Rox Resources Ltd (RXL)roxresources.com.au/wp-content/uploads/2012/11/RXL-19112014.pdf · also be...
Transcript of Rox Resources Ltd (RXL)roxresources.com.au/wp-content/uploads/2012/11/RXL-19112014.pdf · also be...
19 November 2014
Rox Resources Ltd (RXL)
Progressing nickel, zinc & copper projects
Recommendation
Buy (Initiation) Price
$0.03 Valuation
$0.06 (unchanged)
Risk
Speculative
Analyst
Stuart Howe 613 9235 1782
Fred Truong 613 9235 1629 Authorisation
TS Lim 612 8224 2810
Expected Return
Capital growth 82%
Dividend yield 0%
Total expected return 82%
Company Data & Ratios
Enterprise value $23m
Market cap $28m
Issued capital 850m
Free float 93%
Avg. daily val. (52wk) $210,550
12 month price range $0.03-$0.06
GICS sector
Materials Disclosure: Bell Potter Securities acted as Lead Manager to a $4.5m placement in September 2014and received fees for that service.
Price Performance
BELL POTTER SECURITIES LIMITED ACN 25 006 390 7721 AFSL 243480
DISCLAIMER AND DISCLOSURES THIS REPORT MUST BE READ WITH THE DISCLAIMER AND DISCLOSURES ON PAGE 17 THAT FORM PART OF IT.
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(1m) (3m) (12m)
Price (A$) 0.04 0.05 0.03
Absolute (%) -18.60 -28.57 9.38
Rel market (%) -22.45 -26.31 9.23
Project news flow set to intensify into 2015 By the end of 2014, we expect that RXL will provide further clarity on the potential
development path for its Fisher East nickel project. Ongoing exploration results should
also be released from this asset, from a zinc-lead project earn-in by Teck Australia Pty
Ltd (Teck, the Australian subsidiary of Teck Resources Ltd), and from RXL’s earn-in to
the Bonya copper project. RXL has established this solid project portfolio over the last
three years, which we believe is currently undervalued by the market.
We initiate with a Buy (Speculative) recommendation and a $0.06/sh target price.
Fisher East nickel (RXL 100%) - RXL’s most mature project The Fisher East deposit (72kt contained nickel) is located 150km northeast of Leinster,
Western Australia. Mineralisation is open along strike and at depth. We expect RXL
will soon release preliminary scoping study parameters for Fisher East, with both an
integrated mine-concentrator development and mine plus toll-treat option considered.
Steady result from Reward zinc-lead & Bonya copper Teck’s earn-in to the Reward zinc-lead tenements has entered its second phase, with
Teck spending a further $10m to increase its equity interest to 70% by August 2018. In
the first earn-in phase, Teck spent $5m over four years to earn 51%. RXL is earning
into 51% of the Bonya copper project by spending $500k by the end of August 2014. A
further $1m spend by the end of 2016 will take this interest to 70%. Reward is around
8km west of Glencore’s McArthur River zinc-lead mine and Bonya 20km west of KGL
Resources’ Jervois copper project.
Investment thesis – Buy (Speculative) TP$0.06/sh RXL is a highly Speculative investment with significant exploration and development
risk. Our Buy (Sepeculative) rating is supported by: positive news flow from the Fisher
East nickel project and a solid fundamental nickel price outlook; Teck continuing its
70% earn-in at the Reward zinc-lead project; and Bonya continuing to exhibit high-
grade intersections within close proximity to another potential copper development in
that region.
Absolute Price Quarterly cash flows
Sep-13a Dec-13a Mar-14a Jun-14a Sep-14a Dec-14e
Exploration & evaluation $k -1,580 -717 -621 -670 -1,588 -1,700
Administration $k -371 -204 -362 -265 -275 -300
Capital raised $k 0 2,288 3,327 -34 4,241 0
Other $k 11 5 -88 -1,125 11 15
Total quarterly cash flow $k -1,940 1,372 2,256 -2,094 2,389 -1,985
Quarter end cash $k 1,024 2,396 4,652 2,558 4,947 2,962
Shares on issue m 591 665 734 745 850 850
SOURCE: IRESS SOURCE: COMPANY REPORTS & BELL POTTER SECURITIES ESTIMATES
$0.0
$0.0
$0.0
$0.1
$0.1
$0.1
$0.1
Nov 12 May 13 Nov 13 May 14
RXL S&P 300 Rebased
Speculative
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Rox Resources Ltd (RXL) 19 November 2014
Rox Resources Ltd (RXL)
Progressing three Australian base metal assets
Our RXL recommendation is Buy (Speculative):
- RXL’s core projects are: Fisher East nickel (Western Australia, RXL 100%); Reward
zinc (Northern Territory, RXL 49%, Teck earning up to 70%); and Bonya copper
(Northern Territory, RXL earning 70%). Over the last two years, exploration drilling has
returned significant high-grade intersections at each of these projects.
