Nevoro acquires Sheffield Resources, leases past-producing Benbow chromite mine

Having finalized a lease on the past-producing Benbow chromite mine, Nevoro (NVR-T) now controls a project in the Stillwater area in Montana, which, according to Nevoro, contains the largest chromite resource in the western hemisphere, as well as nickel, copper, cobalt and platinum group metals (PGM) targets. And through its recently-concluded takeover of Sheffield Resources, it has gained control of the Moonlight project in California, with a copper resource which Nevoro hopes to expand. The company’s focus is on defining and expanding the resources it controls on its two flagship projects at Stillwater and Moonlight.

Speaking at a recent presentation at the Albany Club in Toronto, CEO Bill Schara said that Nevoro is more a development company than an exploration company. Moreover, the board and executive management have been assembled with a view that they will support both organic growth through advancing existing projects, and growth through acquisitions.

“Our philosophy as a junior is to acquire assets of such a calibre that a lot of value can be created at the pre-feasibility and feasibility stages,” Schara said.

The 25-year lease agreement for the past-producing Benbow chromite mine calls for a signing bonus of US$50,000, annual payments of US$50,000 for the first five years, US$75,000 for years 6 to 10, and US$100,000 thereafter. The mine is subject to a 5% production royalty, calculated on net sales proceeds, and the annual payments form a part of the royalty. Nevoro has the option of buying the mine for US$5 million during the first five years, or US$10 million during the following five years.

The Stillwater property in south-central Montana is a polymetallic project, with chromium, nickel, copper, cobalt and platinum group metals (PGM) mineralization. The 4,600 acre property is adjacent to the producing Stillwater PGM mine, and proximal to the producing East Boulder PGM mine, neither of which is owned by Nevoro. Targets in the Stillwater project include Crescent Creek, Mountain View, Mouat, Nye Basin, Benbow East, and Benbow mine. Mineralization is not uniform throughout the six targets; rather, each target is prospective for different minerals.

Historically, nickel-copper-cobalt mineralization at Stillwater has been explored on three sites: Mouat, Nye Basin and Benbow. Historic resources are between 103 and 133 million short tons (about 94 to 121 million metric tonnes) of 0.6% nickel, 0.5% copper, and 0.06% cobalt, equivalent to about 3.2% copper, while PGM resources are not known. These resources are based on more than 33,000 metres of drilling in 150 holes by Anaconda in the 1970’s. Nevoro intends bringing these historic resources to NI 43-101 standards, expanding them, defining PGM mineralization, and conducting a pre-feasibility study.

Examples of high PGM values from historic holes drilled by Anaconda at Crescent Creek include 1.5 metres of 4.4 grams per tonne PGM, and 1.8 metres of 4.7 grams per tonne PGM. Some historic holes also returned rhodium mineralization. Crescent Creek is a target with a 3.7 km strike, while Mouat, which is also a PGM target, has a 2.5 km strike.

The Stillwater project has four chromite-related targets (Mountain View, Benbow East, Benbow Mine and Nye Basin) with historic resources of 50 million short tons (about 45.4 million metric tonnes) grading an average of 22% Cr₂O₃, equivalent to 22 billion lb. Cr₂O₃. According to Nevoro, this is the largest chromite resource in the western hemisphere, and the seventh largest in the world.

Chromite was mined in the Stillwater area during the Second World War, when about 364,000 tonnes of ore were mined from the Benbow mine and Mountain View mine. Nevoro is interested in the chromium resources at Stillwater due to the fivefold increase in ferrochrome prices over the last five years, coupled with supply problems from South Africa. U.S. Ferrochrome prices are about US$2.05 per lb. for ferrochrome with 50-55% chromium.

A historic feasibility study which was conducted in 1988, taking into account only 30% of Nevoro’s chromite resource, indicated a net present value of US$77 million at a discount rate of 12%. Nevoro’s plan is to update that feasibility study, advance the resource to NI 43-101 standards, and conduct a pre-feasibility study with the new resource figures.

The chief use of chromium is as an alloying agent, particularly in stainless steel. Most chromite is converted to ferrochrome, which is used as a raw material for alloys. The U.S. Geological Survey estimates that world resources of chromite are in excess of 11 billion tonnes, sufficient to meet world demand for many centuries. By far, South Africa has the largest chromite reserves and is the largest producer. World production was 19 million tonnes chromite in 2006.

Nevoro has also finalized the acquisition of Sheffield Resources after Sheffield shareholders voted to approve the takeover. Nevoro is paying 0.8 of a Nevoro share for each of the approximately 37.4 million Sheffield shares outstanding, for a total of 29.9 million Nevoro shares.

Sheffield’s principal asset is the wholly-owned Moonlight copper project in Plumas County in northern California, 140 km northwest of Reno, Nevada. The Moonlight project measures about 6,900 acres, and it hosts porphyry copper and copper-oxide mineralization. NI 43-101 -compliant indicated resources are about 162 million short tons (147 million metric tonnes) at a cutoff grade of 0.2% copper, grading about 0.32% copper, 0.003 oz. gold and 0.1 oz. silver per short ton. Inferred resources are about 88 million short tons (80 million metric tonnes) at a cutoff grade of 0.2% copper, grading about 0.28% copper, 0.003 oz. gold and 0.09 oz. silver per short ton.

The Moonlight project hosts three historic mines (Ruby mine, Engels mine and Superior mine) and has four advanced targets. There has been historic drilling of 43,000 metres on the property. Nevoro is particularly interested in five targets: Moonlight Valley (the most advanced), Engels Mine, Superior Mine, Copper Mountain and Moonlight South. Other targets include Sulphide Ridge, Gossan Ridge and Blue Copper. Nevoro’s objective is to expand the resource, complete an NI 43-101 estimate for the expanded resource, and conduct a pre-feasibility study.

Although management’s clear preference is to advance the known resources at the two flagship projects at Stillwater and Moonlight, Nevoro also has a dozen early-stage projects in Nevada, which are mostly gold prospects. Currently, results from first-round drilling on two of these are awaited, and exploration is planned for three. In addition, Sheffield Resources had an option to acquire the early-stage Golden Loon polymetallic property in B.C., which now joins Nevoro’s stable of early-stage projects.

The company has about 181 million shares fully diluted. After completing a $7 million first tranche of a private placement, there are $9 million in the treasury, and it plans to raise more money in a second tranche.