Northern Miner article....https://www.northernminer.com/news/freeport-dollars-endorse-reservoirs-cukaru-peki-prospect/1003696507/
Freeport cash backs Reservoir's high-grade Cukaru Peki prospect
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2015-07-29
After markets closed on Monday, Reservoir Minerals (TSXV: RMC; US-OTC: RVRLF) reported a drill intercept of 84 metres grading 10.75% copper and 10.86 grams gold (17.26% copper equivalent) including 46 metres of 15.85% copper and 16.77 grams gold (25.91% copper equivalent) from its Cukaru Peki deposit in eastern Serbia.
The deposit, part of the Timok project, is a joint-venture between Reservoir and a subsidiary of Freeport McMoRan Copper & Gold (NYSE: FCX), which currently owns 55% but will own 75% when it completes a bankable feasibility study.
Freeport has committed US$18.7 million to exploration this year at Cukaru Peki, which contains significant copper-gold high-sulphidation and porphyry copper-gold mineralisation.
Raymond Goldie of Salman Partners in Toronto called the intercept “remarkable” and reasoned that it “increases the chances that Freeport and Reservoir could begin production from Cukaru Peki before they get around to permitting, financing, and building a mill.”
“Material with grades that were even a fraction of those reported ... could be dug up and sold, without further processing, directly to the smelter just down the street,” the mining analyst wrote in a research note. “Freeport McMoRan is very much in the mode of conserving cash, not spending it. Yet [it] is budgeting US$18.7 million in exploration expenditures at Timok, which is an extraordinarily strong endorsement of the project.”
Goldie has a 12-month target price of $10.60 per share on the stock, which currently trades closer to $4.15 per share.
Among the latest batch of assay results released on July 27 were intercepts of 43 metres grading 0.51% copper and 1.33 grams gold (1.31% copper equivalent) in drill hole TC140055; 189 metres of 3.37% copper and 3.86 grams gold (5.69% copper equivalent) in drill hole TC140058; and 9.6 metres averaging 15.26% copper and 15.69 grams gold (24.67% copper equivalent) in drill hole TC150059.
An inferred resource encompassing just the upper zone of Cukaru Peki contains 65.3 million tonnes grading 2.6% copper and 1.5 grams gold per tonne (3.5% copper equivalent). The resource estimate was completed in January 2014 and was reported above a 1% copper-equivalent cut-off grade.
Directly below the upper zone, which runs from a depth of about 400 metres to a depth of about 600 metres, is a porphyry zone that starts from a depth of about 800 metres and runs to a depth of at least 1,000 metres.
The potential of the porphyry zone is what excites Freeport about the project, Reservoir’s president and chief executive, Simon Ingram, tells The Northern Miner.
“They’re very much interested in the big deposits,” he says. “What gets big companies like Freeport excited is having these very large, long-lived mines. We know the deposit size in the district is a billion-tonnes plus.”
Indeed, Cukaru Peki’s discovery zone is about 7.5 km from the base of the Bor open-pit copper mine, which operated for 100 years before closing down seven years ago, Ingram says, adding the district is ripe with potential.
Currently there are four drill rigs operating at Cukaru Peki that are focusing on infill drilling the deposit’s upper zone and also trying to ascertain the lateral extent of the underlying porphyry type copper-gold mineralization, or the lower zone.
The company says technical studies to support a scoping study of the upper zone are underway and should be completed in 2016.
Reservoir believes there is potential for a proportion of the high-grade mineralization to be mined and shipped direct to smelter (DSO) after size-reduction processing, but without the need for pre-concentration.
Like Goldie of Salman Partners, Ingram emphasizes that Freeport’s willingness to invest millions of dollars exploring Cukaru Peki is a huge endorsement of the project. “If you see Freeport’s budgets for greenfield projects, they’re basically not spending anything, or virtually nothing, on greenfield projects apart from us, and that is a particular commitment in a market like this because you don’t get a return on your investment because it’s exploration,” he continues. “There are not many companies that have four drill rigs on an early stage project ... With a partner like Freeport, this is a project that has a very good chance of being built.”
Ingram notes that the key to the project is not only that it has rich grades but that it’s in the heart of Europe where a tremendous amount of infrastructure already exists. In addition, Serbia has a long mining history.
“We’re a few km away from a railway line and a power line and close to a government-owned smelter that has just been upgraded and has a lot of capacity,” he continues. “There is also a lot of people employed in mining in the district, and there’s a lot of support for mining at the government and local levels.”
Reservoir has operated in Serbia for the last decade, and Ingram describes the country as “a good system to work in” with a decent, clear and “positive” mining code. Under the code, miners are subject to a 15% corporate tax rate and a net smelter return royalty of 5%. “When you net those together it’s pretty competitive compared to other countries in the world,” he says.
Ingram also argues that the permitting process is quite straightforward. “You apply for a licence, you put forward a work program with a budget, and you get a three-year licence initially," he explains. You then must submit annual reports and you can renew the licence for two years and then for another two years, for a total of seven years, during which time you must complete a feasibility study.
In addition to Cukaru Peki, Reservoir has four other licences in the Timok belt that surround the discovery, four licences for a sediment-hosted copper project, and two lead-zinc licences. Outside Serbia, the company has two licences in Romania, four in Macedonia, and a couple in both Cameroon and Gabon.
Reservoir has a market cap of about $200 million.
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