- Fisher East nickel is located around 150km northeast of Leinster, Western Australia.
RXL has defined a 3.6Mt resource grading 2.0% nickel for 72.1kt contained nickel.
The resource includes high-grade components, occurs over a 3km strike length and is
open along strike and at depth. Further drilling at Fisher East is underway and RXL
expect to release preliminary scoping study parameters for a potential development by
the end of 2014. We expect that full development and toll treating options will be
considered.
- Reward zinc-lead is around 8km west of Glencore’s McArthur River zinc-lead mine
and is funded by earn-in partner Teck. Teck will increase its equity in Reward to 70%
by spending an additional $10m by August 2018. Recent high-grade intersections
include 35m at 6.1% combined zinc and lead from 665m and 34.4m at 6.2% combined
zinc and lead from 652m.
- Bonya copper is located around 350km east of Alice Springs and RXL is earning into
70% by spending $1.5m by December 2016. Initial follow-up drilling of VTEM targets
has intersected high-grade shallow copper mineralisation. The project is 20km west of
KGL Resources’ Jervois copper project.
Capital position and near-term requirements
- At 30 September 2014, RXL had cash of $4.9m and no debt. Bell Potter Securities
acted as Lead Manager to a Placement of 100.7m shares at $0.043/sh to raise $4.5m
in September 2014.
- RXL’s cash outflow estimates for the December 2014 quarter include $1.7m for
exploration and $0.3m for administration. We estimate RXL will have cash of around
$3m at the end of 2014, and will require a further capital raising in 2015 to support
ongoing project development and administration expenses.
- RXL is scheduled to pay the Mt Fisher prospector $0.2m by 31 December 2014 and a
final $2.3m by 30 June 2015.
Table 1 - RXL's quarterly cash flows
Sep-12(a) Dec-12(a) Mar-13(a) Jun-13(a) Sep-13(a) Dec-13(a) Mar-14(a) Jun-14(a) Sep-14(a) Dec-14(e)
Exploration & evaluation $k -273 -294 -876 -2,026 -1,580 -717 -621 -670 -1,588 -1,700
Administration $k -225 -200 -296 -255 -371 -204 -362 -265 -275 -300
Capital raised $k 0 1,495 4,607 0 0 2,288 3,327 -34 4,241 0
Other $k 8 62 1 -74 11 5 -88 -1,125 11 15
Total quarterly cash flow $k -490 1,063 3,436 -2,355 -1,940 1,372 2,256 -2,094 2,389 -1,985
Quarter end cash $k 820 1,883 5,319 2,964 1,024 2,396 4,652 2,558 4,947 2,962
Shares on issue (diluted) m 398 491 591 591 591 665 734 745 850 850
SOURCE: COMPANY DATA AND BELL POTTER SECURITIES ESTIMATES
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Rox Resources Ltd (RXL) 19 November 2014
Forthcoming news flow and value catalysts
- Ongoing – Drill assay results from Fisher East, Reward (Teena) and Bonya;
- Late 2014 – Preliminary scoping study parameters and metallurgical testing results for
a nickel project development at Fisher East;
- Early 2015 – Updated mineral resource for the Fisher East project; and
- Mid-2015 – Scoping study for a nickel project development at Fisher East.
Valuation: Sum of 3 key projects – Fisher East, Reward, Bonya
RXL is a highly speculative investment with projects in pre-scoping study stage. We have
therefore not undertaken detailed financial modelling of potential projects. Our RXL
valuation is heuristic based.
RXL’s value is leveraged to the success of three projects:
- Fisher East nickel and its potential for a successful mine development in the near
term;
- Reward zinc, Teck’s earn-in and ultimately its development aspirations; and
- Bonya copper and its potential to be a meaningful ore contributor to a development in
that region.
We factor in RXL raising an additional $5m (at $0.03/sh) over the next six months to fund
ongoing exploration and administration.
