Mikei Gold Project JORC Mineral Resource Estimate

RNS Number : 4663I

Red Rock Resources plc

25 July 2012

 



Red Rock Resources plc

Additional JORC Mineral Resource Estimates Defined at Mikei Gold Project, Migori, SW Kenya

25th July 2012

Summary

Red Rock Resources Plc ("Red Rock" or the "Company"), the mining and exploration company with an iron ore project in Greenland, a producing gold mine in Colombia and interests in steel feed, uranium and rare earths, is pleased to announce a JORC-compliant Mineral Resource Estimate ("MRE"), prepared by CSA Global (UK) Ltd ("CSA"), of 10.26 Mt @ 1.46 g/t Au (0.5 g/t Au cut-off), containing 482kOz for three more prospects within the Mikei Gold Project, itself part of Red Rock's gold and base metal exploration of the Migori Archaean greenstone belt in southwest Kenya.

The new MREs have been completed on the KKM-West (KW), Nyanza (NZ) and Gori Maria (GM) Prospects. This new MRE is in addition to the JORC MRE for the KKM Prospect which was reported in December 2011 and contains Indicated Resources of 16.34Mt @ 1.00g/t Au for 524kOzzs  and Inferred Resources of 1.41Mt @ 1.15g/t Au for 52kOzs, totalling 17.75 Mt @ 1.01 g/t Au for 577kOz Au. The following table summarises the additional three out of five Mikei Gold Project prospects for which MREs have been estimated at this time. The final area, the MK Prospect, is undergoing the final stages of evaluation and an MRE will be reported shortly.

Table 1 Summary of JORC-compliant MREs (0.5 g/t Au cut-off) for the Mikei Gold Project, SW Kenya

	Indicated		Inferred		Total
	Mt	g/t Au	Mt	g/t Au	Mt	g/t Au	metal kOz
KKM West	1.13	1.07	3.03	1.02	4.16	1.04	139
Nyanza	1.17	3.73	1.15	1.70	2.32	2.73	203
Gori Maria	-	-	3.78	1.16	3.78	1.16	141
Total	2.30	2.42	7.96	1.18	10.3	1.47	483

NB.  Apparent errors may occur due to rounding

·     Including KKM Indicated & Inferred Resources reported in December 2011, total resources for the Project now stand at a total of 18.64Mt @ 1.18g/t Au for 703kOzs Indicated and 9.37Mt @ 1.18g/t Au for 355kOzs Inferred, totalling 28.0Mt @ 1.18g/t Au for 1.06MOzs, with more to come with the completion of the MK MRE due shortly.  

·     The Kansai 2006 estimate of resources for KKM (including KW), GM and NZ, totalled 30.95Mt @ 1.06g/t Au for 1.05MOzs, using a cut-off grade of 0.25g/t Au. For comparative purposes the total combined current resource estimates for these areas, reported at the same cut-off grade total 40.42Mt @ 0.93g/t Au for 1.22MOzs, a 30% increase in tonnes, and a 16% increase in contained metal.

·     66% of the total resource ounces are in the Indicated category.

·     Shortcomings with historic resource estimation techniques have been addressed, and the estimate is both at a higher cut-off grade and much more robust.

·     Mineralisation remains potentially open at depth, and along strike / down plunge of key higher grade zones.

·     Preliminary conceptual pit optimisations will be completed on shallow zones to get an early indication of the best areas for potential economic development and to focus on-going resource development activities prior to more formal economic studies.

Introduction

KW, GM and NZ are part of a larger gold-mineralised shear system known as the Mikei Gold Project discovered in the 1980s that has been a key focus of Red Rock's successful 2011 drilling program, as reported on by the Company in November 2011. The Mikei mineralised trend has a total strike length of 7 km and hosts a total of 5 prospects (see Fig 1).

Figure 1: Mikei Gold Project Location Plan

http://www.rns-pdf.londonstockexchange.com/rns/4663I_1-2012-7-25.pdf

Earlier Work

The Mikei Gold Project at Migori in the Nyanza Province, Kenya has undergone several phases of historical drilling since the late 1980s including a resource estimate under the Canadian National Instrument 43-101 resource reporting standard which was produced by Ddraig Mineral Resources in 2006 and is filed on SEDAR. According to this report, an Indicated MRE of 33.00 million tonnes containing 1,172,000 Oz Au at 1.10 g/t Au at a 0.25 g/t cut-off was defined in four prospects (Gori Maria, KKM, MK and Nyanza).

