Ongoing exploration drilling by Rox Resources at its Camelwood prospect continues to deliver very positive outcomes. As a result of the current drill programme, the company has extended the known mineralised strike length for its Camelwood prospect. The following figure shows the location of the company’s Australian assets.
Source: Rox Resources
The Fisher East project, hosted with the Mt Fisher tenements is the site of the company’s most recent exploration success. The company announced a major intersection of nickel mineralisation from drilling results from its Camelwood prospect.
The initial Camelwood assay results have come from the exploration of a major ground electromagnetic (EM) signature. Drilling of the EM signature commenced in late 2012. The following figure shows a long section of the Camelwood deposit showing drill intersections.
Source: Rox Resources
Further drilling in 2013 on the Camelwood prospect has continued to confirm the nickel mineralisation. The better intersection was 11.4 metres graded 2.93% nickel and two sweet spots of 6.4 metres graded 3.80% nickel and 2.9 metres graded 4.66% nickel all from 282.6 metres deep. Other significant intersections included 1.2 metres graded 5.20% nickel with a sweet spot of 0.7 of a metre graded 7.79% nickel at a depth of 388.7 metres and 22 metres graded 1.42% nickel from 118 metres deep. We consider the results are a significant find including seam width, grade and proximity to the surface.
As a result of the current round of drill outcomes, the known mineralised strike zone has been lengthened to 800 metres. Importantly, the deposit remains open along strike and at depth. The company continues to drill at its Camelwood prospect. Shallow reverse circulation drilling is ongoing to test the extensions of the deposit and further infill sections of the deposit. Drilling for deeper identified anomalies is expected to get underway in late April.
The Camelwood prospect looks to be part of a potential emerging nickel story at Fisher East. The company has identifying a number of other strong electromagnetic (EM) anomalies in close proximity to Camelwood. The following figure shows the EM anomalies in Silverbark and Corktree (VTEM stands for versatile time domain electromagnetic).
Source: Rox Resources
The company is planning to commence drilling at both Corkwood and Silverbark as soon as possible. We will certainly be watching with interest drill assay results from either of the two anomalies. The company has indicated however, that Camelwood will be the primary prospect of interest in the near-term.
We note the contamination regarding a shallow hole at Camelwood that the company reported as a result. Drill operator error caused the contamination and as the company has indicated and reported the incident was a one off. The hole that the drill operator contaminated has now been redrilled with the result pending.
Exploration efforts to date have only penetrated the upper section of the EM conductor. The following figure shows a concept long section of the in ground EM signature of the Camelwood mineralisation.
Source: Rox Resources
The Company is in the midst of planning a deeper drill campaign at Camelwood, to test the deeper EM conductors (blue dots in the above figure). We look forward to assessing the results of the additional drilling, when the company reports the same to the market.
The Mt Fisher project is the company’s major focus, however the Reward zinc and lead project which includes both the Myrtle and Teena zinc prospects are also getting a work-over. The following figure shows a concept of the Teena zinc and lead prospect.
Source: Rox Resources
In 2013, Teck Australia is planning to drill a total of 4,500 metres of drilling across both the Myrtle and Teena deposits. This expenditure is fully funded by Teck Australia, as it forms part of that company’s farm-in to the Reward Project.
We remind Members that the company does not have to fund exploration activities at its Reward zinc and lead project. Teck Australia under its farm-in agreement is carrying the costs up to A$5 million, to explore both at Myrtle and Teena. Teck Australia will earn a 51% interest in the project once this amount has been spent on the project.
Exploration at the Bonya copper project is in its infancy, however early exploration activities have established the presences of copper. The following figure shows the location of the Bonya project.
Source: Rox Resources
The company will earn a 51% interest in the Bonya project following the expenditure of A$500,000 over the next two years. With the expenditure of an additional A$1 million the company will earn a 71% interest in the project.
The Bonya project is a 279 square kilometre tenement with outcrops of visible copper and the old Bonya copper mine. The following figure shows the Bonya tenements and potential copper targets.
Source: Rox Resources
In 2013, the company plans to complete a number of surveys across the tenement, including geochemical and geophysical surveys. Historic assays up to 33% copper and 55 grams per tonne gold. We will monitor announcements concerning the Bonya with considerable interest.
At the company’s last required public reporting of 31 December 2012, the company had cash on hand of A$1.8 million. Expenditure for the just finished March quarter 2013 was A$750,000, of which A$550,000 was earmarked for exploration. The company will report its 31 March 2013 cash position shortly. We do however consider the company has sufficient resources to meet all its current commitments.
Firm support is indicated at the technically important 200 day moving average of 3.7 cents, should the current spell of weakness continue. Positively, the RSI has reached oversold territory, which is suggestive of an exhaustion of the recent selloff.
Rox Resources continues to be a speculative exploration play especially in zinc and nickel and also in gold and copper. Recent exploration success at Fisher East has enabled the company to take major strides toward de risking. With Teck Australia fully funding exploration on the Reward zinc project (Myrtle and Teena deposits), does in our view further mitigate some of that risk. We consider these factors to be major value catalysts for the stock.
With reference to the weekly chart, prices are largely contained within a broad consolidation between support at 5 cents and resistance of 12.5 cents. A decisive break above the upper boundary would likely spark a strong boost of upward momentum to follow into the longer term.
With the gold prospective at Mt Fisher and adding the Bonya copper farm-in, these projects could also be likely value catalyst. We consider the current share price continues to undervalue the potential in the company’s assets. With these points in mind, we reiterate our buy recommend on Rox Resources for Members who currently have no exposure to the stock in their portfolio. DISCLAIMER
RXL Price at posting:
4.9¢ Sentiment: LT Buy Disclosure: Held
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