Rox Resources Ltd. (RXL) - Initiation · Share Price (6/9/2019) $0.028 52 week high/low $0.035/$0.007 *A$3.75 million deferred payment from Teck for Reward sale, plus $150k in ASX

9th September 2019

Taylor Collison Limited 9th September 2019

Rox Resources Ltd. (RXL) - Initiation Speculative Buy

Pre-development Gold with a Nickel Sweetener Price Target: 7.2c

Ryan Armstrong

(02 9377 1500)

[email protected]

Summary (AUD)

Ordinary Shares 1,291.3m

Unlisted Options 64.0m

Market Capitalisation (m, undil.) $36.2

Cash and Equivalents (m) – 30/6 $7.8*

Share Price (6/9/2019) $0.028

52 week high/low $0.035/$0.007

*A$3.75 million deferred payment from Teck for Reward sale,

plus $150k in ASX listed shares and $3.9m in cash

Share Price Graph

Directors Alex Passmore Managing Director

Stephen Dennis Non-Exec. Chairman

Brett Dickson Finance Director

Major Shareholders Venus Metals Corporation 3.6%

Alex Passmore 2.5%

Citicorp Nominees 1.7%

Jorac Pty Ltd. 1.4%

Crescent Nominees Ltd. 1.0%

Investment Highlights

Rox Resources (RXL) is focussed on gold and nickel assets in Western Australia including the Youanmi Gold Mine (earning up to 70% from Venus Metals), the Mt Fisher Project (gold) and Fisher East Project (nickel)

The Youanmi tenure (including 50% JV regional exploration ground) covers ~40km strike of prospective shear zone

The Youanmi Gold Mine has produced 670koz at 5.4g/t Au, which closed in 1997 when the gold price hovered around A$400/oz. The project has a current Mineral Resource Estimate of 12.4Mt @ 2.97g/t Au for 1.19Moz (532,700oz at 1.65g/t in near surface material)

There is a high likelihood of immediate extensions of the Youanmi Pit and also additional targets in close proximity that are being drilled along the known mineralised trends

Significant infrastructure still exists on site including:

- CIP process plant (600ktpa) – requires significant refurbishment

- Tailings disposal facility - Mine offices - Core shed - Borefield - Access roads and airstrip

Fisher East Project - contains two nickel sulphide Resources (total of 4.2Mt @ 1.9% Ni for 78kt of Ni metal) that are 150km from established infrastructure (BHP’s Leinster Nickel Operations). There is exploration upside with 40km of nickel prospective basal contact

Mt Fisher Project - JORC Resource of 89koz @ 2.7g/t Au.

mailto:[email protected]

Rox Resources Ltd. Page 2 of 11 __________________________________________________________________________________________


Valuation

The price target of 7.2c/share is based on $145/oz of in-ground value for the oxide Resource (no

metallurgical issues) at Youanmi, infrastructure in place and the company’s extensive exploration

package (JV and 100% owned) for both gold and nickel. Recent deals that reinforce these valuation

metrics include:

Regis Gold’s (RRL) purchase of Duketon Mining’s (DKM) gold tenements for $20m cash (plus

$5m payments on achievement of milestones). This included an Inferred Resource of 96koz

(1.9Mt @ 1.5g/t), which equates to ~$208 per Resource ounce (ignoring the milestones).

Northern Star’s (NST) takeover of Echo Resources (EAR) for ~$243m cash. The total

Resources in this deal were 27.4Mt @ 1.9g/t (1.67Moz), which equates to ~$145 per

Resource ounce.

