Adavale Resources (ASX: ADD) shares are up 68.75% in Australia today on the back of an announcement about their drilling. Exploration work at the Kabanga Jirani project in Tanzania has located what looks like a substantial layer of nickel sulphides. The phrase used is “massive nickel sulphides” but we've all got to recall that anything at this stage is very, very, preliminary. There may well be a considerable nickel mineralisation there but we've a long path to tread yet before we know that it's economic to exploit.
In more detail Adavale announces: “Adavale Resources Limited (ASX: ADD) (“or the Company”) is pleased to advise that 4.15m of massive nickel sulphide associated with a maficultramafic intrusion was intercepted between 223.35m and 227.50m in drill hole DDLUHC001 (Figure 1) located within Adavale's Prospecting Licence PL 23980/20231”
Now, what this actually means is that at their prospect in Tanzania Adavale has drilled a hole downwards. At between that 223 and 227 metres deep there's a layer of nickel hosting rock. Further: “are being cut and prepared for assay with the results expected in late June/early July. Visually…” proper testing has not been done to check the Ni content. Hand held tools have been used, experience of the mining engineers and their visual inspection have been. We'll know more about the specific Ni content when the proper testing has been done.
Adavale Resources share price from ASX
What isn't know - and is most important - is how wide that belt of nickel sulphides is. Which is the next thing to work out of course. Finding a belt of such minerals several metres deep is good - but it's also necessary to know how wide it is so that total volume can be calculated. Only then can the calculations be done as to whether it's even worth trying to dig it all up. That is, any decision to go mining depends upon both purity and volume of the ore.
As it happens Adavale recently raised a couple of million dollars to fund this drilling programme. Which means that those who bought into the idea that there might be something there have, so far, been vindicated. But that is, very definitely, a “so far”.
For the usual reminder needs to be made about mining. Until the definitive feasibility study is published there is no assurance that any specific project or mine is economic to exploit. Everything that happens before that is just another brick in that wall of evidence. Yes, of curse each brick adds value. But no one piece of evidence is sufficient. There's a long, long, way to go before there's any prospect of revenue here.
At which point we'd suggest that there's a strong possibility of a money raise coming off the back of this information. But maybe that's just us being cynical.