Table 2 - Valuation assumptions
$m $/sh
Fisher East nickel 30 0.04
Reward zinc 20 0.02
Bonya copper 10 0.01
Corporate overheads -6 -0.01
Total 54 0.06
Cash & options 5 0.01
Total before capital raising 59 0.07
Assumed capital raising
Equity requirement $m 5
Share issue price $/sh 0.03
New shares issued m 167
New diluted shares on issue m 1,022
New cash & options 10 0.01
Valuation after assumed capital raising 64 0.06
SOURCE: BELL POTTER SECURITIES ESTIMATES
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Rox Resources Ltd (RXL) 19 November 2014
Nickel, lead-zinc & copper projects
RXL’s key Australian based base metals projects
RXL’s three key base metals projects are:
- Fisher East nickel (RXL 100%) – Located around 150km northeast of Leinster with a
resource of 3.6Mt at 2.0% nickel for 72.1kt contained nickel and exploration upside.
RXL has commenced early scoping study work for a development at this project.
- Reward zinc (RXL 49%, Teck 51%) – Major zinc discovery 8km from the McArthur
River zinc mine (Glencore). Teck can earn up to 70% of Reward by funding a further
$10m in exploration by August 2018.
- Bonya copper (RXL earning 70%) – Outcropping copper oxide mineralisation with
geochemical and EM targets. RXL is earning 51% for $500k spend by December
2014, then to 70% for an extra $1m by December 2016.
Figure 1 - Project locations
SOURCE: RXL 2014 ANNUAL REPORT
Fisher East nickel: Resource now 3.6Mt at 2.0% Ni for 72.1kt Ni
RXL will complete a high-level scoping study for a potential development at Fisher East in
1H2015. The total mineral resource at Fisher East is now 3.6Mt grading 2.0% nickel,
containing 72.1kt nickel metal over the Camelwood and Musket deposits. Of this 3.6Mt
resource, 1.8Mt at 2.1% nickel is in the JORC Indicated category. There is also a high-
grade zone of 100,000t at 10.1% nickel within the Musket deposit. The current deposits
occur over a 3km strike length. Most of the nickel mineralisation occurs as disseminiated
sulphides. However, there are also important zones of massive sulphides.
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Rox Resources Ltd (RXL) 19 November 2014
Exploration upside from EM conductors and high-grade intersections
The following diagram shows the current resource across the Camelwood and Musket
deposits. The deposits are open along strike and at depth, with untested downhole
electromagnetic targets and high-grade intersections at Camelwood and Musket outside of
the current resource envelope. We expect that further high-grade discoveries will add to
the current Fisher East resource base.
Figure 2 - Fisher East nickel sulphide resource
SOURCE: RXL 2014 ANNUAL REPORT
Fisher East work program: Further drilling underway
RXL has recently re-commenced drilling and will extend a
ground EM survey at Fisher East. RC (29 holes for 5,500m)
and diamond (12 holes for 5,000m) drilling will follow up
previously identified mineralisation at Cannonball and
increase the known mineral resources at Musket and
Cammelwood. News flow from the programme will continue
through until the end of 2014.
RXL has also commenced metallurgical test work on
massive sulphide ore from the Camelwood deposit.
Recoveries of 91-95% to a concentrate grade of 14-17%
have been achieved. The test concentrate exhibits desirable
properties including low magnesium oxide values (2.6-
2.8%), high iron to magnesium oxide ratios (15-16:1) and
low arsenic (<100ppm). Metallurgical test work on
Camelwood and Musket disseminated sulphide ores is
ongoing.
Parameters for a preliminary scoping study are expected to
be announced by the end of 2014, with further detail
completed by mid-2015. We expect that both an integrated
mine-concentrator development will be considered, along
with mine and toll treating options.
Mineralisation style: Sulphides similar to Kambalda
The Fisher East nickel sulphide deposits are typical
Archean greenstone, komatiite-hosted, similar to the
Kambalda and Cosmos deposits. Mineralisation typically
occurs as shoots and lenses in ultramafic lava channels,
and is massive and disseminated. Massive ores typically
grade 4-20% nickel and disseminated ores 1.5-3.5% nickel.
Figure 3 - Fisher East Prospects
SOURCE: RXL ASX ANNOUNCEMENT 8/10/2014
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Rox Resources Ltd (RXL) 19 November 2014
Reward zinc-lead: Teck earn-in near Glencore’s McArthur River
The Reward zinc-lead project in the McArthur Basin (Northern Territory) is a joint venture
between RXL (49%) and Teck (51%). The joint venture agreement is now in its second
stage, with Teck earning a further 19% interest by spending $10m by August 2018. In
October 2010, RXL announced the Teck farm-in agreement over the Myrtle zinc-lead
deposit and surrounding tenements. The agreement enabled Teck to earn a 51% interest
by spending $5m over four years. Teck manages the exploration efforts at Reward.
