Kasbah Resources steps up the pace, 5 rigs at Achmmach Tin Project

Kasbah Resources (ASX: KAS), is an Australian based explorer that is focused on developing the 100% owned Achmmach Tin Project in Morocco, containing one of the largest undeveloped tin deposits in the world.  Kasbah has title to Achmmach.

Achmmach is contained within Exploration Permits PE 2912 and PE 193172 covering 32 square kilometres, and is located approximately 140 kilometres to the southeast of the Moroccan capital of Rabat, and about 40 kilometres from the city of Meknes.

The area is well served with infrastructure that includes modern roads, heavy infrastructure and ports at Casablanca, and Tangiers, which is 14 kilometres from Spain and Europe.

Morocco has a long history of mining for tin that dates back to the time of the Phoenicians and now is major exporter of phosphates, along with the mining of copper, lead, zinc and silver. The government operates a favorable tax regime, does not restrict ownership in resource assets, and actively supports export industries.

The lingering after effects of the Arab Spring dissipated in the Country when a new and more democratic constitution was recently accepted in a nation wide vote. 

Achmmach was discovered in 1985 by the Bureau des Recherches et de Participaions Minières or BRPM, who undertook an extensive exploration program that included surface exploration, drilling, development of underground drives, underground bulk sampling, and metallurgical test work.

Kasbah picked up the idled project and commenced exploration work at Achmmach in November of 2007. The Company completed a drilling program and released a JORC compliant resource estimate in August of 2010, and completed a positive Scoping Study in October of 2010.

The resource at Achmmach is expressed at the surface by tourmaline mineralisation that is widespread over a 2,000 metre long and 1,000 metre wide zone that encompasses tin resources within the Meknes Trend, and contains additional potential at the Western, Northern, and Eastern Zones.

Achmmach JORC Resource

The Quantitative Group completed an independent study of 20 historic diamond drill holes completed by BRPM, and 41 new diamond drill holes completed by Kasbah to estimate underground resources at Meknes, Fez, Marrakech, and the East Zone,

The group defined a JORC compliant Indicated Mineral Resource of 2.2 million tonnes of 0.8% Tin, and an Inferred Mineral Resource of 4.8 million tonnes of 0.8% Tin; for a total resource of 7.0 million tonnes of 0.8% Tin, at a cut-off grade of 0.5%.   This would provide 54,000 tonnes of contained tin.

The Study noted that the tin occurs mainly as cassiterite, and that the cassiterite lodes can be traced over several hundred metres of strike, within a 2,000 metre strike line that remains open. Exploration targets were also identified below the East Zone that has potential for an additional 4 to 8 million tonnes of mineralisation carrying a grade of 0.5 to 1% tin.

The mineralised lodes at Meknes, Fez, and Marrakech contain high grade zones of stacked mineralisation that commence at a depth of 150 metres and have been identified down to a depth of 500 metres.

The East Zone is situated along strike and carries a lower grade of tin that commences at a depth of 20 metres and is known to extend to a depth of 200 metres, and may be amenable to low cost bulk mining from an open pit.

Scoping Study

The Scoping Study was modeled around an underground mining operation producing 800,000 tonnes per year of ore by a mechanised cut and fill method. Ore would be crushed and fed through a gravity circuit to remove free milling tin, with the balance fed through a floatation plant to produce a tin concentrate for delivery to an Asian tin smelter.

The base case assumed a life of mine of 7.5 years, processing ore with a head grade of 1% tin, with the gravity and floatation circuits recovering a very modest 70% of the tin. This process rate should produce at least 5,620 tonnes of tin per year, valued at US$129,260,000 when applying a price of US$23,000 per tonne of tin.

Operating costs are estimated at US$12,684 per tonne of tin concentrate that is produced. That breaks down to US$89.10 per tonne of ore extracted, which provides a very healthy operating margin of US$72.00 per tonne. 

Capital costs are estimated at US$85.3 million, with the finished project producing a Net Present Value, less 10%, of $126 million. Kasbah management assumes that the capital cost will be 100% equity funded which will create an Internal Rate of Return of 43%, and is net of all Moroccan taxes and royalties.

Bankable Feasibility Study

A Bankable Feasibility Study has been launched and should be completed in March of 2012. The BFS is expected to increase underground resources, extend mine life, optimise tin grade, increase recoveries and delineate additional ore for open pit extraction at the East Zone. 

Exploration 

Five drill rigs are now on site to expedite in-fill and extensional drilling of the Gap Zone. 

Recent drilling has tested the Gap Zone which covers approximately 400 metres of undrilled strike that is located between the Meknes and Eastern Zone, and included AD-105 and AD-106 that successfully tested half of this strike zone over a distance of 200 metres.