In 2006 the resource estimate for the combined KKM and KKM-West prospects were updated (Kansai, 2006) and reported  to contain 22.1 Mt @ 0.96 g/t Au for a total of 680,000 Oz Au using a cut-off grade of 0.25g/t Au. The objective of the Red Rock drilling programme and associated historical data reviews carried out since late 2010 was to improve confidence in the historical data, increase geological and structural understanding and to update the MRE to JORC standard.

In Dec 2011 Red Rock announced an MRE completed for the KKM Prospect by CSA which reported Indicated resources of 16.34Mt @ 1.01g/t Au for 524kOzs and Inferred Resources of 1.41Mt @ 1.15g/t Au for 52kOzs.  

In addition to collecting new data, Red Rock has been undertaking extensive data validation, resurveying, reassaying, mapping and interpretation over the project and integrated this in to the updated JORC MRE. The resulting block models will be used to assist further resource development activities. The aim of Red Rock's infill drill program throughout has been to augment existing information and provide additional high quality data to provide a robust geological interpretation and to target extensions and higher grade material.

Current Resource Estimation

The MRE, as summarised in Table 1 with a complete tabulation of results in the Appendices included below, was prepared by Mr Galen White, FAusIMM, FGS - Principal Geologist of CSA Global CSA. In total 26,034m of historical drilling and 9,916m of Red Rock's 2011 drilling was used in the resource estimation for the KW, NZ and GM portions of the Mikei Gold Project.

The MRE announced today, estimated by CSA in accordance with the Australasian resource reporting standard (JORC 2004), is not directly comparable to previous resource estimates as it does not yet include the MK Prospect area, and a more conservative 0.5 g/t Au cut-off grade has been used to report resources at this time. Results for the total project area will be released when the MK Prospect MRE is completed.

Substantial changes in the detail of the interpretation have been incorporated into the resource estimation process as a result of Red Rock's 2011 drilling campaign, the re-logging and re-assaying of old core, and the validation of earlier phases of work.

A much more detailed picture of the mineralised system has been developed, with:

·     An improved understanding of grade variability at each deposit.

·     Improved geological and structural understanding.

·     Improved definition of weathering surfaces

·     Metallurgical testwork completed for KKM, KW and NZ with preliminary test work completed for GM and further detailed test work planned for GM and MK.

·     A 3D volume block model that can be used for pit optimisation and mine planning.

CSA worked with Red Rock's Project Geologists in interpreting mineralised domains following cross sectional 2D analysis, before creating 3D wireframes (Fig 2). The MRE process adopted by CSA is summarised as follows:

·     The MRE was completed using Ordinary Kriging within ore envelopes defined using a 0.25 ppm grade cut-off boundary. Mineralised envelopes honoured geological boundaries and ore geometries were informed by surface and orientated down-hole structural data.

·     Oxide surfaces were produced following Red Rock's re-logging of oxidation state, within available core. Oxidation information was interpreted in 2D, with 3D wireframes being created to flag material appropriately and assign densities. A density of 2.4 g/cm³ was applied to oxide, and 2.75 g/cm³ to fresh material at KW and GM, with an SG of 2.9 g/cm³ applied to fresh material at NZ based on current sample density data.

·     The estimate was carried out using Ordinary Kriging following variographic analysis to determine the directions and ranges of grade continuity. Directions of observed grade continuity honour the strike and dip of mineralised domains.

·     Raw assay data was composited to 1 m intervals prior to estimation.

·     Top cuts of 10 ppm were applied to all domains at GM and KW, and at NZ a top cut of 25ppm was applied.

