Listened to a presentation today from Simon Ingram, CEO of Canadian junior explorer Reservoir Minerals, and heard an interesting story. Despite the absolute decimation of the Canadian junior market, Reservoir’s stock, at the time of writing, still stands at C$4.30, giving it a market cap of some $205 million. It is thus one of the top 10 mining related stocks on the TSX Venture Exchange. True this is well down on its heights achieved in March of a little over $7, but that represents a small fall from its peak in comparison with most of its peers in the Toronto junior mining sector.
So why does Reservoir stand out? It describes itself as a project generator and its primary exploration focus is in Europe’s Balkans region – specifically in Serbia, which it describes as very mining positive (the country had some significant copper and lead/zinc mines in the past), with excellent infrastructure and low power costs. The area it is primarily concentrating on is one of the world’s great porphyry copper belts which runs down through Serbia, Greece, Turkey, Iran and into Pakistan, with its primary project just 5km away from the big mining centre of Bor. This area has a tremendous mining history and still boasts an important copper mine and smelter, the latter is being upgraded and is looking for feed.
Here its main project is within its greater Timok concession area (around the old state-run Bor and Majdanpek mines) in JV with Freeport McMoran, which is picking up all the exploration costs. Freeport‘s exploration focus is very much on targeting large major world class copper projects and Ingram feels the Timok concessions have a high chance of containing one or more of such deposits.
On Reservoir’s key project area Freeport has so far earned a 50% stake, and if it takes it all through to bankable feasibility study stage will extend this to 75% but is carrying all exploration costs through to this stage. Within this concession area is the exciting Cukaru Peki prospect which Reservoir reckons will provide the core part of any subsequent major mine should Freeport decide to go ahead.
What is particularly interesting about Cukaru Peki is that drilling indicates a relatively small initial orebody (small in relation to a possible massive likely low grade porphyry which Reservoir reckons lies beneath it) but with an ultra-high grade section averaging around 9.6% copper and 5.8 g/tonne gold, and with sections grading around 14% copper which Reservoir sees as potentially direct shipping ore. Total inferred resource to date is put at 65.3 million tonnes grading 2.6% copper and 1.5 g/tonne gold for 1.7 million tonnes of contained copper and 3.1 million ounces of gold – but the ultra-high grade section at the top runs to 4.5 million tonnes grading an average 11.2% copper and 7.4 g/tonne gold, assessed as 15.7% copper equivalent – remarkably high grades in this day and age.
Even so Reservoir feels that Freeport could find this orebody too small unless it finds a massive porphyry feeder deposit underneath to develop as a major block cave mine. However, Reservoir has first refusal on buying back the Freeport share and feels it would have little difficulty in finding a partner to develop the smaller project given the high grades could mean an extremely rapid payback and there are all kinds of financing options available, including selling the gold stream for a period of years.
Reservoir also has a substantial amount of other ground in the area around Bor and Cukari Peki which it reckons has similar potential and some of which falls outside the Freeport jv ground. But again as a project generator, if it starts to find anything significant it will be looking for jv partners to carry much of the ongoing costs.
Despite Serbia hovering somewhere between the Russian sphere of influence and the EU, Ingram is very positive on Serbia as a mining destination. He notes that the government is committed to raising GDP contribution from mining from 2% to 5% by 2020, does not require government participation in new projects, has a stable tax/royalty regime, has recently introduced a new mining code and has inexpensive energy supply costs at approximately $0.06/kWh. It is very open to exploration and has, as he sees it, huge exploration potential along the Tethyan trend which runs right through the country. The country has a long history of mining and with a high unemployment level in the traditional mining areas sees a supportive local community.
Reservoir has a number of other Serbian projects under investigation, although Cukari Peki is very much its key project at the moment. It also has some African exploration interests but is primarily concentrating on Serbia. But what is perhaps most important is that it is in a good financial position to survive and continued weakness in precious and base metals prices with a treasury containing over $40 million in cash – a nice position to be in when many of its peers are struggling to remain afloat.