Navasota unperturbed by Rio’s troubles in Guinea

VANCOUVER –Christopher Wild, the president and CEO of Navasota Resources (NAV-V, NAORF-O), doesn’t have any grand delusions about his company’s giant bauxite property in Guinea, West Africa.

“We don’t exactly plan on building our own three-billion-dollar refinery,” Wild says. “Our target is to get a resource estimate.”

And despite the fact that the Guinean government recently and suddenly revoked Rio Tinto’s (RTP-N, RIO-L) rights to its Simandou iron-ore project, Wild says he isn’t worried.

“We’re more or less comfortable working in Guinea,” he says.

Navasota continues to release high-grade bauxite numbers from drilling at its Koba property in northeastern Guinea. With a total of 37,000 metres drilled to date on more than 1,000 sq. km of concessions, Navasota has completed both its first and second phase of drilling.

The latest near-surface results come from the property’s northwestern plateaus. For example, at the Ore Pouse 1 and 2 plateaus, hole 428 hit 14 metres grading 46.17% Al2O3 and 11 metres grading 36.51% Al2O3 in hole 434.

To the east of Ore Pousse on the Sapi plateaus, hole 444 returned 10 metres grading 45.63% Al2O3 and hole 451 hit 15 metres grading 44.83% Al2O3. And to the northeast of Sapi on the Foye plateaus, hole 476 hit 5 metres grading 53.08% Al2O3 and hole 483 cut 9 metres grading 36.9% Al2O3.

All told, with 15 holes and 258 metres drilled, results from Ore Pousse averaged 7.2 metres grading 42.3% Al2O3. With 24 holes and 409 metres, holes at Sapi averaged 7.1 metres grading 43.71% Al2O3 and intervals at Foye, with 30 holes and 505 metres, averaged 4 metres grading 43.12%.

Wild says the results from the first phase of drilling, based on 300-to 600-metre spacings, will likely yield an inferred resource in the next couple of months. Second- phase drilling, at 150-metre spacing, should better that and upgrade much of the inferred resource to measured and indicated, Wild predicts.

Much of the potential resource will be clustered in eight to 10 of the property’s south-central plateaus, what Wild calls the “heart of the mineralization.”

The property and the plan

The property, immense by anybody’s standards, is smack-dab in the middle of Guinea’s most well-endowed bauxite region, the Boke Bauxite Belt.

This is a region where the largest single-source producer of bauxite, Compagnie des Bauxites de Guine (CBG), operates a number of mines. CBG is owned by Halco (51%) and the Guinean government (49%). Halco, in turn, is owned by Rio Tinto and Alcoa (AA-N), which both have 45% stakes in the company.

In fact, Navasota’s property used to be part of CBG’s concessions.

“Koba was calved off CBG because they had such a huge permit,” Wild says.

La Societ AMIG Mining International, a group of Guinean businessmen, took ownership of CBG’s offspring.

Wild, a gold man, is the first to admit that Navasota might not have seemed the most likely suitor to AMIG’s holdings. Navasota had been looking for gold in Guinea since 2002 when it heard of the potential bauxite property, he says.

“We were pretty lucky,” Wild says. The price of aluminum hadn’t yet taken off when Navasota began talks to acquire it. “It wasn’t dead, but it hadn’t peaked.”

Wild says that being a junior, Navasota was able to move quickly on the opportunity. He says AMIG liked what Navasota had to offer and that led to an option agreement in March 2007.

Under its terms, Navasota has so far taken a 45% interest in AMIG, which still holds the rights to the property. From this point on, Navasota can either acquire an additional 6% in AMIG if it completes a bankable feasibility study, or — and this is the likelier route — it can acquire a full 100% stake in AMIG for US$15 million.

“But really, we don’t feel any urgency to pull the trigger on that,” he says. Wild speculates that the 100% stake might be part of a future deal on the holding.

As for what he plans for the property, Wild doesn’t want to get ahead of himself by outlining an ambitious mine development. For a small junior like Navasota, the idea is simple: Get a resource, get a major’s interest and get rid of Koba.

There are the more obvious majors already operating in Guinea — such as Rusal, Rio and Alcoa –that might like the property, but Wild also points to potential interest in Koba from the Middle East and China.

The furthest he goes towards imagining a mine is to note that the property is 16 km away from existing railway infrastructure and that it is close to fast-flowing rivers.

“Right now other operations use heavy oil,” Wild says. But he says the region is ripe for hydroelectricity.

Uncertainty over Rio

But there are politically charged storm clouds hanging over the mining industry in Guinea at the moment, ones that might keep majors from wetting ink anytime in the near future.

Recent events between Rio Tinto and the government read like the script of an afternoon soap. Rio Tinto thought it had all the necessary legal title over its mega-iron ore project, Simandou, near the border with Liberia.

And then halfway through this summer, it received two letters. In the first, a Guinean minister called into question its ownership of Simandou, and in the second, Guinean president Lansana Conte fully rescinded Rio’s ownership of the concession.

This after Rio had spent over US$200 million to develop the US$6-billion project.

Meanwhile, the Guinean minister who had sent Rio the first letter was fired, re-hired and then fired again over a period of four days.

Christina Mills, a spokeswoman for Rio, didn’t want to speculate why the president rescinded Rio’s title to Simandou, saying only that “some elements of government are questioning the validity of our concessions.”

She says Rio is talking to the government behind closed doors and is confident the issue will be resolved.

For his part, Wild seems relatively unbothered by the unfolding events.

He says he “didn’t read too much into it,” pointing out that Rio and the government have a long history of negotiation. He believes the Guinean government may be playing hardball with Rio, a way of getting more money out of the company.

He notes that the mining sector is so important to the economy that it can’t help but sometimes boil over into the political arena.

And Rio’s experience at Simandou hasn’t hurt Navasota’s share price. The stock has weathered the storm, holding steady between 60 and 80 since the end of May. On news of the latest drill results, it jumped 5 to close at 75.

In the end, Wild concludes: “It’s not the worst place to be working — but there are certainly some challenges.”