NORTH RIVER RESOURCES PLC (LON:NRRP) — Conference Call Re. Revised Namib Project Work Program — The AIM-quoted company focused on the development of the Namib Lead-Zinc Project in Namibia held a Shareholder Conference Call yesterday to discuss the revised work plan for the project, as originally announced on 13 November 2015.
In the call, the CEO, James Beams, added some detail to the outlook for the company’s operational plans over the coming months and also reiterated that, although confident the that the Mining License for the project would be issued in due course, he would not give a date by which he expected it to be granted. However, it appears that the cause of the delay is related to the Ministry finalising the process and conditions attached to exploration and mining licenses and potential State participation in projects, rather than any project specific issue.
The revised work program has two streams, that required to complete the Front End Engineering and Design (FEED) studies, which it aims to complete in Q1 2016, and an exploration program to increase the level of reserves. The last resource statement was calculated in August 2014, since when a total of 4,796m of diamond drilling has been drilled, mainly with the aim of upgrading existing resources. Over the coming months, the company plans to drill a further 3,500m, of which 800m will continue the infill program and 2,700m will test for extensions down plunge of the existing mineralisation in the Northern Extension. The 5 Level Drive is being developed at a depth of around 150 meters to allow the testing of deeper areas of the Northern Extension to commence later this month. The first results from this program are expected in Q1 2016 and an updated resource statement is planned to be complete by the end of Q2 2016.
RFC Ambrian Comment: At the time of the Open Offer to raise US$4m in mid-September, the then work program had included the early development of the North Decline, which will now not be carried out until a production decision has been made. The work program had also nominally assumed that the Mining License would have been awarded by the end of October, which together with the completion of the FEED studies would have allowed a production decision to be made by the end of the year.
However, the delay in the license award has contributed to the development of a revised work program, which now includes the completion of the FEED studies by the end of Q1 2016 and the addition of an exploration program aimed at increasing reserves, which the company plans to complete by mid-2016. Subject to the timely award of the mining license and the completion of project funding this could allow a production decision to be made in H2 2016.
Moving the revised expected timing of a production decision from December 2015 to mid-2016 has resulted in an increased working capital requirement and the company had previously stated that it expected that it will need to raise additional funds before making a construction decision. On the call the CEO reiterated that this would be dependent on the timing of the receipt of the Mining License and project funding. With respect to the potential sources of any such funding, he noted that discussions were underway with multiple potential sources finance for the main project and that these sources may be helpful in funding any working capital requirement.
The company has taken the opportunity presented by the delay in the award of the mining license to delay the completion of the FEED studies and to change the work program to include a drill program to expand reserves. It is unclear whether this is a result of disappointing results from the infill drill program to date, or a more general desire to further increase resources. In any event, given that the reserve base of August 2014 supported a mine life of just 2.3 years and given with the current commodity price environment, we believe that an increase in the reserve base would be very helpful in securing the necessary finance for the project’s development.
We believe that the potential to increase resources at Namib is good. At the time of the last resource statement in mid-2014, inferred resources represented an additional tonnage of 40% over the indicated resources that were used to calculate reserves. Also, many of the ore shoots appear to remain open at depth offering further potential for additions that we suggest could end up doubling the reserve base at the project over time, adding significantly to the project’s value over time.
