Resource Star: An Interview with Management

Last month, Resource Star (ASX:RSL) released two very significant pieces of news to the market. Firstly, the proposed acquisition of a strategic stake (c18%) in TSX listed CUE RESOURCES , then less than a week later, the appointment of an new highly experienced MD & CEO. Given the transformational nature of these two developments, we thought that now would be a good time to re-visit the Resource Star story and the Company's Management Team agreed to participate in this investor focussed Q&A session with MiningMaven: 

BACKGROUND

MM: Could you provide our readers with a brief introduction to Resource Star, your countries of operation and, in overview, your principal business activities?

RSL: Resource Star was re-listed on the ASX in March 2010 with a portfolio of uranium and uranium-related specialty metals (principally rare earths and niobium) assets in Malawi and Australia.  Many of Resource Star’s initial projects came from its now 24.5% share-holder AIM-listed Red Rock Resources who supported Resource Star’s float to create a company that would have a focused portfolio of uranium-based exploration projects.  Since then, through targeted business development activities and encouraging initial exploration success, the portfolio has advanced further along the project development pipeline. 

Resource Star’s mission is to create sustainable wealth for shareholders by identifying and exploring uranium and uranium-related specialty metals projects to efficiently delineate economic resources for development.  

MALAWI KEY PROJECTS

MM: Looking first at Malawi, could you outline the interesting features of your Livingstonia project, and the progress being made to determine an increased resource?

RSL: Firstly, some background on Livingstonia.  Resource Star entered into a Joint Venture with Globe Metals and Mining Ltd shortly after re-listing for the right to earn up to an 80% stake in the Livingstonia Uranium project, on which Globe had already completed over 11,000 metres of drilling.

Resource Star recognised the potential to define a Mineral Resource based on that drilling, and an initial JORC-compliant Inferred Resource was completed by independent consultants CSA Global Pty Ltd (“CSA”), identifying 7.7Mt @ 270ppm U₃O₈, (4.6mlbs), using a 150ppm cut-off.

Following the initial estimate and interpretations based on trends of thickened, higher grade mineralisation, Resource Star undertook a 1,500m drilling programme at the end of 2010. The programme returned significant intersections both inside and outside the existing Resource boundary.

These included:

                33.95m @ 338ppm eU₃O₈, including 12.10m @ 575ppm eU₃O₈

                11.80m @ 517ppm eU₃O₈, including 2.15m @ 1,546ppm eU₃O₈

                21.65m @ 306ppm eU₃O₈, including 8.70m @ 552ppm eU₃O₈

                22.85m @ 225ppm eU₃O₈, including 2.70m @ 937ppm eU₃O₈

In conjunction with a Resource update currently being undertaken by CSA we will conduct an integrated review of all work completed to date to refine our understanding of the geological controls that have defined the mineralisation to date.  Following this, a new drilling program will be planned for completion during 2011 to further increase the defined Resource.

One interesting feature of this project over and above the exploration potential of Resource Star’s remaining licence area, is the fact that our main prospect, Chombe, continues along strike into Paladin Energy’s adjoining licence. 

This is exciting for two reasons.  First, it enhances the prospect of the deposit being significantly larger which would increase the likelihood of early development.  Secondly,  Paladin own the only operating mine in Malawi, Kayelekera, approximately 100km to the north west of Livingstonia, which  is an ore-body of the same style as Livingstonia.  Not only do they have financial capacity to develop projects, but their experience at Kayelekera gives them the technical and logistical ability to move quickly. It is conceivable that ore or concentrate from any development at Livingstonia could be trucked to Kayelekera for treatment.

Paladin are only just commencing exploration on their side of the licence boundary after the ramp-up of production at Kayelekera, so while we know the radiometric anomaly continues into their ground, this is the first time it will be drill-tested.

MM: Can you explain the principle elements of your Joint Venture with Globe Metals & Mining at Machinga and how you anticipate this project will develop, particularly in light of the significant rare earth discovery?

RSL: Well we think the first point to emphasise about Machinga is that it is still at an early stage.  While there have been very encouraging niobium and rare earth trenching and drilling results at one end of the 7km long Machinga anomaly, there are still similar, completely un-tested targets in the remainder of the exploration tenement.

The second point worth noting is the relatively high ratio of heavy rare earths in the results to date. These elements are of particular interest to the producers of next generation electric and hybrid vehicles and command a strong price premium.  While there is a forecast shortage of all rare earths in the future, this is more pronounced with heavy rare earths, so the make-up of the mineralisation at Machinga is particularly interesting.

