Rockcliff Resources Inc.
(RCR-V: C$0.16)
This Just In
February 14, 2011
BUY, Venture Risk*
12-month target price: N/A
Vishal Gupta / (416) 840-7916
[email protected]
Rod Cooper, P.Eng. MBA / (416) 350-5045
[email protected]
Darcy Donelle, CA / (416) 350-3414
[email protected]
Rockcliff Acquires Spruce Point VMS from HudBay
Event: Rockcliff has agreed to purchase a 100% interest in the former producing Spruce Point VMS (copper-zinc) Mine. HudBay Minerals has reserved a "back-in" right to earn up to 65% interest in the project. The mine is located 50 kilometers southwest of Snow Lake, Manitoba. The Company is adding the asset to its basket of properties situated in the region.
Our Take: We view this transaction as a positive development for both Rockcliff and HudBay (Not Rated). With a sizeable Non NI 43-101 compliant historic resource, Spruce Point adds to Rockcliff's impressive collection of Manitoba-based exploration properties and provides the Company with positive future news flow potential, such as proving up a compliant resource estimate at the Property.
The transaction is in-line with Hudbay management's recent drive to focus on its core assets, while maintaining a "farm-system" of prospective exploration and development stage projects that we believe provide Hudbay with significant potential upside. In this respect, HudBay's recent notable investments include a Joint Venture with Aquila Resources on its Michigan-based Back Forty VMS project and a Joint Venture with VMS Ventures on its Manitoba-based Reed Lake VMS property.
Rockcliff Resources is on our Mineral Exploration Watch List. We have a BUY rating on the stock with no target price.
Spruce Point hosts the following historical resource:
Table 1: Spruce Point VMS Historical Resource (not NI 43-101 compliant)
Source: Rockcliff Resources Inc.
The following are Spruce Point's production statistics while active between 1981 - 1988:
Table 2: Past Production Statistics (1981-1988)
Source: Rockcliff Resources Inc.
Rockcliff Resources Inc. February 14, 2011
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Snow Lake Project
The Spruce Point Mine Property is situated within the Snow Lake Mining Camp and is close to infrastructure. Plans are to include the Property in Rockcliff's Snow Lake Project which presently hosts the following resource:
Table 3: Mineral Inventory at Snow Lake Project
Source: Rockcliff Resources Inc.
Conditions to Earning a 100% Working Interest in the Spruce Point Mine Property:
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Rockcliff must pay Hudson Bay Exploration and Development Company Limited (HBED) and aggregate of $0.5 million in escalating, incremental payments over a four year period or, with respect to $0.47 million of the cash option payments, elect either to make an additional $0.94 million in expenditures on the Property or issue $0.47 million in treasury shares prices at the time of issuance;
•
In addition, Rockcliff will need to spend $2.4 million in escalating exploration expenditures over a four year period on the Property. In the initial year of the option, the Company needs to pay $10,000 in cash payments and expend $200,000 on exploration on the property.
Hudson Bay Exploration and Development Company Buy-Back Rights
•
Once Rockcliff has earned its 100% interest in the property, HBED maintains a buy-back right to acquire a 55% interest in the property by paying Rockcliff 200% of Rockcliff's cash option payments paid in respect of the property and spending 200% of Rockcliff's work expenditures;
•
HBED can increase their interest to 65% (an incremental 10%) if it brings the property to commencement of commercial production and by financing Rockcliff's 35% portion, which such costs recovered from Rockcliff's share of profits realized from future production,
2011 Drilling
Rockcliff has commenced drilling on several properties in the camp:
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15,000 meters (72 holes);
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Drill Budget: $2.0-2.5 million.
The program is fully funded - On December 2, 2010, the Company announced a $4 million private placement to finance its exploration program and operational needs.
Copper-Gold: Snow Lake Project, Manitoba
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Tower Property: Drill test large mineralized place associated with Tower Zone (5,000m - 16 holes);
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Lon Property: Drill test DC Occurrence and Lon Deposit in first phase drill program (5,000m - 25 holes);
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Rail Property: Drill test DPEM target on strike to Rail Deposit (2,500m - 6 holes).
Gold: Kirkland Lake
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Black Gold Property: Drill test high grade surface gold zone; open pit potential (2,500 m - 25 holes).
Rockcliff Resources Inc. February 14, 2011
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Disclosures & Disclaimers
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Note 1: All historical data including financial and operating data on the issuer(s) mentioned in this report come from publicly available documents including statutory filings of these issuer(s). Data may also be sourced from Bloomberg, Baseline, Thomson ONE.
Informal Comments are analysts’ informal comments that are posted on the Dundee website. They generally pertain to newsflow and do not contain any change in analysts' opinion, estimates, rating or target price. Please refer to formal published research reports for valuation methodologies used in determining target prices for companies under coverage. Please refer to formal published research reports for company specific disclosures and analyst specific disclosures for companies under coverage.
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Valuation methodologies used in determining the 12-month target price(s) for the issuer(s) mentioned in this report are contained in current and/or prior research. Target Price N/A: a target price is not available if the analyst deems there are limited financial metrics upon which to base a reasonable valuation.
Rockcliff Resources Inc. February 14, 2011
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BUY: total returns expected to be materially better than the overall market with higher return expectations needed for more risky securities. NEUTRAL: total returns expected to be in line with the overall market. SELL: total returns expected to be materially lower than the overall market. TENDER: the analyst recommends tendering shares to a formal tender offer.
*Risk Ratings: risk assessment is defined as Medium, High, Speculative or Venture. Medium: securities with reasonable liquidity and volatility similar to the market. High: securities with poor liquidity or high volatility. Speculative: where the company's business and/or financial risk is high and is difficult to value. Venture: an early stage company where the business or financial risk is high, and there are limited financial metrics upon which to base a reasonable valuation.
SECURITY ABBREVIATIONS: NVS (non-voting shares); RVS (restricted voting shares); RS (restricted shares); SVS (subordinate voting shares).
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Dundee Securities Equity Research Ratings 37%82%16%41%22%33%44%55%66%77%88%% of companies covered by Dundee SecuritiesLimited in each rating category% of companies within each rating category forwhich Dundee Securities Limited or its affiliateshave provided investment banking services fora fee in the past 12 months.
December 31, 2010
Source: Dundee Securities Ltd.