Figure 2: MRE wireframes for all prospects

http://www.rns-pdf.londonstockexchange.com/rns/4663I_2-2012-7-25.pdf

KW, GM, NZ Resource Classification

The current MRE's are classified as Inferred and Indicated Resources (Fig 3) under JORC guidelines. The resource classification is informed by the following;

Indicated Resources

·     Portions of the MRE where geological and grade continuity is established to a reasonable degree and informed by sufficiently close spaced sampling, in areas where historic and recent drilling data is considered reliable. Block grades are estimated using sample data from more than two holes at ranges not exceeding the ranges of grade continuity defined by geostatistical analysis.

Inferred Resources

·     Portions of the MRE where geological and grade continuity is reasonably assumed but not verified and where sample density is low. Sample data is widely spaced and historic data may be less reliable. Isolated volumes and down-dip extremities.

Figure 3: MRE Block Models for Nyanza and KKM-West distinguishing between Indicated and Inferred Resource categories

http://www.rns-pdf.londonstockexchange.com/rns/4663I_3-2012-7-25.pdf

Comparison with Kansai 2006 MRE's

Historic resource estimates, reported by Kansai in 2006, were classified as Indicated resources under NI43-101 reporting guidelines at that time.

Following recent review work completed by CSA connected with the methodology of grade estimation and in particular the volumes into which grade was estimated, CSA have identified several shortcomings with the 2006 work, which include;

·     The KKM 2006 estimate was completed using the Inverse Distance Weighting grade interpolation technique which assumes a zero nugget effect (grade variability over short ranges). Geostatistical analysis of drilling data available to Kansai suggests moderate to high grade variability and as such the 2006 grade estimate may be considered overstated such that its reliability for use in mine planning and economic viability (a condition of the Indicated classification) would be brought in to question.

·     GM, KW, NZ and MK 2006 estimates were estimated using exaggerated 3D volumes which were, in part, not supported by grade data and the use of the polygonal estimate of grade (considered a crude estimation technique that is known to overstate grade and does not honour the underlying grade distribution) is considered inappropriate.

·     Intervals of unsampled material within the 3D volumes appears to have been ignored which has introduced bias to the grade estimate such that it may not be considered reliable to report Indicated resources.

The Gori Maria estimate of 2006 was classified as an Indicated Resource and has been reported here as an Inferred Resource following review work completed by CSA on the methodology used to estimate resources in 2006, and out of which several shortcomings have been identified;

·     The estimate of 2006 used a constraining 3D envelope within which is the quoted 2006 resource tonnage.  However this envelope is constrained to a grade cut-off significantly lower than that used to report resources.

·     Additional smaller 3D envelopes within the larger envelope are constrained to the grade cut-off reported and the average raw grade within these compares favourably to the estimated resource grade.

·     It would therefore appear that the 2006 quoted resource tonnage has been assigned an incorrect and overstated resource grade that is not supported by the grade data situated within this larger volume.

·     CSA considers the 2006 classification of Indicated Resources to be inappropriate since the grade estimate is significantly overstated.

CSA has classified the Gori Maria MRE as an Inferred Resource under JORC, which is informed by the following;

·     Geological and grade continuity at GM can be assumed but not verified and structural control over this area requires further investigation.

·     GM contains numerous discrete mineralised zones that lack continuity along strike at the current data spacing and the physical shape of the mineralised zones is not sufficiently defined to allow mine planning to be considered.

·     Geostatistical analysis suggests grade variability to be high, and continuity low.

The Kansai 2006 estimate of resources for KKM (including KW), GM and NY, reported at a 0.25g/t Au cut-off totalled 30.95Mt @ 1.06g/t Au for 1.05MOzs. For comparative purposes the total combined current resource estimates for these areas, reported at the same cut-off total 40.42Mt @ 0.93g/t Au for 1.22MOzs, a 30% increase in tonnes, a 12% reduction in grade and a 16% increase in contained metal as compared to that reported in 2006 by Kansai.

On-going/Future Work

Once the MK Prospect MRE is complete the total Project MRE will be reported. This is expected during the third quarter of 2012.

Mineralised envelopes within certain portions of the deposit remain open at depth or along strike. These areas, any gaps in information, potentially coherent higher grade shoots and areas of open mineralisation will likely be targeted in further resource development work. Detailed infill drilling will only be completed to upgrade parts of the Resource to higher categories as part of economic studies to define areas of Resource tonnage is likely to be sufficient to generate mineable Reserves in the near term.

