Rox Resources Cashed Up and Ready for Action
THE INSIDE STORY: One element that often deters investors getting involved with junior exploration companies is the concern that a share-diluting fund raising may be just around the corner.
Rox Resources (ASX: RXL) recently removed any such fund-raising angst by selling off its interest in the Reward zinc project in the Northern Territory, for $20.6 million.
A bidding war for Reward kicked off earlier this year when Rox Resources received a series of offers, with from Marindi Metals (ASX: MZN) being ultimately successful.
However, under the terms of the Earn-in and Joint Venture Agreement between Rox Resources and Teck Australia, the latter retained a pre-emptive right over Rox’s interest in the project, which meant Rox was obliged to offer to sell its interest in the Reward project to Teck on the same terms and conditions.
After a bit of to-and-froing between all parties, Teck finally confirmed it would exercise its pre-emptive right to purchase Rox’s minority interest, on the following terms:
Cash of $8 million;
Immediately tradeable, un-escrowed shares in any ASX or TSX-listed company to a value of $3.6 million or, alternatively $2.6 million cash;
A three year promissory note with a face value of $5.25 million and an interest rate of 10%; and
A deferred payment of $3.75 million, payable on completion of a bankable feasibility study, or the expiry of six years, whichever comes first.
“The obvious benefit of the sale of the Reward project is that we won’t have to go back to our shareholders to raise money for quite some time,” Rox Resources managing director Ian Mullholland told The Resources Roadhouse.
“People criticise juniors for raising money all the time – we won’t have to do that.
“We are set to receive somewhere in the vicinity of $10 to $12 million upfront, consisting $8 million in cash and shares that will be readily tradeable.
“Three years later we get a convertible note for $5.25 million (with a 10% interest rate) and then three years after that we will be due $3.75 million.
“That’s a considerable amount of cash coming in over a period of six years.
“If we use that money wisely, there should be no reason for us to go back to the market and raise more money.”
The ink on the contract had barely dried when Rox announced it was to acquire 100 per cent of the Collurabbie nickel gold project tenements, located 500 kilometres north of Kalgoorlie in Western Australia from Falcon Minerals (ASX: FCN).
The announcement caught many market watchers and industry players on the hop as the project is one many recognised from its historic exploration success, but had fallen off many radar screens.
The new deal transpired to be a good fit for Rox and at a purchase price of $25,000 cash and 7,500,000 shares in the company, well within its now very healthy financial position.
The Collurabbie project tenements are situated a short distance of just 70km due east of Rox’s Fisher East nickel sulphide and Mt Fisher gold projects.
The Fisher East nickel project has always held the number one position on Rox’s development table, and for good reason.
Rox has discovered four deposits on Fisher East - Camelwood, Cannonball, Musket and Sabre, across which it has established a total Mineral Resource of 4.2 million tonnes at 1.9 per cent nickel for 78,000 tonnes of nickel
Collurabbie comprises exploration licences E38/2009 and E38/2912, covering 63.1 square kilometres with most of the known nickel sulphide mineralisation located on E38/2009.
Rox Resources has also applied for adjoining tenement areas covering over 59sqkm, for a total project area of 122.5sqkm.
“We picked up Collurabbie, because we consider it to be a completely underdone project with a great deal of potential,” Mulholland said.
“One thing over the years we have demonstrated to the market, is that we are good at identifying and realising value from distressed, or unloved, projects.
“The Reward project is a perfect example – when we first acquired it the project had some historic drill results, we did some drilling, added some tenements - one of which hosted the Teena deposit, attracted Teck as a JV partner, and the rest is history.
“We turned the company’s $2 million exploration investment in the project into a $20 million windfall.”
The Collurabbie project hosts the Olympia nickel sulphide deposit, where historical drilling returned results that made everybody stand up and take notice, including 5.8 metres at 3 per cent nickel, 2 per cent copper and 5.3 grams per tonne PGE.
Rox believes Collurabbie has potential to add value to the Fisher East project, especially should both projects achieve production status, as ore from Collurabbie could be trucked to a processing plant at Fisher East.
“That is another aspect about Collurabbie that appealed to us, as that option just hasn’t existed for this project before,” Mulholland said.
“Most of the mineralisation was encountered at the project’s Olympia deposits.
“Beyond Olympia, however, there are a number of strong prospects, such as Agora, Leros, Paros and Rhodes (East and West) where indications of mineralisation were identified by previous exploration, but never really received the attention we feel they deserve.”
Due to a number of corporate factors, the Collurabbie project area was subjected to what can be best described as sporadic exploration after its initial discovery.
There was much activity on the discovery between 2004 and 2005 and a smaller campaign carried out from 2010-2011, but since then no exploration of substance has been conducted on the tenement package.
Rox has signalled its intentions to remedy this situation with plans to apply the same exploration techniques at Collurabbie it has implemented with success at Fisher East.
“The last phase of exploration was five to six years ago, so we believe there is considerable scope for new discoveries,” Mulholland said.
“The GFC was responsible for an exploration slow-down across any number of projects and Collurabbie was one to suffer that same fate.
“The Collurabbie discovery was the talk of the town a few years ago for good reason and we believe the opportunity to define more extensive mineralisation there is still extremely attractive.
“In addition there’s the gold aspect which really hasn’t been looked at.”
The previous Collurabbie project drilling also demonstrated its potential to host gold mineralisation with a number of intercepts from the Navos project showing positive signs, including:
2m at 5.2g/t gold from 30m
2m at 2.4g/t gold from 60m; and
2m at 2.47g/t gold from 70m.
Gold exploration carried out in the 1990s focused on the northern part of the tenements, however there has been no further work since 2000.
Having consolidated its cash position with the sale of the Reward project, Rox will now fully-focus on the Fisher East and Collurabbie projects with the intention of moving both projects forward.
The deal has bought Rox one of the most valuable assets it can have at a time when it and other nickel explorers wait for the nickel price to improve.
“We would like to continue to add quality projects to our portfolio,” Mulholland indicated.
“With such a large amount of cash behind us we can afford to sit back and have a look for other opportunities.
“We may not find any, but we are certainly willing to have a look.”
Rox Resources Limited (ASX: RXL)
…The Short Story
HEAD OFFICE
Level 1, 34 Colin Street
West Perth WA 6005
Ph: +61 8 9226 0044
Email: [email protected]
DIRECTORS
Stephen Dennis, Ian Mulholland, Brett Dickson