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Red Rock Resources now happy with operations at El Limon gold mine

Red Rock Resources has an iron ore project in Greenland underway, is producing gold in Colombia, and is exploring for gold and copper in Kenya. Proactive Investors recently caught up with chairman and chief executive Andrew Bell.
Red Rock Resources now happy with operations at El Limon gold mine

Red Rock Resources (LON:RRR) has an iron ore project in Greenland underway, is producing gold in Colombia and is exploring for gold and copper in Kenya. The firm has also recently seen its shares rise to near one year highs and has been one of the most featured stocks on people’s ISA list for this summer. Proactive Investors recently caught up with chairman and chief executive Andrew Bell.

Proactive Investors (PI): Update us on what has been happening, because there is a lot of news that is coming through. Colombia seems to be the top of the news headlines with El Limon. You have been cutting costs there at that unit?

Andrew Bell: Yes, we have been working on improving things there for quite some time. A year ago we were told that there were no cost reductions possible, and everyone was essential. So we got rid of just about everyone with a manager title. We got rid of almost everyone working underground. We have got rid of people in the head office. Then we built it up again. We saw how many people we really needed to conduct an efficient operation underground. We have now got to a stage where we are relatively happy with the way things are running there.

PI: There has also been stoppages in Colombia because of violent activity. You say this is over. What has been the cause of that?

Andrew Bell: The stoppage has been unusual in that it is a stoppage by people who are illegal. It is illegal small miners, it is paramilitaries, and drug smugglers who have been producing gold, the majority of gold, in Colombia, without of course, paying taxes or observing environmental restrictions of any kind. The government wants to regulate that for a number of very sound reasons.

The way it (the government) has gone about it has been that for the last year, it has been burning down and destroying the equipment of illegal miners where they have found it. The paramilitaries, and people like that have now, with the small scale miners, had this unofficial stoppage. But the paramilitaries have the power to block the roads. So in effect, you had a strike.

We got through that period of three or four weeks only losing four shifts, so were quite happy about that. But it has come to an end. 

The long term effects of this will be very good for the industry.

PI: Nonetheless, the El Limon project is up for sale. Is this your preferred outcome or will the sale depend on the direction of the gold price?

Andrew Bell: I think that our production is running at a relatively small level. In order to increase the size of the mine, you would need to put in quite an investment. A question of whether we do that, or whether we leave it to somebody else to do, has been one we have thought long and hard about. Our preference remains to sell. 

If, of course, the gold price goes up, and if we can keep our costs down, the equation begins to change, in that the price that makes it worthwhile for us to sell, goes up.

Proactive: Talking about disposals, the update on September 9 covers the disposal of the asset in Greenland, something else that has clearly helped shares this summer. At what stage are you at there?

Andrew Bell: The lawyer’s execution team, they tell us, have already been paid their completion bonuses. So on the one hand, that is very positive. On the other hand, we have not seen a piece of paper in our hands that would allow us to make an announcement, and of course, we have not got the money.

Now I think that acquirers in some countries, which have different political and legal systems and vary from those we are used to, you need a government tick off, an administrative tick off, before you make an acquisition. I think that is the stage we are at.

PI: There is nothing in the update from Kenya, which I suppose, has the potential to be one of your last remaining assets. What is the message there, in the Kenyan asset?

Andrew Bell: Well, Kenya is moving along, and we are actively engaged there, in doing a number of things. We are planning a geochemistry and mapping programme for this summer, while we wait for some issues to be resolved. We have a new government. We have a new constitution. There is a lot happening there.

But it is not our last asset. We had three main assets, projects, we were running, which were Kenya, Colombia and Greenland. It is true we may be completely out of Colombia. But we will be retaining a royalty in Greenland, and an interest. We also have a royalty of course on an asset in Australia.

We also have our interest in Jupiter Mines. We have the interest in Resource Star, that is suddenly from being a neglected and forgotten asset, is quite important. In addition of course, we have a stake in Ascot Mining, through a convertible loan there.

PI: Through Resource Star, I know you are also looking at a deal in Texas. What can you tell investors about that, and how significant could it be?

Andrew Bell: Resource Star was uranium stock. Uranium is out of favour. Oil is still in the energy sector. It is a very attractive project to rework old wells in Texas. We have been doing due diligence. So far, the due diligence is coming up pretty well. If the project is all that it is cracked up to be, this will be worth more than anything else in Red Rock, so touch wood.

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