13th February 2012 Analyst: Dr Michael Green
Regency Mines* - Good thickness and grades confirm the potential of the Mambare Nickel Laterite Project. Speculative Buy at 2.45p with a 4.2p target price
Regency Mines, the nickel and copper explorer, has announced positive drilling results from the Mambare Nickel Laterite Project in Papua New Guinea. These included the highest nickel grade yet recovered of 3.258%, along with 0.12% cobalt over a one metre interval at a depth of 16 metres below the surface (MAM-KK-0051). Results from the Plateau (Area 1) and the North Ridge Extension (Area 2) revealed thickness including 20.4 metres at 0.87% Nickel, 0.17% Cobalt from 6.60 metre depth (MAM-KK-0055, Area 1) and 23.35 metres at 1.10% nickel, 0.04% Cobalt from 4.05 metre depth (MAM-KK-0040, Area 2). So the latest results show good thicknesses and grades from both the Plateau and the North Ridge Extension with nickel grades in excess of 1% found in 27 out of the first 32 holes reported so far from a 200-hole program. What is so exciting is that the Plateau area which measures 5 kilometres by 16 kilometres has never been previously drilled; past exploration had been focused on the North Ridge Extension (Area 2) zone and on the lower southern slopes of the Plateau in 2008 where access is easier. So these results confirm the potential for significant grade and tonnage of the Plateau (Area 1) zone at Mambare as well as at Area 2 which really seems to point to a world class project.
The real key to unlocking the value at Mambare is the technology necessary to extract nickel cost effectively and in this respect the management is leaving nothing to chance by taking a key stake in Direct Nickel Limited (DNi) and recruiting DNi to become their joint venture partner in this project. Regency has just announced preliminary leach results using material from the drill samples Test number 387 from the middle of the mineralised profile gave excellent nickel and cobalt extraction of 99.1% and 98.0% from the standard DNi atmospheric leaching test run over five hours. Test number 390 was based on a high iron, low magnesium sample with high cobalt value at 0.23% from the upper limonitic portion of the mineralised laterite profile extracted 92.2% nickel with the majority being leached in the first two hours. At the time Graham Brock, Chief Technical Officer of Direct Nickel commented that: “There are pleasing results for the very first leaches conducted on samples from the 2011 exploration programme. Whilst the samples are not necessarily representative of any particular zones they provide encouraging information at this early stage.”
This year, the Mambare Nickel Laterite Project looks like it will really begin to take shape with further assay results expected in the coming weeks. The drilling programme has been well-designed to allow for the identification of a JORC-compliant resource.
The Mambare Nickel Laterite Project looks to be a world class asset which the company now holds in a joint-venture with Direct Nickel. DNi has technology which can process nickel laterites cost effectively, which is the key to unlocking the true potential of Mambare. This tropical laterite deposit forms the 20 kilometre long by 5-7 kilometre wide Mambare Plateau which rises prominently from the surrounding land and is far larger than the Wowo Gap project. Work by Regency has estimated that this plateau has the potential for 4.75 million tonnes nickel and 200,000 tonnes of cobalt. The drilling program continues with both partners keen to see a JORC resource being identified as soon as possible, which would probably provide the spark for this joint-venture to gain its own listing. Looking at the grade of the assay results received to date, Mambare looks like it is shaping up to be not just bigger but also with a higher grade compared to many of the new laterites mines that have come on stream in recent years.
Regency Mines Australasia seems to be being readied to become a base metal exploration vehicle that could soon be floated under its own identity. The team has made an important discovery in West Australia (WA) of the high grade sulphide which may point towards some type of mineralisation and has caused a scramble for the surrounding licences by competitors, such as Trilogy, that already has a substantial nickel discovery to the south west. Their geologists could well be opening up a new copper region in Queensland. The truth is that Bundarra has been known about for a couple of centuries and it has been the site of many small copper mines. But for the first time Regency has united all the licences. Bundara has been neglected but it is certainly a copper target worth looking at especially using new exploration techniques that are already beginning to hint at the sort of potential that may exist here. Good progress from exploration at Bundarra coupled with and a beefing up the team on the ground down under has created a structure which could allow for Regency Mines Australasia to be spun-off into its own quote.
Valuation
Regency was created with a twin strategy of being a mining and mining technology finance house alongside its exploration activities. Very early in its history, the firm floated off Red Rock Resources, which has tended to hog the limelight. In well-timed acquisitions and deal making Regency’s iron ore interests were spun-off into Red Rock where the company continues to hold a 18% stake. These iron ore projects are now part of ASX-listed Jupiter Mines Limited (JML), which is being developed into a steel feed business by Pallinghurst Resources - the investment vehicle of ex-BHP CEO Brian Gilbertson.
Today Regency offers a lot more to investors than just being a cheap way into Red Rock for a number of reasons. Firstly, the 50% stake in the Mambare. Secondly, Regency Mines Australasia has gained a number of licences covering copper, nickel oxide and gold in Australia, which really deserve a separate listing. Thirdly, Regency has a stake in AIM-quoted Oracle Coalfields which possesses a large JORC coal resource in Pakistan and which looks as though it will be important in helping to meet the energy needs of the Sindh Province. Our recommendation is a Speculative Buy at 2.45p with a target price of 4.2p.
probably a lesson in there somewhere.
