Millrock Resources: oodles of potential within its project generator business model

Millrock Resources (CVE:MRO, OTCQX: MLRKF) is a project generator and early stage discovery specialist that funds development of its property portfolio through joint venture participation. The Company has eight gold and copper projects in Alaska, and four porphyry copper projects in Arizona, with $15 million in exploration expenditures committed in the current calendar year. 

Millrock creates value by identifying large ore bodies that can be ventured to major mining companies, and seeks to emulate Altius Minerals (TSE:ALS). Altius holds 9% of Millrock, and is a very successful Project Generator Company that is currently capitalized at around $310 million. 

The Company is led by Gregory Beischer, who is President and CEO and is a seasoned explorationist who was previously with Inco, now owned by Vale (NYSE:VALE), and with whom Millrock maintains exploration interests. He was also with the Bristol Bay Native Corporation, which is one of twelve Native owned regional corporations created in Alaska to manage local landholdings and investments on behalf of the local inhabitants, and currently serves on the Alaska Minerals Commission, and was past President of the Alaska Miner’s Association. 

Philip St. George serves as Chief Exploration Officer, and is an exploration geologist who was the first to recognize the porphyry mineralization at the Pebble Deposit in Alaska, and led the Cominco team that drilled out the initial 500 million tonnes of gold, copper and molybdenum mineralization. Teck owns Cominco and maintains exploration interests with Millrock. He was also Vice-President of Exploration for Novagold Resources from 1998 to 2003, and helped build that company’s project portfolio. 

The Company’s most recent Strategic Alliance was announced in mid-October and is with Vale, which is the second largest mining company in the world, and will seek large scale copper, gold and porphyry deposits in target zones of Alaska that will be generated by Millrock. 

Vale will provide funding of US$1.0 million in the first year, and holds an option for an additional US$1 million in the second year. This will underwrite early stage exploration that may be subject to a further option agreement providing $3.5 million over 3 years, allowing Vale to establish a 65/35 Joint Venture in each specific project.

Crescent Resources (CVE:CRC) holds an option to purchase a 100% interest over the Uncle Sam Project, covering 31 square kilometres, located 75 kilometres southeast of Fairbanks, and lying within a world class gold belt. Crescent has agreed to spend $2.5 million over 3 years, and issued 1,583,281 shares to Millrock, and may commit a total of 18% of its issued shares to Millrock to maintain that interest at the end of 2011.  

Drilling is focused at Lone Tree where a shallow gold zone measuring 500 metres by 250 metres has been drill defined. Drilling highlights include 19.22 metres at 2.03 g/t Au, and 6.8 metres at 1.01 g/t Au, within a gold-in-soil anomaly that has been outlined over a strike of 4,000 metres and width of 1,000 metres.

A second prospect know as Wolf lies 2,000 metres along strike from the Naosi Prospect, which was recently discovered by  Sumitomo Metal Mining, where drilling intersected 7.92 metres at 7.8 g/t Au and 19.7 g/t Ag. The partners have already reported an intersection at Wolf that assayed 4.42 g/t Au over 11.4 metres, and plan more drilling across this highly prospective target. 

Teck Resources (TSE:TCK.A,TCK.B) has incurred almost US$3.6 million in exploration expenditures and will earn an initial 55% interest in the Estelle Project. Teck can increase this interest to 65% by expending an additional US$5 million in exploration costs, and making a cash payment of US$400,000 to Millrock.

Six main zones of large-scale anomalous gold and pathfinder element geochemistry have been identified over the past two years at Shoeshine, Shadow, Train, Oxide Ridge, RPM and Stoney.

Four drill holes for 1,500 metres were recently completed along various targets with assay results awaited by the partners. A drill hole at Shadow deepened a historic hole completed by Cominco in the 1980’s that intersected 3.01 g/t Au over 29.6 metres and ended in mineralization at a depth of 100 metres. Surface work also identified several previously unknown mineralized zones for future exploration. 

Kinross Gold (TSE:K) is earning in on the Humble Project in southwest Alaska. Surface geochemical sampling has been completed over the entire land package, but early drilling has been problematic. 

Millrock expended approximately $1 million for regional project generation in Alaska during 2011, and staked 7 new properties. The Fortymile Project located at the Yukon border, has drill ready targets and is also available for joint venture.

Vale has the option to earn a 60% interest in the Galiuro Project in southeastern Arizona through exploration expenditures totaling US$3.5 million and payments totaling US$850,000. The earn-in agreement is in its second year, and Vale has expended approximately US$2.5 million on the property to date, and may earn an additional 10% interest, for a total of 70%, by funding a feasibility study. 

The target at the Galiuro property is a large porphyry copper and gold deposit hidden beneath alluvium and Tertiary volcanic cover, and is situated at the intersection of the Resolution, San Manuel and Kalamazoo porphyry copper trends

The partners are seeking deep porphyries, with recent drilling intercepting trace amounts of copper and anomalous molybdenum values along with the associated alteration package in geologically permissive rocks suggests that a porphyry copper deposit is nearby. 

A third phase of drilling is expected to get underway in the fall of 2011 at Fourmile, which is a circular magnetic feature that is ringed by a strong conductive zone that is identified by a ZTEM airborne geophysical survey. Intense argillic alteration is known from rock exposures and prior drilling on the west side of the structure.

Inmet Mining Corp (TSX:IMN) may earn a 70% interest in the San Jose and Dry Mountains Project by incurring US$4 million in exploration expenditure and making option payments of US$300,000.  

The partners are planning to drill at least 3 holes for up to 5,000 metres, which will test coincident ZTEM anomalies with overlying geochemical anomalies. The targets may represent buried porphyry copper deposits with molybdenum and gold credits, and are located directly along trend of the Safford copper deposits being developed by Freeport McMoran (NYSE:FCX). The nearby Safford and Morenci porphyry trends host over 10 billion tonnes of historic copper production and future reserves and resources. 

Dry Mountain is located 20 kilometres to the southeast of San Jose on the Morenci Trend, and displays a geochemical anomaly carrying strong copper and molybdenum values measuring 10 kilometres in diameter, and carries coincident ZTEM-Magnetic signatures.

Millrock acquired the Rainville Project, located in southeastern Arizona, which is on an extension of the Safford porphyry copper trend, and is anticipating the execution of an earn-in agreement and completion of a geophysical survey. 

The Company reported current assets of $11.9 million for the second quarter of 2011, of which $4.4 million is cash and cash equivalents, and generated $0.4 million in management fees from its status as an operator on a number of joint ventures.  Like many junior exploration outfits, shares in Millrock have pulled back sharply in the past twelve months, and are currently trading at 47 cents, down over 50% from their 52-week high of $1.05, but up from their 2011 low of 35 cents which was hit in September.  Investing in project generators like Millrock requires a medium to long term view, but for patient investors the rewards can be huge.