Current Youanmi Resource + Infrastructure (70% ownership) ~$54.1m ($145 per Resource oz in oxide)

Exploration Ground (including Mt Fisher gold/nickel Resources + JVs) ~$35m

Cash and Liquids $4.1m (excluding Teck payment)

Price Target (undiluted) 7.2c/share

Summary

We believe there is upside to this price target, with numerous exploration targets yet to be

sufficiently tested including:

- Areas adjacent to Youanmi Pit (lower grade, shallow oxide material)

- Currans Find (high grade, free milling)

- Commonwealth (high grade, free milling and within 4km on Youanmi Plant)

Figure 1 – Drill rig operating at Currans Find (source: photo from August site trip)



Further increases are expected with the Resource at Youanmi. Rox Resources is highly leveraged to

exploration success and also has strategic nickel assets that we believe will deliver significant value to

shareholders in the near term.

We attended a site visit in August, which allowed us to understand the full potential of the project. A

number of drill rigs were actively drilling both the near-mine and regional targets. There was plenty

of activity happening on adjacent tenements (not owned by RXL) as well due to the recent discovery

of the Penny North Deposit by Spectrum Metals (SPX), which has re-rated to a Market Capitalisation

of over $150m.

General access across the tenement area is good, with a functional airstrip and graded roads that

allowed for easy travel between various working areas within the Rox Resources tenure. The level of

infrastructure on site was also impressive and in our opinion would fast-track the project

development phase (this is all pending further exploration success of course). The main Youanmi Pit

and mill set-up is located on a Mining Lease and the tailings facilities were in good condition with

further capacity to operate.

Figure 2 – Youanmi Pit with Milling Facility and Tailings Dams in background (source: RXL Presentation)

There are functional camp facilities, which are proving to be a real blessing during the exploration

phase. The camp accommodates the drillers working on-site. Again, this will prove favourable when a

development decision is made and part of the reason we believe the overall Capex will be greatly

reduced.

The milling facilities will need significant refurbishment and it has been estimated that $20-$25m

may be required to bring the facility up to specification (essentially replacing motors/electrical



components etc). We view this as a reasonable figure and envisage that further funds will be spent

on expanding the mill beyond the current 600ktpa capacity once a larger Resource is defined.

With numerous targets to drill (focussing on oxide and free milling high grade material) and the

current advanced set-up at Youanmi (plus additional gold/nickel prospective tenements), we look

forward to extensive news flow over the coming months and initiate coverage on Rox Resources

(RXL) with a Speculative Buy recommendation.

Youanmi Gold Project (RXL earning up to 70% of Youanmi Gold Mine and nearby extensions. A 50% JV with Venus Metals (VMC) covers an additional 270km

2, which includes 40km of strike along the Youanmi Shear Zone)

The Youanmi Gold Project is located 480km to the northeast of Perth, Western Australia. The project

is accessed by the sealed Great Northern Highway for a distance of 418km from Perth to Payne’s

Find and then for 150km by the unsealed Payne’s Find to Sandstone Road. The regional JVs extend

the length of tenure to 40km of strike along the Youanmi Shear Zone. The Youanmi Mining Centre

has produced an estimated 667koz of gold @ 5.47g/t Au since discovery in 1901.

Figure 3 – Location of Youanmi Resource and high priority targets on JV ground (source: RXL Presentation)

The current Mineral Resource Estimate at the Youanmi Gold Project is 2.4Mt at 2.97g/t Au for

1,190,600oz and located ~25km from Spectrum’s (SPX) Penny West Deposit. The oxide Resource is

contained within several pit areas and Rox Resources will investigate the potential for the northern



pits (Kurrajong, Rebel, Kathleen and United North) to become one amalgamated pit alongside the

other main pit at Youanmi. This will simplify the operation and bring a lot more of the Resource into

a mineable plan.

Figure 4 – Long Section of northern pits at Youanmi with 2g/t Au and drill targets (source: RXL Presentation)

Geology

The project is situated in the Youanmi Greenstone Belt and dominated by the Youanmi Fault Zone, which traverses the eastern margin of the tenements and separates the greenstone stratigraphy to the west from the basement granitoids and gneisses to the east. Most of the gold is hosted within the north-northwest splays off the Youanmi Fault. The splays diverge from the Youanmi Fault and trend sub-parallel with the granite-greenstone contact. Near the Youanmi Mine, gold mineralisation occurs in lode structures contained by shears in close proximity to the granite-greenstone and contact Gold is also distributed in a series of steeply plunging shoots. The gold also occurs in a number of other units (within structures) that include granite, basalt-BIF sequences and felsic volcanic rocks.