Teena zinc prospect is Teck’s current focus
RXL announced the high grade zinc discovery at Teena in August 2013. Zones of high-
grade Sedex zinc-lead sulphide mineralisation were intersected including 26.4m grading
13.3% combined zinc and lead from 1,060m. Throughout 2013, exploration drilling
continued to intersect high-grade zones at depth and extended the strike length of
mineralisation to over 1.5km.
The 2014 drilling campaign at the Teena prospect has intersected mineralisation at
shallower depths:
- In late October 2014, RXL announced a 35m intersection grading 6.1% combined zinc
and lead from 665m (TNDD013).
- The most recently released results (10 November 2014) include 34.4m intersection
grading 6.2% combined zinc and lead from 652m (TNDD014).
The Teena prospect is located around 8km west of Glencore’s McArthur River zinc-lead
mine.
Figure 4 - Reward zinc-lead project location Figure 5 - Teena prospect drill plan (current 10 November 2014)
SOURCE: RXL ASX ANNOUNCEMENT 8/10/2014 SOURCE: RXL ASX ANNOUNCEMENT 10/11/2014
Myrtle deposit adds further weight to Reward prospectivity
RXL has previously delineated a (JORC 2004) mineral resource of 43.6Mt at 5.04% zinc
and lead. The resource includes a 5.8Mt indicated component grading 3.56% zinc and
0.9% lead.
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Rox Resources Ltd (RXL) 19 November 2014
McArthur River Mine (Glencore) next door…
MIM Holdings and Japanese consortium ANT Minerals (Nippon, Mitsui and Marubeni)
commenced commercial operations at McArthur River in 1995. The open pit development
at McArthur River occurred during 2007-08. Xstrata plc acquired MIM in July 2003 and
subsequently the ANT Minerals share in September 2005. Glencore acquired Xstrata in
2013.
McArthur River has an estimated mine life to 2038. The McArthur River open pit measured
and indicated resource is 194Mt grading 9.2% zinc, 4.0% lead and 41g/t silver and reserve
is 109Mt grading 10% zinc, 4.6% lead and 46g/t silver (31/12/2013 estimates).
McArthur River is currently producing at rates of around 200ktpa zinc, 45ktpa lead and
1.35Mozpa silver. A US$360m (Phase 3) expansion approved in mid-2012 will more than
double plant capacity from 2.5Mtpa ore to 5-5.5Mtpa ore.
Reward featured in recent Teck investor presentations
Figure 6 - Teck’s November 2013 Zinc presentation
SOURCE: TECK WEBSITE ACCESSED 18/11/2014
Bonya copper: Earning-in to 70% of NT copper project
RXL signed the Bonya farm-in agreement with Arafura Resources (ASX: ARU) in October
2012. Under the terms of the farm-in, RXL can earn 51% of copper, lead, zinc, silver, gold,
bismuth and PGE mineral rights by spending $500k on exploration by December 2014.
RXL’s equity can increase to 70% by spending a further $1m by December 2016. Bonya is
a 279km2 tenement package located 350km east of Alice Springs (Northern Territory).
VTEM surveys and recent drilling highlight project prospectivity
RXL’s recent work plan at Bonya includes:
- October 2013 to March 2014 - Competed a VTEM (Versatile Time Domain Electo-
Magnetic) survey to detect electro-magnetic conductors (such as sulphide
accumulations) to a depth of up to 1km. Interpretation of survey data identified ten
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Rox Resources Ltd (RXL) 19 November 2014
exploration targets for follow-up, many with coincident secondary copper and copper
in soil anomalies.
- August to October 2014 - Reverse circulation drilling to test VTEM targets. In early
October 2014, RXL reported intersections of visible massive sulphide mineralisation
with portable XRF analysis indicating grades of over 3% copper. Assays results
released in late October 2014 and early November 2014 included intersections of:
11m at 4.4% copper from 30m; 38m at 4.4% copper from 60m; and 9m at 3.8%
copper from 97m.
- November 2014 - Drilling at Bonya has recommenced. Further intersections have also
been reported including: 2m at 1.9% copper from 10m; 2m at 3.1% copper from 55m
and 1m at 1.2% copper from 69m.
