Red Rock Resources, the AIM-listed mineral exploration and development company, says it has entered into an agreement with Kansai Mining Corporation under which Red Rock may acquire up to 60% of the issued share capital of Mid-Migori Mining Company Ltd (MMM), a wholly-owned subsidiary of Kansai. MMM is incorporated in Kenya and owns the beneficial title and mining rights to the Migori Gold Project in south-western Kenya which consists of two contiguous special prospecting licences (the mining tenements).
The tenements are located approximately 290km west of Nairobi and cover 310.5km2 of the WNW-ESE-striking Migori Greenstone Belt lying just north of the Tanzanian border (see attached map). This belt hosts outcropping gold shows, structures and geochemical anomalies along the entire 68km strike length of the two tenements. It also hosts the famous Macalder copper-zinc-gold-silver volcanic massive sulphide (VMS) deposit, discovered by Falconbridge in the 1930s and mined until the early 1960s.
Commenting today, Red Rock chairman Mr Andrew Bell said:
"The Tanzanian craton just extends into Kenya, and due in part to its location this Kenyan belt has not attracted attention. There is potential here for the development of a gold field with several million ounces, including surface and high grade zones that can be brought into early production. Only the western 10km of the belt has been explored to any degree in recent times, and 1.17m ounces of gold in the Indicated Resource category has been identified, with a further 67,000oz in old mine tailings. There are numerous untested gold shows on the tenements, and the resource figure is expected to rise significantly on resumption of the incomplete 2007 drilling programme, which covers the existing resource areas. In addition, further VMS orebodies like Macalder may be present. This is an attractively structured deal, allowing us to produce and get cash flow as we explore. It is a huge opportunity for us, and potentially the company-defining event we have been looking for."
Under the terms of the agreement with Kansai, Red Rock has paid a non-refundable cash deposit of US$25,000 and has until September 10 to complete due diligence. Subject to a satisfactory outcome, the Company will then be allotted 15% of MMM's issued share capital in return for payment of US$725,000, comprising a mix of cash (US$350,000) and new Red Rock shares (US$375,000). Payment will be made in three tranches, the first on completion (which shall not be later than September 30), and the second and third tranches three and six months thereafter.
The number of shares to be issued will be determined by reference to the volume-weighted average price of Red Rock shares in the three days before each payment is due.
From completion, Red Rock will become manager of the mining tenements together with related information and intellectual property rights. It will also be responsible for 100% of exploration costs until completion of a bankable feasibility study (BFS).
Red Rock has the option to terminate the agreement at six months notice, and has six years to complete the BFS, at which point Kansai will issue or transfer a further 45% of MMM's issued share capital to Red Rock.
BACKGROUND NOTE
The westernmost 10km of the Migori Greenstone Belt has seen the most intense exploration to date, with four major zones of mineralisation identified and positive signs of further resource potential from scout drilling of other shows.
Kakula-Kalange-Munyu. An Indicated Resource of 679,000 ounces of gold contained in over 22m tonnes of material grading approximately 1g/t of gold. It has been identified over 3km of strike and drilled to a vertical depth of about 140m. Varying widths (10-60m) of low grade mineralisation envelop a high-grade (5-12 g/t) core up to 10m thick, extending along strike for about 1km and persisting in depth. Over 300 holes of exploration fence drilling have previously been completed.
Gori Maria is a 500m long strike zone with true widths of up to 100m, on which over 100 drill holes have been completed to a depth of over 150m. This has outlined an Indicated Resource of 8,600,000 tonnes grading approximately 0.9g/t gold (240,000oz contained). Much of the zone grades 1-2g/t gold, however, and there is no diminution of grade with depth.
The other two zones, MK and Nyanza, both have significant promise for higher grade mineralization, and further drilling is warranted.
MK, considered to be a highly prospective zone, has an Indicated Resource of 1,444,000 tonnes grading 2.32 g/t gold for 108,000oz gold, 63,000 oz of which is in material grading over 9g/t at shallow depth. Drilling to a vertical depth of about 100m has indicated there may be at least two further high-grade shoots present with some underground development completed from an adit 25m below outcrop. There is a possible strike length of over 700m.
Nyanza is a zone of multiple gold bearing veinlets and stockworks with some high grade intersections running in excess of 1oz/tonne gold. The current Indicated Resource is 842,000 tonnes at 5.32g/t gold for 144,000 ounces. The zone has been identified over about 300 metres along strike but remains open, and drilled to a vertical depth of less than 100m.
A late 2007 drill programme aimed at raising the resource base to over 2,000,000 oz gold was curtailed when the drill company withdrew its rigs from the country during the period of instability that followed the Presidential election. Samples from the completed holes at Kakula, Gori Maria and Macalder were analysed, but no revision of the 43-101 resource base has yet been carried out, pending the completion of the programme with planned holes at MK and Nyanza.
Any net income generated by sale of minerals from the mining tenements will be applied to acquisition payments, then to finance exploration up to completion of a BFA and, finally, to pay dividends to the shareholders of MMM.