Youanmi Resources

The following Resources are based on a database of ~550,000m of drilling that has been analysed and confirmed by Rox Resources. Table 1: Mineral Resource for near-surface deposits

Table 2: Youanmi Deeps Mineral Resource Estimate



Site Infrastructure

The site infrastructure includes a CIP process plant (requiring significant refurbishment) which was

designed to treat 600ktpa of oxide ore, a tailings disposal facility, mine offices, combined core shed

and workshop, mine village, access roads and airstrip. Sufficient power for the current ‘care and

maintenance’ activities is supplied via a small generator. Potable water is sourced from a bore

adjacent to the Bunker open pit. Process water is available from local aquifers and may be

supplemented from abandoned open pits.

The mine village includes a kitchen, mess, wet mess, common room, TV room, office, three self-

contained houses for families, six houses (comprising 6 bedrooms and 2 bathrooms and a communal

lounge), six concrete plinths for transportable cabins, six caravan bays, two communal laundries,

gymnasium, squash court, combined tennis and basketball court, telephone communications and

satellite. Facilities at the village will ultimately require varying degrees of refurbishment to

accommodate a full-time work force. However, for the purposes of exploration crews, the village is

well equipped.

Figure 5 – Youanmi Camp (source: photo from August site trip)

Currans Find (RXL ownership = 45%)

Rox Resources and Venus Metals together acquired a 90% interest in the high-grade historic Currans

Find Gold Prospect located in the centre of the Youanmi Gold Project. The 90% stake acquired is

shared equally between Venus and Rox, with the remaining 10% held by the vendor. Venus is the



manager of the JVs until Rox elects to move to 70% ownership of the Joint Venture covering the

Youanmi Gold Mine.

The Currans Find project area is located within the Youanmi Greenstone Belt and situated

approximately 5km north-northwest of the historical Penny West gold mine (Spectrum Metals). High

grade gold mineralization is associated with quartz veins that generally plunge to the southwest and

steeply dip to the southeast. The mineralisation is hosted by mafic rocks (amphibolite), ultramafics

(talc-tremolite schist) and diorite. Similar rocks are host to the gold mineralisation at Penny West.

RC drilling (3 stages completed now) has provided some high grade results including:

- 3m @ 32.58g/t Au from 115m

- 4m @ 9.25g/t Au from 46m

- 3m @ 27.5g/t Au from 39m

- 2m @ 13.34g/t Au from 61m

- 3m @ 25.00g/t Au from 109m

- 1m @ 39.61g/t Au from 94m

- 1m @ 13.32g/t Au from 110m

- 4m @ 5.28g/t Au from 90m

Stage 4 RC drilling is planned to test the down-plunge extension of the stacked high-grade gold lodes

at the Currans North Prospect, and explore down-plunge and along-strike. The drilling will also test

other new targets based on historical drill data within the mining lease, as well as any potential

targets generated by the IP geophysical survey currently underway.

Figure 6 – Recent drill intersections at Currans Find (source: VMC announcement)



Commonwealth – High Grade Target (Captured within the Youanmi Gold Mine JV – RXL earning up to 70%)

The Commonwealth Target and mineralised trend is ~4km northwest of the Youanmi Plant. Gold

mineralisation is within a 3m-10m wide zone of sheared quartz-veining and highly altered mafic

volcanic rocks. Drilling is underway at Commonwealth and initial results from this are expected

within the next couple of weeks.

