The last few months have not been kind to base metals explorers with many stocks in this sector down 50% or more. US/China trade tensions are to blame for much of the recent weakness in base metals such as copper and zinc, however, the long term outlook for these metals has seldom looked better. In particular, demand from electric vehicles is set to increase global demand for copper by more than 250% by 2030 according to Scottish consultancy Wood Mackenzie.
Short term market fears around the US/China trade war has delivered long term investors a unique opportunity to pick up base metals explorers/developers/producers at decade low valuations just as the electric vehicle revolution is beginning to take hold. This revolution will generate surging demand for copper, nickel, zinc, in addition to many other metals. Copper in particular, is set to benefit tremendously from the EV revolution due to the fact that a fully electric-vehicle requires 4x the amount of copper as a gasoline-powered vehicle (80 kilos for a fully electric-vehicle vs. 20 kilos for a gasoline-powered car).
The short term US/China trade war turmoil has sunk copper prices to US$2.60/lb and copper explorers/developers/producers have seen their share prices fall 2-3x more than the copper price itself (on a percentage basis). This situation has given long term investors the opportunity to pick up shares of copper juniors at deeply undervalued levels.
C$4.6 million market cap Rockridge Resources (TSX-V:ROCK) delivered the inaugural 43-101 compliant resource estimate for its flagship Knife Lake Project in Saskatchewan. Knife Lake is a copper-zinc-silver-cobalt VMS deposit in a similar geologic setting to the world-class Flin Flon metals belt to the south of the Knife Lake District. The maiden resource for Knife Lake consists of 3.8 million tonnes of indicated resources grading 1.02% Copper-Equivalent and 7.9 million tonnes of inferred resources grading .67% Copper-Equivalent. This maiden resource estimate gives Rockridge a good anchor with which to move forward from, and it’s important to note that Knife Lake is a near surface VMS deposit that starts a few meters below surface and remains open at depth and along strike for further resource expansion.
Earlier this year Rockridge drilled several impressive holes which intersected near surface high-grade copper over substantial widths including 33.1 meters grading 1.28% copper (1.49% copper-equivalent) and 37.6 meters grading 2.03% copper (2.42% copper-equivalent).
Rockridge CEO Grant Ewing offered the following comments on ROCK’s inaugural resource estimate and the company’s plans for the future:
“This first NI 43-101 resource estimate for the Knife Lake deposit represents an important milestone for the Company. The near surface resource serves as a great foundation for the project. The Company will now focus on expanding the resource by drilling off extensions to the known deposit and exploring for additional deposits in the immediate vicinity on the extensive Knife Lake landholding. The geologic setting of the Knife Lake district is similar to the world-class Flin Flon metals belt to the south, where numerous economic mines have been developed, implying high mineral potential for the underexplored Knife Lake property.”
Knife Lake is underexplored with ~90% of Rockridge’s 85,197 hectare property package having hardly been touched by historic exploration. Rockridge President Jordan Trimble believes that the shallow Knife Lake deposit which constitutes ROCK’s first resource estimate is a remobilized portion of a presumably larger primary VMS deposit. This larger primary VMS deposit could be found at depth.
Mr. Trimble also points out that the Flin Flon base metals district is heating up:
“With the shallow Knife Lake deposit as a remobilized portion of a presumably larger primary VMS deposit, we are excited to commence a regional summer field program to unlock further value at the project through additional discoveries. There have been several other notable developments in the region including an upcoming 100,000m drill program planned by Rockcliff Metals as well as Hudbay Mineral’s new discovery near the Lalor mine. With several mineral properties in our portfolio, we will continue to execute on our value creation strategy of going into overlooked but prospective projects in prolific mining jurisdictions and using modern exploration methodologies to test new ideas and make new discoveries.”
Rockridge has an extremely tight share structure with 25.44 million shares outstanding, more than ½ of these shares are held by insiders and institutions such as HudBay which means that the trading float is barely more than 10 million shares. ROCK currently has C$1 million in the bank and the next order of business will be to conduct a regional summer field program in order to identify and further refine additional drill targets for resource expansion. In addition, ROCK has a gold project in Northern Ontario called the Raney Gold Project. Raney has some impressive historical drill intercepts including 6.5 meters of 7.44 grams/tonne gold and 6.8 meters of 3.4 grams/tonne gold. In order to fulfill its option agreement on Raney ROCK has to conduct some exploration programs over the next six months, and considering the current gold price trajectory this could prove to be a positive catalyst for ROCK shares.
At a sub-C$5 million market cap ROCK shares currently offer deep value to long term investors who can see past the US/China trade war clouds and to a brighter day when large base metals deposits in safe jurisdictions will be valued at a premium, rather than a steep discount. By buying ROCK shares today at C$.185 shareholders are getting the Raney Gold Project for free, Raney may prove to be an under-the-radar catalyst that the market may begin to appreciate later this year.
Disclosure: Author owns ROCK.V shares and may buy or sell at any time without notice.
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