Resource Star has a free-carried interest in the Project up to the delivery of a completed Feasibility Study.

The JV was particularly useful for us, as it allowed work to start on the ground last year even before we had relisted. And Globe’s experience with their similar Kanyika Niobium Project, coupled with their significant logistical presence in Malawi has allowed rapid progress on this project to date.

MM: Also within Malawi, can you explain the significance of your recent announcement regarding soil sampling results from Ilomba Hill and how the results have impacted your forward work programme for this project?

RSL: Ilomba Hill is another mineralised alkali intrusive complex similar to Machinga and Globe’s Kanyika project which is at feasibility stage. Historical rock chip samples show that the complex is highly anomalous in both uranium and niobium. We completed a detailed airborne geophysical survey over the system last year, and it defined a 1.5km long radiometric anomaly cutting across the intrusive complex.

A soil sampling program designed to cover this newly defined anomaly and other interesting features in the area has been completed successfully.  Soil sampling is an important technique to complement the geophysics since not all of the potentially interesting metals, such as niobium and rare earths, have a radiometric response. Elsewhere, these metals are known to have overlapping, but not identical distributions, to the radiogenic minerals.

The results of the soil sampling program were very pleasing in that they defined new rare earth anomalies adjacent, but separate to, the radiometric targets identified by RSL’s airborne geophysics and the known niobium-uranium-zircon anomalism.  In addition, the strongest rare earths target, with readings of four to five times background, was defined over a 1.6 x 0.4km area and is supported by a separate nearby 0.9km long rare earths anomaly.

We intend to follow up with mapping, trenching and potentially first-ever drilling during 2011.

We have applied for additional licence areas to cover all mapped components of the alkali intrusive complex that had not been recognised by our JV partners when they originally pegged the tenement.

AUSTRALIAN KEY PROJECTS

MM: Turning to Australia, please outline the key features of your Edith River project, and how you anticipate this will be progressed following your recent drilling campaign?

RSL: The Edith River Uranium Project covers a large area of the margin of the highly prospective Pine Creek Inlier, which hosts the majority of defined uranium mineralisation in the Northern Territory, and is based on historical occurrences of uranium identified in shears within the Cullen Granite. A number of mineralisation styles are possible, and we intend to progressively explore the whole area using what we have learnt in areas of known mineralisation and applying it to new areas.

During 2010 we completed an extensive airborne radiometric survey, which defined a number of new anomalies. This was followed up by a short drilling program which intersected anomalous uranium (e.g. 3m @ 141ppm U₃O₈, and 1m @ 224ppm U₃O₈).

Work will continue both in the areas explored last year to understand the controls on mineralisation and over new anomalies defined in last year’s airborne geophysical program. In addition, an extension to the airborne geophysical survey will be flown to cover all our tenements in the area. This is expected to generate new targets for ground exploration.

MM: Just North West of Edith River is your Hayes Creek project, again the subject of recent drilling.  What interests you with Hayes Creek and how is this project likely to move forward?

RSL: The Hayes Creek project has a 2.5km long uranium channel radiometric anomaly defined in detailed airborne geophysics flown last year. The anomaly is interpreted to be at the contact between granite and sediments on a fault splay that is part of the Hayes Creek Fault Zone, which is considered to be important in the localisation of mineralisation at Thundelarra’s discoveries nearby.

Our ground follow-up at the end of 2010 did not locate the source of the airborne radiometric anomaly, so more mapping and sampling work will be undertaken, likely followed up by further reconnaissance drilling.

MM: Your Tasmanian project, Specimen Reef, (35% owned), is operated in Joint Venture with Walkabout Resources which itself was the subject of an acquisition by Nimrodel Resources.  How will the corporate activity surrounding the project impact progress in the foreseeable future and what do you anticipate will be the next steps for Specimen Reef during 2011?

RSL: The acquisition is a positive for us since Nimrodel Resources is in a position to undertake the planned exploration at Specimen Reef. Resource Star’s JV with Walkabout will transfer as it stands to Nimrodel, and we will be free-carried for the first $3M worth of exploration expenditure. We understand some adjoining tenements may be brought into the JV under the same terms, thus increasing the prospective area. We expect exploration to start there during 2011. 

MM: Can you explain the rationale for your Joint Venture with Thundelarra and the Spinifex project and potentially what you may achieve from your involvement here?

