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Red Rock, RRR, Kenya Gold Drilling Update – Good Results?

Tim Worstall
Tim Worstall trader
Updated 22 Mar 2022

Buy Red Rock Resources Shares Your Capital Is At Risk

Key points:

  • Red Rock Resources has updated on its gold drilling results in Kenya
  • The share price is up 5% on this news
  • The results are no more exciting than that
  • Rockfire Resources Up 6% On Greek Win

Red Rock Resources (LON: RRR) shares are up 5% on the company’s update on its drilling programme in Kenya, at the Mikei gold project. This could be about right as the drill results aren’t if we’re honest about it, all that exciting.

We should understand the stage this project is at, this Mikei. This is a stage that every junior miner, every mining project, goes through. There is something interesting there. However, we put it – perhaps just what the jobbing engineer God brought in to do the geology left it as – there is some mineralisation there that is of interest. The next stage is to find out exactly how interesting – how high are the concentrations of the target element, in this case gold – and then, in parallel, how much of that interesting material is there? Small volumes of high-grade material, large of low, both can be interesting. But the combination has to be high enough, and large enough, to carry the capital costs of setting up to mine and process.

This is the stage at which Mikei is. Investigating these details of how much of how good an ore there is. Only once that is known, properly, can the resource be said to be “proved” and thus become a reserve that is worth mining.

Also Read: Gold Trading: The Essential Guide

Red Rock is therefore conducting a drilling programme to see how much of that gold ore there is and in what concentrations? Thus these results.

The first batch of results from this drilling campaign at Mikei was released by Red Rock Resources back in January. They’re here. When they were released there was no great uptick in the Red Resources share price – that’s a pretty good indication that those first results were not material in increasing the value of Red Rock. Obviously – they didn’t increase the value so they don't increase the value.

The second set of results from the same drillings at Mikei are released today, here. They’re not, not in concentrations at least, better. So, a reasonable conclusion is that this is also not a material event for Red Rock. That’s not quite the end of the story though for it is the combination of concentration and volume that determines the viability of the mining project. What these results do show is more gold-bearing mineralisation than we knew of earlier. But not, as already stated, of greater concentration than that already known of.

This doesn’t mean that the Mikei gold project is now a dud. Nor does it mean that it is obviously a goer. One set of drilling results very rarely provides a conclusive answer either way after all. Rather, it just tells us that the calculation is complex. We do, after all, require a greater volume of lower grade mineralisation to make a project economic.

Which is exactly what Red Rock Resources is to do – continue to drill and so delineate the opportunity at Mikei. The share price will be driven by what they find as they do so.

Tim Worstall
Tim Worstall is a freelance writer specialising in economics and the financial markets.