Some of the better intersections in previous drilling include:

- 20m @ 2.6g/t Au from 11m

- 18m @ 12.9g/t Au from 39m

- 10m @ 9.2g/t Au from 8m

Figure 7 – Previous drilling intersections and targets of current drilling (source: RXL Presentation)

Fisher East Nickel Project (RXL ownership = 100%)

The Fisher East nickel project is located in the North Eastern Goldfields region of Western Australia

and hosts several nickel sulphide deposits. The total project area is ~350km2.

JORC 2012 Resource: 4.2Mt @ 1.9% Ni containing 78,000 tonnes of nickel.



Rox recently entered into a binding terms sheet with Cullen Resources (ASX:CUL), which allows Rox

to earn up to a 75% interest in Cullen’s Mt Eureka tenements. Rox’s Fisher East nickel deposits occur

along an ultramafic flow basal contact which, along strike, extend into Cullen’s Mt Eureka Project.

The new tenure also contains significant gold mineralisation, including the Galway and Southern

Prospects. This puts Rox Resources in a strong position to effectively and quickly explore and develop

drill targets for the project.

The Mt Eureka Greenstone belt represents the northernmost 40 strike km of the contiguous Mt

Fisher – Mt Eureka belt. The strike length of prospective ultramafic stratigraphy on the Mt Eureka

Group of tenements is extensive with the prospective basal contact unit extended from Rox’s tenure

onto the Mt Eureka tenure.

Figure 8 – Location of Mt Fisher Gold and Nickel Project (source: RXL announcement)

Mt Fisher Gold Project (RXL ownership = 100%)

The Mt Fisher gold project is located in the North Eastern Goldfields region of Western Australia,

adjacent to the Fisher East nickel project, and hosts several gold deposits. The total project area is

~220km2. This is a lower priority for Rox Resources going forward and the focus is more likely to be

on the nickel targets on the eastern edge of the tenements. JORC 2012 Resource: 1Mt @ 2.7g/t Au for 89koz (includes Damsel, Moray Reef and Mt Fisher deposits).



Collurabbie Gold-Nickel Project (RXL ownership = 100%)

The Collurabbie project is located in the highly prospective North Eastern Goldfields region of

Western Australia and is prospective for gold and nickel. The project area of ~123km2 hosts the

Olympia nickel sulphide deposit and a number of other prospects for nickel sulphide mineralisation.

JORC 2012 Resource of 573,000t @ 1.63% Ni, 1.19% Cu, 0.082% Co, 1.49g/t Pd, 0.85g/t Pt has been

defined at Olympia. The style of nickel sulphide mineralisation is different to that at Fisher East, with

a significant copper and PGE component at Collurabbie, and has been compared to the Raglan nickel

deposits in Canada (>1Mt contained nickel). In addition, there is potential for gold mineralisation,

with several strong drilling intersections including 2m @ 2.4g/t Au from the Naxos prospect. This will

not be a focus for Rox Resources in the immediate term.

Directors

Alex Passmore

Managing Director – Appointed April 2019

Mr Passmore is a qualified geologist with extensive corporate experience. He holds a Bachelor of

Science degree with First Class Honours in Geology from the University of Western Australia and a

Graduate Diploma of Applied Finance from the Securities Institute of Australia.

Mr Passmore is an experienced corporate executive and company director with recent appointments

including Managing Director of Cockatoo Iron NL, Non-Executive Director of Aspire Mining Ltd, Non-

Executive (and Executive) Director of Equator Resources Ltd/Cobalt One Ltd (which merged with TSX-

listed First Cobalt Corp.), and CEO of Draig Resources (now Bellevue Gold Ltd).

Stephen Dennis

Non-Executive Chairman – Appointed August 2015 Stephen Dennis has been actively involved in the mining industry for over 30 years. He has held

senior management positions at MIM Holdings Limited, Minara Resources Limited and Brambles

Australia Limited. Until July 2015, Mr Dennis was the CEO and Managing Director of CBH Resources

Limited, the Australian subsidiary of Toho Zinc Co. Ltd of Japan.

