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Rocky Mountain Resources

Rocky Mountain Resources: sets its sights on Vanadium production

Rocky Mountain Resources clearly has been doing something right.  Since 2007, the company’s share price has climbed from around C$1.00 per share to a peak of $2.50 earlier this year and is currently at the $1.80 mark.  

Any mining junior with a project and a promotion attached to it could boast a rising share price in 2007, but in 2008 the story has been very different.  Mainstream commodities, like gold, copper, nickel, oil and platinum enjoyed strong runs up until early 2008, but have recently haemorrhaged back and forth, but mostly back.  This has undermined sentiment in the vast majority of commodity related companies, and many companies have witnessed falls of 50-75% in their share price this year along.  That puts Rocky Mountain Resources share price into context – it has performed strongly against its peers.

So why is Rocky Mountain Resources looking so strong when others aren’t? Well, perhaps somewhat surprisingly, the market appears to ‘get’ this company.  It would be easy to say there has been a pull back in commodities, but the devil is always in the detail. In fact, not all commodities have suffered the same fate.  Molybdenum, Vanadium, Tungsten, Chromium and some other ‘minor metals’ have continued to perform well.  All four of the metals aforementioned share one thing in common – all are used to enhance the characteristics of steel..  

For Rocky Mountain Resources, the name of the game is Vanadium.   Vanadium doesn’t grab many headlines, but looking at the recent price performance, it probably should!  The Vanadium (V2O5) price is currently hovering around $16 per pound, near all time highs, and has shown itself to be in very high demand.  The problem is, like so many metals used in the enhancement of steel, the market for Vanadium is small, and the number of supplier’s limited. Most Vanadium production is the result of being a by-product of other minerals.  So while it can be a tasty credit for a mining company, it normally isn’t the primary focus. Rocky Mountain Resources is one of a handful of listed companies where primary Vanadium production is an ambition.  Ambition may not be the right choice of words however, as Rocky Mountain Resources isn’t some grass roots explorer.

Rocky Mountain Resources most advanced project is the Gibellini Property in Eureka County, Nevada. At Gibellini, the company has a 43-101 compliant indicated resource of 20.79 million tonnes grading 0.338% Vanadium Pentoxide (‘V2O5’) and a further 0.87 million tonnes grading 0.277% V2O5V2O5 in the inferred resource category. This resource is based on a 0.1% V2O5 cut-off and at a price for V2O5V2O5 of $5.50 per pound.  What makes Gibellini even more intriguing is the nature of the Vanadium.   At the cutoff of 0.1% V2O5, the gross value of the metal in the rock would be $32 per ton at the current price of $16 per pound V2O5.

Vanadium mining and extraction can be a complicated process, with the end product usually being ferrovanadium (Iron mixed with V).  At Gibellini, overburden is non-existent, which has allowed for nature’s natural processes to get to work, oxidising the Vanadium.  The net result for Rocky Mountain is that Gibellini could very well be the first Vanadium mine in the world that is amenable to a heap leach operation. Heap leach operations are monumentally cheaper than other extraction techniques, and are comparatively simple to run.  This puts Rocky Mountain in the driver’s seat, with a Vanadium deposit that could become a serious low cost producer.  Nevada is loved by mining companies for its infrastructure, access, power and workforce availability, which combined with a good project, allows mining operators to generate substantial cash flow.  Rocky Mountain’s situation is no different.  
Gibellini isn’t a mine yet however.  The company is putting the finishing touches on a scoping study, with results expected in the next few weeks.  Once that is complete, and assuming a positive outcome, the next step is likely to be a full feasibility study. That will likely include shipping a considerable amount of material away for further metallurgical testing. Rocky Mountain Resources is aiming for commencement of production in 2010-2011-2012, which suggests investors can expect a feasibility study on their lap in 2009, with financing and permits ideally sorted in 2010, including off-take agreements, later that year to allow mine development to start in early 20102011.  That’s not far away at all, and puts the company on a path to production in around two  to three years.

Rocky Mountain Resources ambition to move into production shouldn’t be perceived as flippant either.  This goal was strongly underlined by the appointment of Thomas DeMull as CEO and President of the Company. Mr. DeMull is no promoter or exploration geologist, he is an engineer, and engineers build things!  Tom brings to the table over three decades of experience in the mining industry – and has plenty of experience in the development of new projects, including the development of three metallurgical plants in Nevada and Indonesia in recent years.  Since 1984, he has worked on 8 new mine development projects, six of which became producing mines.  At Rocky Mountain, Tom is working on development projects 9 and 10, with the expectation that Gibellini will be notch number 7 in his miner’s belt and that the new acquisition, Paris Hills, will be the eighth.

Most mining juniors would probably be content with a project of the size and quality of Gibellini.  Not so here, where the company is constantly keeping one eye on the future, and announced last week that it has snatched up a considerable phosphate-vanadium project in Idaho, named Paris Hills. Paris Hills is no stranger to exploration, and received considerable attention in the 1970’s, by Earth Sciences, Inc., including drilling, 3600 feet of tunnelling, metallurgical testwork, environmental impact studies and engineering work.  Between 1976 and 1977 ESI reported a total resource of 304 million tonnes of phosphate rock with an average grade of 26.8% Phosphorus PentoxidePhosphate  (‘P205’) and 44 million tonnes of V205 over 3,300  acres of the property.  The vanadium mineralization included 6.7 million tonnes of proven and probable resource grading 0.88% V2O5.  Even before Earth Sciences appeared on the scene, the area had already been the subject of small scale underground mining in the 1910's and 1920's at Paris Canyon and Bloomington Canyon. Historical resources such as the one at Paris Hill cannot be reported under NI 43-101 reporting standards until considerable work can been conducted to confirm the data, and that is exactly what Rocky Mountain Resources intend to do, starting with a 7000 foot, 12 hole drill program this autumn to test ESI’s numbers.  

Paris Hills is quite different from Gibellini.  First and foremost, it is a considerably larger project, and would be an underground mine. This clearly involves a much larger budget to advance to development.  At is stands right now; Phosphate fetches around $450/tonne, buoyed by strong demand from its primary use – fertilizer.  The  formation consists of two phosphate beds, an upper bed with 25% P2O5 that is 15 feet thick, and a lower bed which averages 6.8 feet thick and contains 30% P2O5. 170 feet of waste shale separates the upper and lower phosphate beds.  Immediately below the upper phosphate bed is a vanadium bearing bed that is 11 feet thick.  This bed also contains phosphate averaging 12% to 13% P2O5, in addition to the vanadium.  Historic test results show that the phosphate can be upgraded to market quality.. Initial thoughts from Tom DeMull, are that the project would likely involve mining out both layers from one underground operation, with the possibilities to produce phosphate rock or fertilizer along with either vanadium pentoxide or ferrovanadium.

So the horizon looks rather nice for Rocky Mountain Resources at the moment. Gibellini offers an attractive asset that could get the company into production and cash flow in two to three years. By then, Paris Hills would be further along the development path, and cash flow from Nevada could be directed towards Idaho to help fund the larger capex requirements.  At the moment, this may sound all a bit too far in the future, but for Rocky Mountain Resources, it has firmly set its sights on production – and that is exactly what the market wants to hear.

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