Figure 7 - Bonya Mine Prospect drill plan Figure 8 – Bonya Mine Prospect drill cross section
SOURCE: RXL ASX ANNOUNCEMENT 20/10/2014 SOURCE: RXL ASX ANNOUNCEMENT 20/10/2014
Regional implications: Adjacent to KGL’s Jervois Project (+280kt contained copper)
RXL’s recent high-grade copper exploration success at the Bonya project is around 20km
west of KGL Resources’ (ASX: KGL) Jervois copper project. Given this close proximity,
should RXL achieve further exploration success at Bonya, it is likely that the Bonya and
Jervois projects will be co-developed.
KGL expects to complete a prefeasibility study for Jervois by the end of 2014. The study is
examining the development of its mineral resource of 25.3Mt grading 1.1% copper for
contained copper of 280kt. KGL has an additional exploration target of 50-150kt contained
copper. On current resources and the exploration target, the study is likely to examine an
open pit project producing around 25ktpa copper.
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Rox Resources Ltd (RXL) 19 November 2014
Figure 9 - Bonya project tenements and KGL’s Jervois copper deposit
SOURCE: RXL WEBSITE ACCESSED 13/11/2014
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Rox Resources Ltd (RXL) 19 November 2014
Company timeline & management
Timeline from listing in 2004 to present
FY04 – RXL is listed on the ASX in April 2004. Corporate focus is the historic Menzies
goldfield north of Kalgoorlie in Western Australia. RXL consolidates the Menzies tenements
and commences an exploration program. The Menzies project is 100% RXL with a 2.1Mt
resource grading 2.5g/t for 170,000oz contained gold. RXL’s founding Chairman is Alistair
Cowden and Managing Director is Ian Mulholland.
FY05 – RXL enters agreements to acquire a 60% interest in the Pha Luang lead-zinc-silver
project in Laos, and commences diamond exploration in South Africa. Exploration at the
Menzies gold project is ongoing. RXL also discovers a significant nickel laterite deposit on
the Acacia Ridge area of the Menzies project.
FY06 – Exploration continues on the Laos lead and zinc project. The South African
diamond and Menzies gold projects are divested. RXL undertakes two capital raisings for a
total of 23.3m shares issued for $6.3m.
FY07 – Exploration ongoing at the Laos lead and zinc project. Jeffrey Gresham replaces
Alistair Cowden as RXL Non-Executive Chairman.
FY08 – RXL acquires the Reward zinc-lead project in the Northern Territory from Rio Tinto
Ltd. The company’s expenditure on the Pha Luang project in Laos is reduced to a
minimum while the Laos Government reviews the granting of Foreign Investment Licences.
FY09 – RXL defines a 37Mt, 5.2% zinc plus lead resource at the Myrtle prospect within the
Reward project in the Northern Territory. No further progress is made in the granting of a
Foreign Investment Licence by the Laotian Government, and as such the Pha Luang
project is maintained at minimum expenditure on care and maintenance.
RXL raises $1.4m in equity during FY09.
FY10 – RXL progresses the Myrtle zinc-lead deposit, undertaking metallurgical testing and
additional exploration drilling. A revised resource is now estimated at 43.6Mt grading
5.03% zinc plus lead, an 18.5% increase in ore tonnes and a 14.7% increase in contained
metal over the FY09 estimate. RXL also expands its land position in the Myrtle area and
negotiates the removal of a vendor lump-sum cash payment to Rio Tinto of A$1/t of
mineable resources stated in a Bankable Feasibility Study.
RXL withdraws from the Pha Luang project in Loas in December 2009. Brett Dickson joins
the RXL board as an Executive Director, replacing Non-Executive Director Michael
Blakiston.
RXL raises $1.6m in equity during FY10.
FY11 – RXL signs an earn-in agreement with Teck for the Myrtle (Reward) zinc
project. Teck can earn a 51% interest in the project by spending $5m by August
2014, and increase that interest to 70% by spending a further $10m by August 2018.
RXL negotiates the purchase of the Mt Fisher gold-nickel project from Avoca
Resources and a local prospector, a 615km2 greenstone belt tenement position in
Western Australia. The tenements have a previously defined gold-in-regolith anomaly
extending over 7km in strike length.
RXL pegs a new phosphate project in the Northern Territory (Marqua), 300km south-west
of Mt Isa. The tenements exhibit a 25km strike length of phosphate bearing rocks identified
from surface sampling.
RXL raises $5.3m in equity during FY11.