AD-105 returned extremely impressive results that included 5 separate mineralised intersections that started at a depth of 209 metres and ended at a depth of 458 metres.

These included 7 metres of 0.98% Tin at 209 metres, and included 3 metres of 1.79% Tin, followed by 20 metres of 0.71% Tin at 232 metres, and included 8 metres of 1.13% Tin, followed by 25 metres of 0.66% Tin at 263 metres, and included 5 metres of 1.48% Tin, followed by 18 metres of 0.48% Tin at 308 metres, and included 4 metres of 0.98% Tin; and finally 13 metres of 0.68% Tin at 445 metres, and included 5 metres of 1.07% Tin.

AD-106 also confirmed the continuity of mineralisation by recording 3 separate intersections that started at a depth of 256 metres and ended at a depth of 421 metres.

These included 6 metres of 0.72% Tin at 256 metres, and included 2 metres of 1.31% Tin, followed by 11 metres of 0.99% Tin at 300 metres, and included 3 metres at 2.37% Tin; and finally 4.0 metres of 2.37% Tin at 417 metres.

These drill-holes appear to be extending the mineralisation defined at Meknes by 200 metres and may end up closing the gap between Meknes and the East Zone for a continuous mineralised trend of approximately 1,250 metres, which is indicating potential for a very significant resource upgrade within the Gap Zone. 

Funding

Kasbah raised $30 million in late 2010, and has sufficient funds to fully test the Meknes Trend with its contracted fleet of 5 rigs, and should provide a steady flow of assay data into the market place over the coming months.

Kasbah had $22 million in cash at June 2011.

Tin Market

Tin is all about electronics not cans. Soldering for computers, keyboards, monitors etc accounts for 53% of demand for tin.  Tin plate and packaging accounts for 16%.

Existing tin mines are fast becoming depleted and moving up the cost curve  Indonesian smelters have halted exports from Oct 1 2011.  There are few new, sustainable tin projects in development ensuring that demand is greater than supply.

The tin price has retraced of late due to de-stocking but this looks to have an end zone at which time the tin price could regain strength.

Share register

There is a significant institutional investment in Kasbah with major holders including:

IFC (World Bank) 12.7%
African Lion 2 Fund 12.7%
Transamine 4.1%
Thailand Smelting & Refining 2.2%
Traxys Projects 1.7%
Societe Generale 1.6%

Catalysts
- Drilling results – extensional and in-fill
- New resource upgrade first quarter 2012
- PFS is underway. Target completion first quarter 2012

Analysis

Achmmach is a significant tin project, with a growing tin resource. There is potential to link the resources in the west of Achmmach to resources in the east.  Latest drilling results from the Gap Zone support the premise, potentially transforming Achmmach and Kasbah into a significantly larger and higher valued “tin play” than currently the case.

From a Scoping Study, with an IRR of 43%; tin operating costs of $12,683 per tonne of tin in concentrate provides Kasbah with a “meaty” operating margin on current tin prices for Achmmach development.  The Scoping Study demonstrated robust project economics and a rapid payback period of two years..

Recent drilling results intersected thicker mineralisation that should support a higher mining rate, leading to a boost in both estimated annualized revenue and profitability for Kasbah. 

There are not many advanced tin focused plays on the ASX; Kasbah represents one of few pure tin plays on the ASX. Kasbah also owns 100% of Achmmach..

The project is located in a pro-mining & pro-development country of Morocco.
A drastic reform of Morocco's constitution saw Morocco citizens vote overwhelmingly for changes.  The King of Morocco will hand some of his powers to Parliament. A referendum on a new constitution was passed by 70% of registered voters. Morocco's transition to democracy could be the bellwether for the region.

With 5 diamond rigs turning on the Gap Zone, more rigs = increased news flow and regional and shallow target assessment, there is significant upward momentum building at Achmmach and for Kasbah.

This is a significant change.  As delays in drilling and assay turnaround (down to two weeks) in the recent past had hampered investor upward momentum in the stock price.

Kasbah has five diamond rigs running now and a significant increase in drilling productivity and data flow can expected.

The Kasbah share price had retraced on the fall in tin price due to de-stocking and as tensions in neighbouring Arab states affected perceptions of political risk in Morocco. 

With no likely further equity required until after the BFS stage, is a good sign for investors.

Netting off current holding of $22 million cash, and the Kasbah market valuation of $62 million looks light for the Achmmach project with an EV of $40 million.

With the Kasbah share price testing yearly lows again around $0.17 – $0.19, provides surprisingly good opportunities for investors – with such an advanced project and project economics.

There is now an opportunity to acquire or top up holdings in Kasbah at lower prices.

Originally published at: http://www.proactiveinvestors.com.au/companies/news/20851/kasbah-resources-steps-up-the-pace-5-rigs-at-achmmach-tin-project--20851.html