Figure 4: MRE Block Models at different cut-off grades

http://www.rns-pdf.londonstockexchange.com/rns/4663I_4-2012-7-25.pdf

The coherence of higher grade mineralisation (>1.5g/t Au) within the Prospects suggests that potentially mineable volumes of higher grade material do exist (Fig 4), and the shoots of higher grade mineralisation within these systems are currently the subject of detailed analysis.

Conceptual pit shells will be then modelled on the best areas of shallow higher grade mineralisation with a view to understanding the potential for economic development, and for maximising the positions of planned resource development drilling.

All of this information will be integrated to improve geological interpretation so as to better understand the whole of the ~7km long Mikei Gold Project shear system, and in particular the controls over the formation of higher grade shoots.  The understanding of the orientation of, and controls over higher grade shoots within the broader, more weakly mineralised shear zone is a key element in Red Rock's understanding of the Mikei Gold Project. 

Company Chairman Andrew Bell comments: "These revised Mineral Resource figures are an important milestone for us and the culmination of a long process of redrilling, reanalysis, and revalidation. They create a strong platform from which to advance and find more gold and higher grade gold. We are pleased by the results at the higher cut-off and have increased our understanding of the controls on grade and the areas of potential promise. We continue to analyse the results and further announcements on key findings will be made."

For further information contact:

Andrew Bell       020 7402 4580 or 07766 474849                    Chairman                     Red Rock Resources plc

Sandra Spencer 020 7402 4580 or 07757 660 798                   Investor Relations   Red Rock Resources plc

Gerry Beaney / Daniela Amihood 020 7383 5100                 NOMAD                       Grant Thornton Corporate Finance

Nick Emerson    01483 413500                                                       Broker                          Simple Investments Ltd

Updates on the Company's activities are regularly posted on its website, www.rrrplc.com.

Competent Person Statements

The information related to the estimation of in-situ Mineral Resources in this release has been compiled by Mr Galen White of CSA Global (UK) Ltd. He is a Fellow of the Australian Institute of Mining and Metallurgy and has sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration, and to the activity he is undertaking, to qualify as a Competent Person as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (The JORC Code) and as a "Qualified Person" as defined in the Note for Mining Oil & Gas Companies, June 2009, of the London Stock Exchange. Mr White has reviewed this announcement and consents to the inclusion of the information in this release in the form and context in which it appears.

Forward Looking Statements

This report contains 'forward-looking information' that is based on the Company's expectations, estimates and projections as of the date on which the statements were made. This forward-looking information might include, among other things, statements with respect to the Company's business strategy, plans, objectives, performance, outlook, growth, shareholder value, projections, targets and expectations, Mineral Reserves and Resources, results of exploration and related expenses, property acquisitions, mine development, mine operations, drilling activity, sampling and other data, grade and recovery levels, future production, capital costs, expenditures for environmental matters, life of mine, completion dates, uranium prices, demand for uranium, and currency exchange rates.

Generally, this forward-looking information can be identified by the use of forward-looking terminology such as 'outlook', 'anticipate', 'project', 'target', 'likely', 'believe', 'estimate', 'expect', 'intend', 'may', 'would', 'could', 'should', 'scheduled', 'will', 'plan', 'forecast' and similar expressions. Persons reading this report are cautioned that such statements are only predictions, and that the Company's actual future results or performance may be materially different.

Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the Company's actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information. Forward-looking information is developed based on assumptions about such risks, uncertainties and other factors set out herein, including but not limited to the risk factors set out in the Company's Annual Report. This list is not exhaustive of the factors that may affect our forward-looking information. These and other factors should be considered carefully and readers should not place undue reliance on such forward-looking information. The Company disclaims any intent or obligations to update or revise any forward-looking statements whether as a result of new information, estimates or options, future events or results.