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Rox Resources Ltd (RXL) 19 November 2014
FY12 – Exploration is ongoing at the Mt Fisher gold and nickel, Myrtle/Reward zinc and
lead and Marqua phosphate projects. A JORC resource of 973kt grading 2.75g/t gold for
86koz is defined at Mt Fisher. Teck undertakes various geophysical and geochemical
surveys at Myrtle/Reward as part of its farm-in agreement. Drilling at Marqua records a
number of high-grade intercepts.
RXL raises $347k in equity during FY12.
FY13 – RXL discover a significant nickel sulphide occurrence at the Camelwood prospect
at Mt Fisher. Intersections of massive and disseminated sulphide occur over a strike length
of 1.2km and to a depth of 500m. Further prospective targets at Mt Fisher are identified.
Teck makes a significant discovery of high-grade zinc-lead mineralisation at the Teena
prospect within the Reward project in the Northern Territory. Intersections exceed 13% zinc
plus lead over a downhole thickness of greater than 20m
RXL enters a joint venture to earn into the Bonya copper project in the Northern
Territory. The project exhibits historical workings and rock chip samples of up to
33% copper.
RXL raises $6.5m in equity during FY13.
FY14 – RXL defines a nickel sulphide resource at the Camelwood and Musket prospects at
Mt Fisher. Exploration at the Reward zinc project by earn-in partner Teck continues to
intersect zinc-lead mineralisation over substantial downhole thicknesses. Geophysical
exploration techniques at the Bonya copper project identify a number of anomalies possibly
indicative of copper sulphide mineralisation.
RXL raises $5.9m in equity during FY14.
Board of directors
Mr Jeff Gresham - Non-Executive Chairman, appointed October 2006
Mr Gresham is a geologist with a distinguished industry career of varied exploration,
operational and corporate experience both in Australia and internationally spanning over 40
years.
Previously he was Managing Director of Titan Resources, an active nickel explorer in
Western Australia, and roles prior to that have included Managing Director of gold miner
Wiluna Mines Limited, General Manager – Exploration for Homestake Gold of Australia, and
several senior executive roles with Western Mining Corporation (WMC) including Chief
Geologist of the Kambalda Nickel Operations, and Executive Vice President Exploration for
WMC’s Canadian subsidiary Westminster Canada Ltd.
Mr Gresham’s extensive professional experience covers numerous mineral deposit types
and he has authored a number of professional papers on the Kambalda nickel deposits and
the Olympic Dam copper-uranium deposit, and has a B.Sc (Hons) degree from the Victoria
University, Wellington, New Zealand.
Mr Ian Mullholland - Managing Director, appointed November 2003
Mr Mulholland is a geologist with over 30 years broad experience in the exploration and
mining industry in a number of commodity groups including gold, silver, copper, lead, zinc,
uranium, nickel and kaolin. He has been Managing Director of Rox Resources since it’s
inception, and prior to that he managed activities from grass roots exploration to advanced
resource definition, feasibility studies and mining operations for a number of major, medium
sized and junior companies including WMC, Esso, Otter Gold, Aurora Gold, Anaconda
Nickel, Archaean Gold, Summit Resources and Conquest Mining. His strength is in bringing
resources to economic fruition and his experience is particularly appropriate for his role with
Rox.
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Rox Resources Ltd (RXL) 19 November 2014
Mr Mulholland has been involved in the Nimbus silver-zinc project, the Mt Martin, Mt Muro,
Toka Tindung, Tanami and Mt Carlton gold-silver projects, the Murrin Murrin, Weld Range,
Marshall Pool, Lawlers and Cawse nickel projects, the Valhalla and Olympic Dam uranium
projects, and the Mt Windsor VMS copper-lead-zinc projects.
Mr Mulholland has a B.Sc. (Hons), Geology from the University of Sydney and a M.Sc. in
Exploration and Mining Geology from the James Cook University of North Queensland. He
is a Fellow of the AusIMM, the AIG, and the Society of Economic Geologists.
Mr Brett Dickson - Finance Director, appointed April 2010
Mr Dickson has over 30 years experience in the financial management of companies,
principally companies in early stage development of its resource or production, and offers
broad financial management skills. He has been Company Secretary and Chief Financial
Officer (CFO) for a number of successful resource companies listed on the ASX, and in
addition to Rox Resources currently also acts as Company Secretary and CFO for Azure
Minerals Limited.