RSL: The Spinifex project, owned by Thundelarra, who also happen to be our neighbours in the Northern Territory, has had some very exciting high-grade historical results that have never been drill-tested. Recent work by Thundelarra has clearly defined 2 prospects.  The unconformity target being tested is of a style that is often high-grade and it complements RSL’s existing portfolio well.  Thundelarra have a very good track record of targeting new uranium fields and we are happy to be working with them.  Subject to finalising access arrangements, we are planning to drill test the prospects this year.

OTHER PROJECTS

MM: Could you outline the rationale behind the acquisition of interests in Cue Resources from London AIM listed companies Red Rock Resources and Regency Mines?

RSL: At re-listing in 2010 RSL had no defined uranium resource; by the end of its first year it had an inferred resource at Livingstonia which we expect to increase when the December drilling results are incorporated.  If shareholders approve the acquisition, the stake in Cue Reources will give Resource Star an interest in Cue’s Indicated and Inferred Resource of 10.1Mt at 430ppm _eU₃O₈, (9.6M lbs.) at the Yuty Project in Paraguay, which is also in the process of being upgraded.  In addition, the exploration potential within Cue’s licences is very attractive and historical work has shown some exciting results that indicate the potential for multiple resources within the licence.

This strategic stake allows Resource Star to benefit from the exploration upside that we believe exists, without having to commit time and resources to running a project in a third country.  RSL’s proposed shareholding of 17.6% would increase to 18.8% if all the warrants on issue are exercised, and RSL’s chairman, Andrew Bell, will have a seat on the Cue Board.

MM: It is fair to say you have a diverse portfolio?  Would you like to comment on any other areas of the portfolio, including specific projects therein?

RSL: It is diverse, but is focused on uranium, and uranium-related projects and we’re very careful not to extend ourselves, since we are still a relatively small company. For any project to be added to the portfolio it has to meet a number of criteria if it is not a stand-alone, game-changing company maker. It needs to be of the same suite of metals,  i.e. uranium, niobium/tantalum, rare earths; it needs to be in the same development-friendly jurisdictions we’re already operating in to leverage our logistical and administrative reach; it needs to be strategically advantageous in the context of our other assets, and ideally at a stage to be quickly advanced  towards development.

MANAGEMENT & STRATEGY

MM: What are the key strategic goals for Resource Star and, recognising the recent addition of Mr Simon Heggen as Managing Director and Chief Executive Officer, how well positioned and experienced is the management team to deliver on these goals for shareholders?

RSL: Resource Star’s key goals on relisting were the early definition of a Resource and a new discovery; and with the results at Livingstonia and Machinga we were able to deliver. The subsequent drilling results at Livingstonia further enhanced our reputation for delivering.

Our key goal is create sustainable wealth for shareholders and we will do that by:

• continuing to grow the Resource at Livingstonia as quickly and cost effectively as possible while beginning scoping studies on conceptual development options to guide further drilling;
• supporting Globe in defining new mineralisation at Machinga;
• completing the acquisition of the strategic shareholding in Cue Resources, if it is approved by shareholders, and ensuring that value is constantly being added to that investment by the management of Cue Resources;
• advancing another new project within the portfolio, with a focus on Spinifex, Ilomba Hill and our Northern Territory tenements; and
• reviewing other opportunities as they arise.

The recent addition of Simon Heggen, a very experienced resource industry and investment banking executive, as Managing Director together with the just announced recruitment of Baker Khudeira as Exploration Manager has added real depth to the Resource Star team. 

Baker has significant experience working as an exploration geologist on a number of projects in Australia, Asia, Africa and the Middle East. His expertise extends to base and precious metals, coal and molybdenum projects. He holds a B.App.Sc.Geol from the University of Ballarat and is Member of AusIMM and the AIG.

Prior to his appointment at Resource Star, Baker worked as a Senior Exploration Geologist for BHP Billiton at the Yeelirrie Uranium Project in Western Australia. He has also worked at Heathgate Resources’ Beverley Uranium Mine in South Australia, a sandstone hosted uranium deposit, the same style as our Livingstonia Project in Malawi, where he was an exploration geologist.

MM: Recognising the attractiveness of your sector (Uranium and Rare Earths), do you anticipate further third party interest in the company and its projects and how will any such interest be managed?

RSL: We will be focussing on executing our plans to add value for all our shareholders by growing the uranium, rare earths and specialty metal resources under our control and advancing projects towards development.

If, in doing that, we attract the attention of third parties who may be interested in what we do as a company or in specific projects, we will continue to act in the interests of all shareholders and engage with those parties if we determine it is rational to do so.

Our new Managing Director has significant commercial and investment banking experience on top of his resource industry background, so we are well equipped to manage those aspects of our continuing growth.

ENDS