Appendix 1 - Complete tabulation of Mikei Gold Project MRE results

CSA JORC Mineral Resource Update - KKM West
Au (g/t) Cut-off	CLASS	Tonnes	Au (g/t)	Density (tcm)	MOzs
1	inf	1 095 000	1.57	2.73	0.055
0.75	inf	1 868 000	1.28	2.74	0.077
0.5	inf	3 029 000	1.02	2.74	0.100
0.25	inf	4 766 000	0.79	2.73	0.121
0	inf	4 885 000	0.77	2.73	0.122
1	ind	457 000	1.59	2.73	0.023
0.75	ind	753 000	1.31	2.72	0.032
0.5	ind	1 134 000	1.07	2.71	0.039
0.25	ind	1 576 000	0.88	2.73	0.045
0	ind	1 615 000	0.87	2.73	0.045
1	total	1 552 000	1.58	2.73	0.079
0.75	total	2 621 000	1.29	2.73	0.109
0.5	total	4 163 000	1.04	2.73	0.139
0.25	total	6 342 000	0.81	2.73	0.166
0	total	6 500 000	0.80	2.73	0.167
CSA JORC Mineral Resource Update - Nyanza
Au (g/t) Cut-off	CLASS	Tonnes	Au (g/t)	Density (tcm)	MOzs
1	inf	535 000	2.89	2.89	0.050
0.75	inf	721 000	2.36	2.85	0.055
0.5	inf	1 149 000	1.70	2.89	0.063
0.25	inf	1 803 000	1.22	2.89	0.071
0	inf	1 936 000	1.15	2.90	0.071
1	ind	875 000	4.74	2.89	0.133
0.75	ind	973 000	4.36	2.88	0.136
0.5	ind	1 167 000	3.73	2.86	0.140
0.25	ind	1 335 000	3.31	2.88	0.142
0	ind	1 377 000	3.22	2.80	0.142
1	total	1 411 000	4.04	2.89	0.183
0.75	total	1 694 000	3.51	2.86	0.191
0.5	total	2 316 000	2.73	2.88	0.203
0.25	total	3 139 000	2.11	2.88	0.213
0	total	3 313 000	2.01	2.87	0.214
CSA JORC Mineral Resource Update - Goria Maria
Au (g/t) Cut-off	CLASS	Tonnes	Au (g/t)	Density (tcm)	MOzs
1	inf	1 672 000	1.70	2.72	0.092
0.75	inf	2 495 000	1.43	2.72	0.115
0.5	inf	3 784 000	1.16	2.73	0.141
0.25	inf	5 401 000	0.92	2.74	0.160
0	inf	5 641 000	0.89	2.73	0.162

NB.  Apparent errors may occur due to rounding

Appendix 2 - Grade Tonnage Tables and Graphs

 http://www.rns-pdf.londonstockexchange.com/rns/4663I_-2012-7-25.pdf

The linked tables and graphs show conceptual grade-tonnage relationships only and is derived from these in-situ Inferred and Indicated Resources for which economic viability of realising tonnage above any given grade cut-off has not been assessed at this time.

