Rig Movements in Serbia Raise Queries for Timok

Issue 55, September 2013

“We’re in the right place,” ventures Simon Ingram, president of Reservoir Minerals. On Monday the company announced assays of 260m grading 3.9 per cent copper from its giant Timok discovery in Serbia. The project has delivered intersects of 10.2 per cent copper equivalent over 160m, propelling shares 680 per cent higher since July last year. Geologist Byron King describes the assays as the best of the last 30 years, whilst stock promoter Keir Reynolds terms them “gangbuster.”

Marvelling at Reservoir’s drill results however misses the model on which they were borne. “The traditional Vancouver model was to raise $5m for one or two projects,” Ingram explains, “but if you look at the hard numbers of exploration success, the odds you’re facing are really pretty poor.”

Instead, Reservoir has built a portfolio of projects, using partners to fund drilling. US copper giant Freeport McMoRan has spent $12.6m on Timok this year, earning a 55 per cent share. Without Freeport, Reservoir could not have financed drill holes 1.5km deep at $100 per foot and without Reservoir, Freeport is unlikely to have spent years evaluating licenses for a campaign in a country where it does not operate.

The partnership also leverages Reservoir’s expertise. “We’re not having to put the technical effort in and we’ve got a tier one operator,” Ingram adds. “This is a relatively deep underground mine. There’s only a handful of companies in the world capable of mining block caves at the size that Freeport have mined. That expertise isn’t out there broadly in the market. If you try to find yourself a block cave mining engineer, most of that experience is within majors.”

Reports in June suggest Freeport had 6 drill rigs on site, but Monday’s announcement said the company had “scaled back” from 2 to 1. Superficially, the move could signal a Freeport retreat, or a broadening of the agreement to Reservoir’s surrounding properties, but holders have dubbed it the first move in a buyout, with Freeport unwilling to continue drilling, driving Reservoir’s stock higher, beyond the point at which it is convinced of the project’s scale. Drilling has so far failed to find the edges of mineralisation.

“All things are open,” Mr. Ingram says. “If it’s a Freeport material mine, it’s a significant one.”

“If it’s a Freeport material mine, it’s a significant one.”

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