uly 16, 2007 Rusina Mining Not Only Has Good Partners, But Some Great Assets As Well
Investors seem to have got the idea that the deal agreed between AIM and ASX listed Rusina Mining and DMCI, which we wrote about back in May, is the beginning and end of the story about Rusina Mining. Hence the stagnation in the share price in the low 20ps in recent days. They got it half right. It is the beginning of the story but certainly not the end. Last week Rob Gregory was in London on a mission to update investor as to the full potential of the sequence of deals which started with DMCI and he made the strong point that he was here to inform rather than seek money. That is a point that should not be lost on other dual listed companies who only do the rounds here when involved in a financing.
The DMCI deal certainly got the show on the road as it meant early cash flow from nickel laterites at the Acoje project in the Philippines. DMCI Holdings is a major mining and civil contractor, based and listed in Manila, and an ideal partner for Rusina. It recently partnered with Hong Kong-based First Pacific Group to secure a majorprivatisation water supply contract in Manila so clearly has contacts in the right places. Among other projects DMCI also manages the 3.5 million tonnes/year Semirara coal mine in the southern Philippines of which more anon. The initial agreement with Rusina will result in 5 million tonnes of Acoje’s surface nickel laterites being mined over the next five years under a profit sharing, partnering contract whereby all net profits from the sale of the mined laterites at Acoje will be shared 50:50 with DMCI.
This deal involves only the surface limonite zone of the laterites which is soft and easy to mine. The current resource estimate for limonite is 33.15 million tonnes in the indicated and inferred JORC categories grading 0.95% nickel and 0.074% cobalt over a thickness of 2.4 metres. DMCI will do the mining so the capital cost of the operation is minimal, especially as DMCI is going to construct a purpose built port. Agreed the grades are low, but the high price of nickel means that it is a highly profitable operation and transport costs do not eat into this as it is only two days sailing to China. An environmental permit has already been granted for the site and ore for the initial 50,000 tonnes bulk sample required by the Chinese purchasers is now being stockpiled. Provided this passes muster ,cash flow should start before September and production will ramp up to 1 million tonnes/year.
If this looks to be a generous deal for Rusina, the decision by DMCI to cement its partnership at Acoje by investing US$1.2 million directly in the shares of the company and another US$2.5 million to buy a 10 per cent stake in Acoje supports this view. But there is more to the deal than immediately meets the eye. DMCI has this big coal reserve on Semirara Island south of Acoje. If the saprolite ore proves up from the current drilling programme to be higher grade, as expected, it would make sense to ship it to Semirara where it could be treated in a smelter or electric arc furnace fuelled by DMCI’s coal. Rusina would have a 40 per cent free carried interest in such a project and the two companes are currently investigating the possibilities.
This is where AIM listed European Nickel comes into the picture with its investment in Rusina which was also announced a couple of months ago. Initially it invested £1 million, but it also has a two year option which is already in the money. The plan is for European Nickel to drill the saprolite mineralization to JORC indicated resource status and it will also spend up to US$10 million on a feasibility study on the saprolite which will earn it a 40 per cent interest in the nickel project. This feasibility study will, among other things, determine whether tropical laterite ores can be treated as successfully as the ore at European Nickel’s Caldag project in Turkey and initial tests indicate that they will. Thus heap leach using the technology developed by European Nickel would provide the crucial stage between mining and transporting to the Semirara.
It is worth pointing out that the farm-in with European Nickel does not include the chromite or platinum group metal/nickel sulphide portion of the property and this is explained best by a look back in history. The Acoje mine was one of the world's largest metallurgical chromite suppliers producing over 3.3 million tonnes of chromium concentrate from 1935 to 1991. Early in the mines history it was found that the dunite zones to the east of the chromite zones contained appreciable quantities of nickel sulphides, platinum group metals, copper, gold, cobalt and chromite. High nickel prices in the late 1960's prompted surface and underground exploration, mine development and the establishment of a sulphide concentrate plant. Mining took place from 1971 to 1975 with nickel concentrate, containing platinum and palladium being sold to Japan for smelting.
Rusina is currently carrying out a feasibility study on the chromite. That must be showing potential as last month Rusina acquired an option to purchase a company called Zambales Chromite Mining with ground just 3 kms to the north of Acoje. Work was done on it by Falconbridge in the 1970s and it has many similarities in terms of limonite as Acoje, with the saprolite yet to be proved. As the name suggests it is also prospective for chromite, so Rusina has a further resource on its hands whch may also contain platinum group metals. As Rob Gregory points out , his company has plenty to work ahead and there is even more in the pipeline in terms of copper and gold.
Rusina Mining has steadily been expanding its position around Acoje and recently it reported that it holds ground within 1 km of the world class Tampakan deposit which is the largest undeveloped copper-gold deposit in the South East Asia - Western Pacific Region. Last year a new measured, indicated and inferred JORC resource estimate of two billion tonnes at 0.59% copper and 0.23 g/t gold at a 0.3% copper cut-off grade was announced. This resource contains 11.6 million tonnes of copper metal and 14.6 million ounces of gold. Significant additional mineralisation potential exists and towards the end of last year Xstrata paid Indophil, the Australian company which owned Tempaka in a JV with a local Philippine company, A$49.4 million for a 62.5 per cent interest.
How delighted Xstrata will be to find Rusina sitting on the edge of its new nest is a subject for interesting debate. Without doubt Rob Gregory, a tough man who anyone would want on their side in a fight, considers it of major value and is already seeking a JV partner. And this is another factor which should be taken into consideration. Rusina already has deals with DMCI and European Nickel which mean it is free carried for the foreseeable future and is on the verge of initial cash. Not a bad position to be in. flow. The queue to get involved in the copper-gold project already runs round the block so there is no question that this is the beginning, not the end of the Rusina story.
------------------------------------------- The writer has a beneficial interest in Rusina shares.
