery and construction time to be in production. A secondary benefit to starting smaller scale is that it allows for optimization of mining methods and processing in advance of an expansion from the mine while early cash-flow from high-grade allows for ongoing development of a larger mine if metal prices remain robust. And lastly, smaller mines require less capital for development and therefore have less exposure to changes in price.


    Full-Scale Mining Operation


    While the prospects of production from a small high-grade operation at MAX in 2005 are compelling, Roca is also advancing concepts for the development of a larger scale mine that would operate at a rate of approximately 2000-3000 tonnes per day. Described previously as CASE B, Hatch Associates Ltd. is also preparing a preliminary economic assessment for a larger mine based on a measured and indicated resource of 11,350,000 tonnes grading 0.36% MoS2 at a 0.20% MoS2 cutoff. The results of this study will be used to market the project to senior operators throughout 2005.


    Because of soaring molybdenum prices, a key consideration of any engineering study will be to preserve the mineability of the larger system surrounding the higher grade zones. The global measured and indicated resource, 42,940,000 tonnes grading 0.20% MoS2 at a 0.10% MoS2 cutoff, remains open at depth and future exploration will focus on expanding this resource both at depth and in the areas surrounding the main deposit.


    43-101 Molybdenite Resources


    On September 21, 2004, Roca announced that a comprehensive geological report on its 100% controlled MAX Molybdenum Project was completed by independent qualified person and geologist T.N. Macauley, P.Eng. The following table provides a summary by cutoff grade and classification:


    MAX Molybdenum 43-101 Compliant Resource Estimate
    Cutoff Grade (% MoS2) Measured Indicated Measured + Indicated
    Tonnes Grade
    (% MoS2) Tonnes Grade
    (% MoS2) Tonnes Grade
    (% MoS2)
    0.10 27,870,000 0.21 15,070,000 0.18 42,940,000 0.20
    0.20 9,340,000 0.35 2,010,000 0.41 11,350,000 0.36
    0.50 1,010,000 1.01 370,000 0.77 1,380,000 0.94
    1.00 260,000 1.95 20,000 1.87 280,000 1.95


    In addition to these estimates, Inferred Resources total 8,900,000 tonnes averaging 0.16% MoS2 at the 0.10 cutoff, including 460,000 tonnes averaging 0.33% at the 0.20 cutoff. All estimates were made manually by drawing grade contours at the 0.10, 0.20, 0.25, 0.50, 1.00% MoS2 levels on the 30 m (98 feet) spaced sections, and then dividing the material bounded by the contours into polygons, generally based on one or several drill intercepts. Bulk sampling of the underground adit, crosscut and drift rounds confirmed the grades of diamond drill holes and grade contours in those areas.


    MAX Option Terms


    MAX was previously explored by a joint venture of Newmont Mines Limited ('Newmont') and Esso Minerals Canada Ltd. ('Esso') from 1975 to 1982. Work expenditure during that period totaled $14.9 million. Work on the project was suspended by the Newmont-Esso joint venture in 1982 due to a price decline and poor market projection for molybdenum products. The core claims to the deposit were later staked by a prospecting team from Nelson, British Columbia with whom Roca finalized an option agreement in January of 2004.


    Under the terms of its option agreement, Roca may earn a 100% interest by paying cash payments totaling $200,000 and by issuing 400,000 common shares to the vendor at certain dates up to January 16, 2007. In addition, the Roca must issue 200,000 common shares to the vendor upon the commencement of commercial production. To date, $100,000 in cash payments have been made and 200,000 common shares have been issued to the vendor. The vendor will retain a 2.5% net smelter return royalty subject to various conditions. Roca may purchase at any time prior to commencement of commercial production up to 60% of the NSR by paying $1,000,000 for each 30% ($2,000,000 for the full 60% of the 2.5% NSR).


    On August 6, 2004, Roca acquired a 100% interest in certain crown grants, mining leases and mineral claims contiguous to the original MAX mineral claims. Under the terms of this acquisition agreement, Roca agreed to pay $100,000 (paid) for the contiguous property and original data detailing all previous exploration. This $100,000 has been included in acquisition costs for the year ended August 31, 2004. Roca has granted a 2.5% NSR, reducible to 1% upon payment of $2,000,000, and has agreed to issue 200,000 shares if it commences commercial production from any part of the newly acquired contiguous property.

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