Glossary

Alteration	Changes in the chemical or mineralogical composition of a rock, produced by weathering or hydrothermal solutions.
Archaean	A period in geological time between approximately 2.5 - 3.8 billion years ago.
Assay	A chemical test of a rock to determine the metal content.
Block model	A three dimensional shape that is designed to define the estimated extent of a particular portion of a mineralised system. The volume will usually be assigned a particular density, and therefore tonnage, and grade, and so metal content. All the blocks within a mineralised system will be combined to come up with the total mineral resource estimate.
Competent Person	A professional person with a minimum of five years' experience relevant to the style of mineralisation, the type of deposit under consideration, and to the activity which that person is undertaking.
Cut-off grade	A lower grade level used to define continuity of mineralisation.
Geological boundaries	The divisions within a rock mass determined by rock type, deformation, alteration and / or mineralisation.
Geostatistics	A branch of applied statistics that deals with variables (here Au) that fluctuate in 3D space.
Grade variability	The characteristics of metal distribution through a mineralised system. If sufficient sampling information is available, the understanding of the grade variability within the mineralised system at sampled locations can be used to estimate metal grades at unknown locations within the system.
Grams per tonne, 'g/t'	A chemical measure of the amount of gold or other metals in a rock. Exactly equivalent to 'ppm' or parts per million.
Greenstone	A broad term for volcano-sedimentary sequences, usually of Archaean age, that are known to host gold mineralisation. Referred to as 'green' due to their common alteration state, which contains noticeable amounts of the greenish mineral chlorite. They generally occur in tectonic belts that are longer than they are wide.
High grade shoot	The part of mineralised zone, surface or vein that contains higher grade material. Since the concentration of these minerals is the result of large scale geological features these shoots are usually traceable for significant distances, once enough information is available.
Indicated Resource	An "Indicated Mineral Resource" is that part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a reasonable level of confidence. It is based on exploration, sampling and testing information gathered from locations such as outcrops, trenches, pits, workings and drill holes. The locations are too widely or inappropriately spaced to confirm geological or grade continuity but are spaced closely enough for continuity to be assumed.
Inferred Resource	(JORC, 2004) An "Inferred Mineral Resource" is that part of a Mineral Resource for which volume or tonnage, grade and mineral content can be estimated with a low level of confidence. It is inferred from geological evidence and assumed but not verified geological and/or grade continuity. It is based on information gathered through appropriate techniques such as outcrops, trenches, pits, workings and drill holes which may be limited or of uncertain quality and reliability.
JORC	The Australasian mineral resource reporting standard. The Joint Ore Reserves Code is defined as the code for reporting of Mineral Resources and Ore Reserves and is widely accepted as a standard for professional reporting purposes. The JORC Code requires that, for a published report to be compliant with the JORC Code in reporting resources, reserves or exploration results, the documentation on which the report is based must be prepared by, or under the direction of, and signed by, a Competent Person or Persons. As established by the Joint Ore Reserve Committee of the AusIMM and others - (JORC 2004).
kOz	Thousands of ounces of contained metal.
Kriging	A statistical linear method of grade interpolation which uses distance weighting estimation where the distance employed is a measure of spatial correlation (derived from variography).
Metallurgical testwork	Any of a range to tests designed to characterise the requirements to extract a mineral or metal from a particular rock; frequently includes metal recovery after particular physical and / or chemical processes.
Mineralisation	The parts of a geological system that are enriched in the metal of interest.
MRE	Mineral Resource Estimate, as defined by JORC.
MOz	Millions of ounces of contained metal.
Mt	Millions of tonnes.
Nugget / nugget effect	Inherent grade variability within the same sample or between samples at close distances. The tendency, particularly of gold distribution, to be characterised by localised high concentrations of metal. Including, but not exclusively, the occurrence of visible gold.
Oriented core / downhole structural information	The recovery of drill core such that its actual orientation in space is known so that actual measurements of the spatial orientation of structural features can be made which helps predict the correlation of mineralised zones.
Oxidation	The alteration of rocks by natural processes, usually resulting in reduced strength, such as the prolonged exposure to surface weathering.
Pit shell	The design of a theoretical open pit based on an MRE block model and the application of economic parameters used in mining. Part of the process of determining economic feasibility, and here preliminary to the definition of an Ore Reserve.
Polygonal grade estimation	A simplistic form of resource estimation where each drillhole is assigned, a usually irregularly-shaped, polygon of the thickness and grade encountered in that hole without taking into account any of the geostatistical variability or geological continuity.
ppm	Parts per million. A chemical measure of the amount of gold or other metals in a rock. Exactly equivalent to grams per tonne.
Quartz vein / reef / lode	A secondary accumulation of a silica-rich mineral, quartz, along a fracture surface usually caused during the deformation of a volume of rock, and often the host to, or associated with, gold mineralisation in greenstone belts. Can vary from millimetre-scale up to a number of metres thick.
Shear zone / system	A volume of rock in which shearing across a measurable width, and such that the rock is deformed as much by ductile deformation as it is by discrete planar breaks or faults.
Strike	eg 'along strike'. The direction a geological feature, such as a shear zone, bedding or a quartz vein, is trending.
Structure	In the geological context this refers to the deformation of pre-existing rocks by fold, faulting, shearing and veining.
tcm	'tonnes per cubic metre' a measure of density, required to estimate tonnages within a volume.
Variography	Analysis of grade continuity via the comparison and correlation of sample grades according to the distance and orientation between samples.
Wireframe	A computer-generated three dimensional outline of a volume of material.

 

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