Holding a LLB and a B.Com., Mr Dennis is also currently the Chairman of Heron Resources Limited,

Graphex Mining Limited, Cott Oil and Gas Limited and Lead FX.

Brett Dickson

Finance Director – Appointed April 2010 Mr Dickson is a resource industry executive focussing on the start-up, restructuring, management

and financing of emerging publicly listed resource companies. He has proven corporate skills in areas

of capital and debt raisings, stock exchange listings, corporate governance and administrative

management.

He has a sound financial background with a Bachelor’s of Business, majoring in Economics and

Finance and is a Fellow of both CPA Australia and the Governance Institute of Australia.



Disclaimer The following Warning, Disclaimer and Disclosure relate to all material presented in this document and should be read before making any investment decision. Warning (General Advice Only): Past performance is not a reliable indicator of future performance. This report is a private communication to clients and intending clients and is not intended for public circulation or publication or for the use of any third party, without the approval of Taylor Collison Limited ABN 53 008 172 450 ("Taylor Collison"), an Australian Financial Services Licensee and Participant of the ASX Group. TC Corporate Pty Ltd ABN 31 075 963 352 (“TC Corporate”) is a wholly owned subsidiary of Taylor Collison Limited. While the report is based on information from sources that Taylor Collison considers reliable, its accuracy and completeness cannot be guaranteed. This report does not take into account specific investment needs or other considerations, which may be pertinent to individual investors, and for this reason clients should contact Taylor Collison to discuss their individual needs before acting on this report. Those acting upon such information and recommendations without contacting one of our advisors do so entirely at their own risk. This report may contain “forward-looking statements". The words "expect", "should", "could", "may", "predict", "plan" and other similar expressions are intended to identify forward-looking statements. Indications of and guidance on, future earnings and financial position and performance are also forward looking statements. Forward-looking statements, opinions and estimates provided in this report are based on assumptions and contingencies which are subject to change without notice, as are statements about market and industry trends, which are based on interpretations of current market conditions. Any opinions, conclusions, forecasts or recommendations are reasonably held at the time of compilation but are subject to change without notice and Taylor Collison assumes no obligation to update this document after it has been issued. Except for any liability which by law cannot be excluded, Taylor Collison, its directors, employees and agents disclaim all liability (whether in negligence or otherwise) for any error, inaccuracy in, or omission from the information contained in this document or any loss or damage suffered by the recipient or any other person directly or indirectly through relying upon the information. Disclosure: Analyst remuneration is not linked to the rating outcome. Taylor Collison may solicit business from any company mentioned in this report. For the securities discussed in this report, Taylor Collison may make a market and may sell or buy on a principal basis. Taylor Collison, or any individuals preparing this report, may at any time have a position in any securities or options of any of the issuers in this report and holdings may change during the life of this document.

Analyst Interests: The Analyst may hold shares in Rox Resources, but Taylor Collison Limited considers such holdings not to be sufficiently material to compromise the rating or advice. The Analyst’s holdings may change during the life of this document. Other Staff (including Principal accounts) may also hold shares in RXL: ASX, in personal and family related accounts. These holdings may change during the life of this document. Taylor Collison, its officers and employees may have conflicting roles in the financial products referred to in this research and, as such, may affect transactions which are not consistent with the recommendations (if any) in this research. Taylor Collison may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. Accordingly, Taylor Collison employees or officers may provide oral or written opinions to its clients which are contrary to the opinions expressed in this research. Analyst Certification: The Analyst certifies that the views expressed in this document accurately reflect their personal, professional opinion about the financial product(s) to which this document refers. Date Prepared: September 2019 Analyst: Ryan Armstrong Release Authorised by: David Cutten

Documents

Rox Resources Ltd. (RXL) - Initiation · Share Price (6/9/2019) $0.028 52 week high/low $0.035/$0.007 *A$3.75 million deferred payment from Teck for Reward sale, plus $150k in ASX