North River Resources' subtle change of priorities could lead to early production and cashflow

A change of priorities at North River Resources (LON:NRRP) points to an interesting and exciting period of development that could lead to early production and cashflow.   

"We may have previously put too much emphasis on acquisitions, distracting investors away from our existing portfolio,” says managing director David Steinepreis. 

“There has been a subtle reprioritisation of our Namibian assets, where we believe we have the potential to establish multiple profitable mining operations.” 

Those assets include the Namib lead-zinc mine, with a resource target of 2.8 million tonnes and an in-situ value of US$480 million, or US$1.8 billion if the resource extends down to 600 metres as thought.

And there’s the Dordabis and Witvlei copper deposits in the country. 

The group has a whole host of other projects and joint ventures with the likes of Baobab and Extract.

However, the focus at present is on what North River can deliver itself without the aid of partners, and in particular how it can create value in a very short space of time.    

So the twin prong attack will see it focus on the development of the Namib mine while simultaneously attempting to bring two small copper projects into production.

Namib is the site of historic production, which was closed in 1992.

“It was mined down 200 metres and then closed down due to low metal prices,” says chief executive Luke Bryan. 

“The stope we accessed stopped in ore. The overall state of development suggested the mine shut without running out of ore.” 

Initial drilling of the project below the mined stopes returned sections of 20 per cent zinc, 14 per cent lead and 330 grams per tonne of silver. 

The results were far better than Bryan and his team were expecting and confirmed the mineralisation continued at depth.

“We initially thought that the average grade would be around 5.5 per cent zinc, however we drilled through mineralisation of 20 per cent zinc,” Bryan says.

“If we got intersections of 7 or 8 per cent I would have been happy. 

“Of course the grades returned are not reflective of average grade. But if we come across good intersections with these high-grades, then it helps.

“We are looking at a reasonably small, moderate to high grade mine in a great location for staff and logistics.”

The plan now is to carry out a far more extensive underground drilling campaign, which will then be the basis for JORC resource.

Possibly the most effective way to do this will be to develop the decline a further 150 to 200 metres, adding escapeways and ventilation as the team progresses.

“It is a case of building a mine while you explore,” says Bryan. 

“We can’t drill this out from surface as the bodies pinch, swell and change direction. We need to get down close to the ore shoots and do short holes from underground, we need to follow the ore down.”  

The estimated cost of this work is in the order of $5-$7 million. However there are a number of questions to be answered during the engineering study so this number could change considerably. 

There's also 400,000 tonnes of tailings at around 2 per cent zinc which could be useful to blend in with the run of mine ore.   

“I’d be very surprised if this doesn’t prove to be a profitable mine to rebuild,” says Bryan.

However there is a long way to go before North River is able to deliver its hoped-for 250,000 tonne a year throughput at Namib.

It could take up to two years to compile a meaningful JORC resource estimate and a further year, possibly longer, before Namib makes it into production.

“The idea is to push the work on as fast as possible,” says Steinepreis. “Everyone wants it to be done sooner rather than later but we are committed to advancing it professionally and in a way that doesn’t create any hiccups.”

However if all goes to plan, North River’s first producing asset is likely to be one of two open pit copper projects, the Koperberg prospect, on the Dordabis Project or the Malachite Pan prospect at Witvlei.

Split into three deposits, the Koperberg prospect hosts an estimated 25,000 tonnes of copper. 

Malachite Pan is the larger of the two with about 65,000 tonnes of contained copper.

The company is currently talking to mining consultants AMC to see what the projects might look like. “We are doing some first pass numbers to see if there is an economic option” says Bryan.

However, Bryan won’t know if the copper projects are viable until the end of the year, or early in the first quarter when further work is completed. 

 “We are working on metallurgy and processing options for the copper projects,” the North River chief executive says. 

“We have the first numbers back for Koperberg and now we are waiting for Malachite Pan numbers.

“Although the projects are some distance apart we need to look at any options which might give us economies of scale.

“If we can confirm that we have the potential to advance Koperberg into a profitable mine, then this might be the first cab off the rank.”

He is also confident North River will get a “very interesting” pit out of Malachite Pan too. 

“It would be a similar model to Koperberg, but with the potential for perhaps 5-7,000 tonnes a year. 

“The challenge will be to see if we can build small scale inexpensive plants, sourcing second hand equipment.  

“We have seen what private operators have done in Namibia with low cost plants and it’s given us some ideas.”

In the space of a few months North River could be an entirely different investment proposition than it is currently today.

The development of Koperberg in the next year to 18 months might fund the development of Malachite Pan and, more importantly, the larger scale Namib lead-zinc programme.

“We are also ramping up regional exploration in the Witvlei and Dordabis areas,” Bryan says.

“We have about 140,000 tonnes of copper in the ground in those areas. However very little work has been done other than drilling surface outcrop, so we feel there is still potential for further discoveries.”