The sale of Rox Resources’ 30% interest in the Reward Zinc Project to its joint venture partner Teck Australia for around $20 million represents a transformational event in the life of one of Australia’s most awarded and respected exploration companies.
“We knew the market wasn’t valuing our interest in the Reward zinc project, so we were able to conclude a smart corporate deal to monetise our investment, and now we will be fully funded for several years and have a strong focus on nickel.
We already have our exciting Fisher East nickel sulphide project in the Northern Goldfields of Western Australia, and we recently acquired the Collurabbie nickelgold project located just 70km from Fisher East.
Collurabbie has the potential to add value to our nickel operation at Fisher East and there’s also good gold potential there too,” Rox managing director Ian Mulholland said.
Despite the recent downturn in exploration expenditure across Australia since the end of the resources construction boom, Rox has been one of the few exploration companies to maintain an active exploration program during the downturn, and the benefits are now paying off.
“The resources sector is all about timing and cycles. You need to explore when commodity prices are low so you can define your resources, conduct your studies and get your project into production just as the price cycle swings upwards again. The key is to capture the upside of the commodity price cycle and ensure your operating costs are low enough to remain profitable even at the bottom of the price cycle.
We see nickel prices starting to improve, driven by increased demand and reductions in stockpiles, but it’s still a few years away from peaking. Our aim is to position Fisher East to come into production with the next peak in nickel prices,” Mulholland said.
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Now that Rox is fully-funded for the foreseeable future, Mulholland says it’s a good time for the company to review its corporate strategy and look for new opportunities to generate value for shareholders.
Investors want growth and we’ll be able to fund that growth after monetising the Reward project.
As explorers, we are naturally inquisitive about new opportunities in the exploration sector, and now is a good time to assess our options. While we’re conducting a thorough review of these opportunities, we’ll also continue to drill our WA nickel projects and advance them towards production, while also testing the gold potential at Collurabbie,” Mulholland said.
Drill core from Fisher East showing extent of nickel sulphide intersection
Rox will receive approximately $20.6 million from Teck Australia for the Reward zinc project. Teck will make Rox a $8 million cash payment immediately, and will either give to Rox tradeable and un-escrowed shares in one or more ASX or TSX-listed companies to the value of $3.6 million, or alternately Teck can make an additional cash payment of $2.6 million, plus Rox will also receive a three-year promissory note from Teck with a face value of $5.25 million at a 10% per annum interest rate, and a deferred payment of $3.75 million, payable on completion of a bankable feasibility study (BFS) or the expiry of six years, whichever comes first.