2018.12.30

A new copper and battery metals play in Saskatchewan is out of the gate with an oversubscribed private placement of $1.7 million.

Rockridge Resources (TSX-V:ROCK) – a new company that IPO’d about a year ago – has an option on the Knife Lake Copper VMS project currently owned by Eagle Plains Resources (TSX-V:EPL).

The 85,196-hectare property is about 50 kilometers northwest of Sandy Bay, SK and within the Flin Flon-Snow Lake mining district, a prolific greenstone belt. Since the initial discovery of mineralization in 1915, the Flin Flon camp has produced over 170 million tons of sulfide ore from 31 volcanogenic massive sulfide (VMS) deposits, worth over $25 billion.

Hudbay Minerals owns three mines – 777, Lalor and Reed – and a processing facility at Snow Lake. The mines produce mostly copper and zinc, plus smaller amounts of gold and silver.

According to a press release issued Thursday, Rockridge has received approval from the TSX Venture Exchange for its option agreement with Eagle Plains, allowing the stock to resume trading, having been halted during the private placement.

Option agreement

Under the terms of the agreement, Rockridge can acquire the Knife Lake project by incurring exploration expenditures of C$3.25 million over four years, along with issuing 5,250,000 Rockridge shares and paying a total of $150,000 in cash.

Financing

In connection with the option agreement, Rockridge completed a non-brokered private placement, raising $1.694 million through 8,470,000 units sold at $0.20. Each unit consists of one common share and one warrant, giving each shareholder the right to buy another common share at $0.35, exercisable for five years. Proceeds from the oversubscribed private placement will go towards funding exploration at Knife Lake plus general working capital.

Of interest to current and potential investors is Rockridge’s tightly held share structure. Out of 21 million issued and outstanding shares, about 90% are held by insiders, management and close associates, leaving only 2 million shares in the public float. The company currently has an enterprise value of roughly $3.5 million – which is low considering the potential of the project. 

Steady copper supply is dependent on a few giant deposits that were discovered many generations ago and have been mined for decades – the median age for 2017’s top ten copper mines in terms of production is 95 years.

Project  

The Knife Lake Copper VMS project is an advanced-stage copper, zinc and cobalt exploration property. Over 400 diamond drill holes have been completed. Characterized as a “remobilized VMS deposit,” Knife Lake has about a 15m-thick mineralized zone containing copper, silver, zinc and cobalt. It dips 30 to 45 degrees eastward over a 4,500m-long strike.

The International Copper Association estimates that the demand for the metal for electric vehicles will rise to 1.74 million metric tons by 2027; that figure is currently at 185,000 metric tons. Energy research consultancy Wood Mackenzie is more cautious, expecting that number to reach 1.6 million metric tons by 2035. And according to global investment manager Aegon Asset Management, if electric vehicles make up 34 percent of the global vehicle fleet by 2040, that development would lead to an estimated 2.66 million metric tons of extra copper demand. Stratfor.com

The property has been extensively explored, with about $20 million spent so far. The first work was carried out between 1969 and 1973, including airborne geophysical surveys and soil sampling. The 1969 discovery hole returned 2.37% copper over 4.48m, including 3.5% over 2.5m. These days, anything over 1% is considered high-grade copper.

Exploration picked up again in the 1990s, but ceased when metals prices dropped. A company called Leader Mining punched in 350 holes between 1996 and 2001, and published a resource estimate in 1998, consisting of 20.3 million tonnes grading 0.6% copper, 0.1 g/t gold, 3.0 g/t silver, 0.06% cobalt and 0.11% zinc. Within this shallow resource is a higher-grade zone of 11 million tonnes grading 0.75% copper in addition to other metal credits (The resource estimates are historical in nature and are not NI 43-101 compliant). The property is estimated to contain between 300 and 350 million pounds of copper-equivalent.

“What’s exciting about it is it’s open along strike and at depth, it’s never been drilled deeper than about 100m, and it’s a big property, 85,000 hectares,” said Rockridge President and CEO Jordan Trimble, adding that VMS deposits typically occur in clusters. “So there’s strong potential to go and find additional deposits and zones of high-grade mineralization in the region.”

Last year, the mining leases on Knife Lake were allowed to lapse and Eagle Plains came in and re-staked the property. Trimble believes it’s the first time that’s ever happened in Saskatchewan which presented a very unique opportunity to acquire an advanced stage exploration project at pennies on the dollar.

Saskatchewan was named the second most attractive jurisdiction for mining investment after Finland, according to the latest Fraser Institute rankings. Earlier this year, the Saskatchewan and federal governments teamed up to offer about $2 million to help junior mining companies explore northern Saskatchewan and Manitoba. It is also worth noting that two larger mining companies are active in the area: Hudbay Minerals and Glencore.

News flow

Flush with over $2 million in the treasury, Rockridge is planning a $700,000 drill program to begin in February or March 2019. Trimble said the focus of the program will be confirmation drilling in the deposit area as well as expansion drilling and some exploratory holes. This will provide ample news flow in the first half of the new year.

Copper

The option agreement comes at the perfect time to be exploring for copper in Canada, one of the safest and mining-friendly environments in the world.

Demand for the “red metal” needed for construction (copper wiring), communications and auto manufacturing, is now part of the global transportation system shift from reliance on the internal combustion engine to electric vehicles. Copper is an essential component of EVs. That means copper demand is going to soar even higher than it already is.

According to a study by Bloomberg, a deficit in copper is likely to emerge around the year 2020. Despite the fact that the current project pipeline will add new supply in the short term,  the long-term trends show a less rosy picture for the availability of copper. The problem lies in the robust demand growth for copper. According to Bloomberg, demand for copper is growing at 3.7% per year, and is therefore significantly higher than the downwardly revised 3.2% supply growth. This year’s added supply of copper from new projects will peak, and will fall away dramatically as we move towards 2020. Bloomberg still sees the possibility of expanded production from existing mines, but after 2020 there really is no more flexibility. Copper deficits will emerge in 2020, according to Bloomberg

Second, we are on the cusp of a major change in the copper market, where supply is not going to be able to keep up with demand. A supply deficit is expected as soon as 2020. If supply can’t meet demand that means one thing: higher prices. It also means that governments (and companies) will be scrambling to get their hands on new copper properties to meet the demand. Nothing less than their economic growth is at stake. Without copper, construction and the automotive industries would grind to a halt. Maintaining a smooth supply chain is critical to growth.

Conclusion

For all these reasons I’ve got copper, and Rockridge Res. (TSX.V:ROCK) on my radar screen.

For more on bullish copper trends, read our Copper fundamentals still solid. Another must read is this excellent piece from mining.com These charts show just why copper price fundamentals are so strong.

 Richard (Rick) Mills

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Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified. Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.

Richard owns shares of Rockridge Resources (TSX-V:ROCK). ROCK is an advertiser on his site aheadoftheherd.com