He has had close involvement with the financing and development of a number of Greenfield
resources in the oil and gas and mineral sectors. Mr Dickson is a Certified Practising
Accountant with a Bachelors Degree in Economics and Finance from Curtin University.
SOURCE: RXL WEBSITE ACCESSED 17/11/2014
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Rox Resources Ltd (RXL) 19 November 2014
Mineral resource estimates
Table 3 - Fisher East nickel resource
Mt % Ni kt Ni
Camelwood
Oct-13 Measured
Indicated 0.6 2.4 14
Inferred 1.0 2.1 21
Total 1.6 2.2 35
Musket
Sep-14 Measured
Indicated 1.2 2.0 24
Inferred 0.9 1.5 14
Total 2.1 1.8 38
Total
Sep-14 Measured
Indicated 1.8 2.1 37.8
Inferred 1.9 1.8 34.3
Total 3.6 2.0 72.1
SOURCE: COMPANY DATA AND BELL POTTER SECURITIES ESTIMATES
Table 4 - Mt Fisher gold resource
Mt g/t Au koz Au
Feb-12 Measured 0.2 4.11 23
Indicated 0.2 2.8 19
Inferred 0.6 2.3 45
Total 1.0 2.8 86
SOURCE: COMPANY DATA AND BELL POTTER SECURITIES ESTIMATES
Table 5 - Reward zinc-lead resource
Mt % Zn % Pb % Zn+Pb kt Zn kt Pb
Myrtle 3% Zn + Pb cut-off
Mar-10 Measured
Indicated 5.8 3.6 0.9 4.5 205 52
Inferred 37.8 4.2 1.0 5.1 1,575 361
Total 43.6 4.1 0.9 5.0 1,780 413
Myrtle 5% Zn + Pb cut-off
Mar-10 Measured
Indicated 1.2 5.4 1.4 6.8 64 17
Inferred 14.1 5.5 1.4 6.8 768 196
Total 15.3 5.4 1.4 6.8 832 213
SOURCE: COMPANY DATA AND BELL POTTER SECURITIES ESTIMATES
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Rox Resources Ltd (RXL) 19 November 2014
Capital structure
Table 6 - RXL capital structure
Issued shares (including performance shares) m 850
Share price $ 0.03
Market cap $m 28
Net cash $m 5
EV (undiluted) $m 23
Options (in money) m 6
Issued shares (diluted) m 856
Market cap (diluted) m 28
Net cash + options $m 5
EV (diluted) $m 23
SOURCE: IRESS & RXL ASX RELEASES
Table 7 - Major shareholders
Major shareholders % m shares
Drake Private Investments 4% 32
Rox Directors 3% 25
Other 93% 792
Total 100% 850
SOURCE: IRESS & RXL ASX RELEASES
Table 8 - RXL share register history
Date Event Shares
Options
Added Ordinary Added Total
FY08
58
FY09
51 109
FY10
109 218
FY11
138 355
34
1/07/2011 Expiry of options
355 -30 4
18/07/2011 Issue of shares 4 359
4
26/07/2011 Issue of shares 4 363
4
9/02/2011 Issue of shares 20 383
4
10/08/2011 Issue of shares 15 398
4
22/11/2011 Issue of employee options 0 398 1 4
2/10/2012 Lapse of options 0 398 -4 1
3/12/2012 Share purchase plan 92 491 9 9
12/12/2012 Capital raising 10 501
9
15/02/2013 Capital raising 90 591
9
6/12/2013 Share purchase plan 75 665
9
27/02/2014 Issue of employee options 0 665 1 10
25/03/2014 Capital raising (shares & options) 69 734 6 16
4/04/2014 Capital raising (shares & options) 11 745 13 29
26/09/2014 Capital raising (shares & options) 101 846
29
30/09/2014 Capital raising (shares & options) 4 850
29
SOURCE: IRESS & RXL ASX RELEASES
Page 15
Rox Resources Ltd (RXL) 19 November 2014
Rox Resources Ltd (RXL)
Company description – diversified base metals explorer
RXL is a mineral exploration company with Australian based projects: Fisher East nickel
(Western Australia, RXL 100%); Reward zinc (Northern Territory, RXL 49%, Teck earning
into 70%); and Bonya copper (Northern Territory, RXL earning 70%).
Investment thesis – Buy (Speculative) TP$0.06/sh
RXL is a highly Speculative investment with significant exploration and development risk.
Our Buy (Sepeculative) rating is supported by: positive news flow from the Fisher East
nickel project and a solid fundamental nickel price outlook; Teck continuing its 70% earn-in
at the Reward zinc-lead project; and Bonya continuing to exhibit high-grade intersections
within close proximity to another potential copper development in that region.
