We originally published our value proposition on Red Rock Resources (AIM:RRR) in December, and we really didn't expect to re-visit this so soon. However the company has just announced an update on progress at the Migori gold prospect in Kenya, and it contains some rather interesting news.Unsurprisingly the drilling program has now recommenced in earnest after the holidays, full details of which are provided in the announcement; and it all appears to be on track. However, more significant in our eyes is the news that once results are in from the 2009 drilling campaign, (which will also include additional samples taken from the previous operators interrupted program), the company will carry out a revision of the NI 43-101 resource estimate. This was the part that caught our attention, as this is where significant additional value can be built in very short order. The company's 23rd December AGM presentation indicates that Migori is set to be in the forefront of activities for 2010, and in our value proposition we note their stated intention to fast track the Migori project into production at the earliest opportunity. The prospect being considered amenable to a low cost open pit mining operation with a low stripping ratio. As detailed in the Edison Research note, most of Migori's, 1.2m ounce resource is currently in the indicated category, with a small amount (9.7k ounces) in the Macalder tailings actually measured.
By carrying out a revised NI 43-101 resource estimate, the company will not only be targeting an increase in the size of the resource, but also looking to move more of the resource up from the indicated to the measured category.
Just to remind readers that measured ounces carry the highest level of confidence and ounces in this category will command a significantly higher "in the ground" value than those on a lower category. What value? Well, as the Edison Gold Sector report from last October suggested, $381 attributable per measured ounce and $30 for indicated ounces. In other words 10,000 measured ounces would book in at $3.8m, 100,000 measured ounces to $38m and so on.
It's a bit soon to start crunching the numbers, but there seems to be a lot of scope here not only to increase the scale of the resource but also the confidence in the ounces of gold in the ground. Add that to…
About the Author
Mining Maven
0 comments
