Rockfire Resources (LON: ROCK) has reported interesting numbers from the explorations at Lighthouse in Australia. As is common enough in such circumstances Rockfire is not actually carrying out the work itself. Instead that has been “farmed out” to Sunshine Gold. The way this works is that Rockfire owns the mineral deposit, Or, perhaps, owns the exploration and or exploitation rights. Then Sunshine does the actual work of discovering exactly what is there. By doing this work Sunshine “farms in” and ends up with a percentage of what is found. If, indeed, anything of any value is. For this is all very early stage exploration here.
Sunshine can gain up to 75% of the project by doing this work. So, the residual to Rockfire can become rather small. These sorts of arrangements are entirely common at this very small company end of the mining business. Signing away some portion of what is found but also not having to support the costs of doing the finding. What has been found is some very interesting gold numbers - these days 10 grammes Au per tonne rock is high - and also some cobalt. It is though very early days.
Rockfire Resources share price from London Stock Exchange
While the gold numbers look good there's then the next question to be answered. Is there enough there to make mining worthwhile? It is necessary, after all, to have enough volume to make any exploitation worthwhile. No point in getting the diggers and trucks out there if total recovery is going to be some small amount less than the cost of getting the diggers and trucks out there. So the gold find is only the first stage - good concentrations, but now we need to know in what volume?
The cobalt is a little different. Yes, cobalt is valuable, it's a critical mineral for this electric revolution and all that. But it's also not worth mining these days. Or often will not be worth mining as Jervois just found out. After all, Jervois had an entire cobalt mine ready to go then decided not to bother. Because the market price of cobalt is currently below any likely production cost.
The current truth is that cobalt finds just aren't that valuable. Gold is and the concentrations here look good - but what's the volume?