Valuation: Sum of 3 key projects – Fisher East, Reward, Bonya
RXL is a highly speculative investment with projects in pre-scoping study stage. We have
therefore not undertaken detailed financial modelling of potential projects. Our RXL
valuation is heuristic based.
RXL’s value is leveraged to the success of three projects:
- Fisher East nickel and its potential for a successful mine development in the near
term;
- Reward zinc, Teck’s earn-in and ultimately its development aspirations; and
- Bonya copper and its potential to be a meaningful ore contributor to a development in
that region.
We factor in RXL raising an additional $5m (at $0.03/sh) over the next six months to fund
ongoing exploration and administration.
Risks
Risks to resources sector equities include, but are not limited to:
- Commodity price and exchange rate fluctuations. Future earnings and valuations
of exploration, development and operating resources companies are subject to
fluctuations in underlying commodity prices and foreign currency exchange rates.
- Infrastructure access. Commodity producers are reliant upon access to transport
infrastructure. Access to infrastructure is often subject to contractual agreements,
permits, and capacity allocations. Agreements are typically long-term in nature (+10
years). Infrastructure can be subject to outages as a result of weather events or the
actions of third party providers.
- Operating and capital cost fluctuations. Markets for exploration, development and
mining inputs can fluctuate and cause significant changes to operating and capital
costs. Key mining operating costs are linked to energy and labour costs.
- Resource growth and mine life extensions. Future earnings forecasts and
valuations may rely upon resource and reserve growth to extend mine lives.
- Sovereign risks. Mining companies’ assets can be located in countries other than
Australia and are subject to the sovereign risks of that country.
Page 16
Rox Resources Ltd (RXL) 19 November 2014
- Regulatory changes risks. Changes to the regulation of infrastructure and taxation
(among other things) can impact the earnings and valuation of mining companies.
- Operating and development risks. Mining companies’ assets are subject to risks
associated with their operation and development. Risks for each company can be
heightened depending on method of operation (e.g. underground versus open pit
mining) or whether it is a single operation company. Development assets can be
subject to approvals timelines or weather events, causing delays to commissioning
and commercial production.
- Funding and capital management risks. Funding and capital management risks can
include access to debt and equity finance, maintaining covenants on debt finance,
managing dividend payments, and managing debt repayments.
- Corporate/M&A risks. Risks associated with M&A activity including differences
between the entity’s and the market’s perception of value associated with transactions.
Page 17
Rox Resources Ltd (RXL) 19 November 2014
Bell Potter Securities Limited ACN 25 006 390 7721
Level 38, Aurora Place 88 Phillip Street, Sydney 2000
Telephone +61 2 9255 7200 www.bellpotter.com.au
Recommendation structure
Buy: Expect >15% total return on a
12 month view. For stocks regarded
as ‘Speculative’ a return of >30% is
expected.
Hold: Expect total return between -5%
and 15% on a 12 month view
Sell: Expect <-5% total return on a
12 month view
Speculative Investments are either start-up
enterprises with nil or only prospective
operations or recently commenced
operations with only forecast cash flows, or
companies that have commenced
operations or have been in operation for
some time but have only forecast cash
flows and/or a stressed balance sheet.
Such investments may carry an
exceptionally high level of capital risk and
volatility of returns.
Research Team
Staff Member
TS Lim
Industrials
Sam Haddad
John O’Shea
Chris Savage
Jonathan Snape
Sam Byrnes
Bryson Calwell
John Hester
Tanushree Jain
Financials
TS Lim
Lafitani Sotiriou
Resources
Peter Arden
Stuart Howe
Fred Truong
Quantitative
Tim Piper
Title/Sector
Head of Research
Industrials
Industrials
Industrials
Industrials
Industrials
Industrials Associate
Healthcare
Healthcare/Biotech
Banks/Regionals
Diversified
Resources
Resources
Resources
Research Assistant
Phone
612 8224 2810
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613 9235 1633
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613 9235 1601
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613 9235 1853
612 8224 2871
612 8224 2849
612 8224 2810
613 9235 1668
613 9235 1833
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612 8224 2825
@bellpotter.com.au
tslim
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ANALYST CERTIFICATION Each research analyst primarily responsible for the content of this research report, in whole or in part, certifies that with respect to each security or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about those securities or issuers and were repared in an independent manner and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by that research analyst in the research report.