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North River chief sets out road-map to production

Published: 07:30 13 Aug 2015 EDT

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North River plans to use first phase funding for underground development.

North River Resources' (LON:NRRP) chief James Beams said there is a positive dialogue with Namibian authorities ahead of the granting of a mining licence for the Namib lead-zinc project.

“It [the mining licence] might arrive anytime and we have very good engagement with the ministry,” he told Proactive Investors.

“But the company does not have control over the process, or when the licence will be granted.”

The approval will start the countdown to production for a 250,000-tonne-a-year operation, which could be up and running in 18 months at a cost of up to$30mln.

Earlier this week, North River announced an interim US$4mln financing proposal underwritten by cornerstone investor Greenstone Resources, subject to shareholder support at a general meeting later this month.

The mining-focused private equity house currently has just under 30% of North River.

The stake may grow if the proposed placing and open offer of new stock is not fully subscribed and Greenstone makes up the shortfall.

This first phase funding is crucial in that it allows the company to maintain progress in advancing the project to a construction decision while waiting for the licence.

The work programme will include initial work on front-end engineering and design of the processing plant, early development of the Namib north decline and development of an exploration drive in the northern portion of the deposit.

Underground work will provide access for underground exploration drilling at depth to increase the resource base in order to expand the life of mine from the current three-and-a-half years.

“I am keen to continue with the development programme that will allow us carry out the next phase of exploration drilling to grow the relatively short initial mine life,” Beams told Proactive.

The North River CEO reckons development of the plant should be fairly straightforward and he is looking at opportunities to get costs down from the capital cost estimates in the feasibility study.

“We will explore opportunities to source portions of the plant from China, and cautiously, any good quality second-hand equipment that is a good fit with our design,” he said.

“The critical path for what is a fairly short construction period is not on the building of the fairly straightforward plant, but rather on development of the mine to feed that plant.”

The first phase financing proposal just announced will be followed by a larger debt and equity funding package required to develop the plant and mine.

Once it has secured its licence to mine Namib, Beams is confident that North River can move quickly to find the funding required for construction.

“We have been working with a number of parties through due diligence so we have quite a few potential interested parties that are already familiar with the project,” he explained.

Namib’s definitive feasibility study, published last November, ascribed a net present value of over US$50mln to the resource, and reckons it will take as little as a year to repay the initial investment in the mine.

However, there is more to the opportunity than a short-life mining play, which is why Beams is keen to advance further underground exploration.

“The size of the resource is just a factor of the easily accessible drilling to date,” said Beams.

In the northern part of the deposit the resource has been compiled from surface drilling to date down to only 150 metres.

An electromagnetic survey suggests continuation of the mineralisation as far down as 7-800 metres – so there is plenty of exploration upside to Namib.

The broker RFC Ambrian, which has just taken over as broker to the company, said the feedback it has received on North River to date has been “really good”.

In a note to clients, analyst Jonathan Williams said: “Investors like the story. The project is what is known as ‘deliverable’: it’s a brownfield deposit in a good jurisdiction with low upfront capex, a high IRR [internal rate of return] with a quick payback for a commodity that is performing well and is sought after. What’s not to like?”

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