15 Apr 2013 - Perth-headquartered Trafford Resources (ASX:TRF) is eyeing 2013 as the year it comes of age, seven years after listing on the Australian stock market.
By Rebecca Lawson, Resources Roadhouse
This is the year one of the company’s many investments, the Wilcherry Hill iron ore mine, will come into production, while the Twin Peaks and Moorarie projects begin to take shape as exploration gathers pace.
The fruition of the game changer projects stems from Trafford’s diversification strategy, or as managing director Ian Finch calls it – “the insurance policy”- which was born out of the global financial crisis (GFC) as a way to counter economic downturns.
Finch equates the company’s strategy to an octopus.
Each tentacle represents one of Trafford’s investments, which range from base and precious metals to bulk commodity iron ore, international exposure and the company’s own exploration projects.
"We have developed over time a series of insurances for the company - for the shareholders – while conducting effective exploration,” Finch told The Resources Roadhouse.
“We've had to because we've been through a GFC and we've been through the Greek tragedy play.
“So we've grown the company in a different way."
Trafford’s strategy centres on taking substantial shareholdings in other exploration companies, which have a high prospect of returning value to shareholders and to the company.
This was proven when Trafford invested $2.24 million in Indonesia-focused exploration play Robust Resources in 2008, taking a major shareholding in the company.
A year later, Trafford started turning that investment into a liquid asset that has generated about $17 million, part of which was returned to shareholders as dividends and has helped to fund the company’s own exploration program.
“That’s $17 million we didn't have to go to shareholders for, that’s 17 million worth of shares we didn't have to put out, that’s how we keep our market cap tight,” Finch said.
It’s a strategy Trafford is aiming to replicate with its recent investment in Perth-based Orinoco Gold, which is progressing its flagship asset, the Curral De Pedra gold project in Brazil.
Trafford has been keen to get into the area for more than two years, with Finch saying Orinoco provided the company with the “perfect opportunity” to get into the lucrative South American market.
Curral De Pedra sits in a high-grade gold area, with the two nearest operating mines owned by Anglo and Yemana, having multi-million ounce gold reserves.
Exploration is at an early stage, with bulk sampling at the Cascavel target returning an average grade of 22 grams per tonne, while first round drilling has yielded gold grades of up to 101g/t.
“It’s a positive investment for shareholders in Trafford and it’s our introduction to South America,” Finch said.
Trafford’s main investment, however, lies in IronClad Mining, a company it spun out and floated in 2007 to focus on developing the iron ore assets within the Wilcherry Hill project in South Australia’s northern Eyre Peninsula area.
Trafford has a 20:80 joint venture with IronClad over the project.
Six years on and IronClad is about to become Trafford’s first mining arm, with stage one to involve the production of one million tonnes of Direct Shipping Ore per annum, and exports to start before the end of the calendar year.
The second stage aims to produce between three and five million tonnes per annum with the addition of dry magnetite and gravity separation concentrates.
Wilcherry has a current JORC-compliant iron ore resource of 263 million tonnes and exploration potential of more than 1.5 billion tonnes.
Trafford retains a 27.6 per cent interest in IronClad.
"The strategy is that the arms of the Trafford octopus feed cash back to the head so that we can do more and more effective exploration and find more mines, and ultimately find more arms of the octopus," Finch explained.
“Chinese astrologists may think this is the year of the snake, but it’s not.
“It’s the year of the octopus and the year that Trafford comes of age.”
Towards that end Trafford is advancing its latest projects, the Twin Peaks and Moorarie projects, which have been touted as potential game changers for the company.
The Twin Peaks project, is located 200 kilometres northeast of Geraldton in the Mid-West region
It is a joint venture with Independence Group, whereby Trafford can earn 80 per cent equity in the project’s iron ore rights by spending $5 million over five years.
Earlier this year, Trafford began a 5000 metre drilling program where a total of 15 iron ore prospects have been delineated along a 20 kilometre strike length covering a Banded Iron Formation belt.
Results from the first four holes have been received and include:
- 31 metres at 63.5 per cent iron, including 5 metres at 68.1 per cent; and
- 17m at 64.3 per cent iron, including 6m at 67.7 per cent.
All results have so far shown low impurities.
Drilling has also shown the outcrop extends to a minimum depth of 80m and remains open.
“This is going to be a big winner for Trafford,” Finch said
“There’s no doubt about this if you look at the way at which we could truck the Direct Shipping Ore to the coast - or many of the options that we can deal with this - and the high margins currently available.”
Another exploration area Trafford will actively pursue is its Western Gawler Craton gold joint venture with Kingsgate Consolidated.
The agreement, struck in August last year, saw Trafford buy Southern Gold’s 51 per cent share in the JV, with the tenements next door to Kingsgate’s Challenger gold mine.
The JV landholding, covering 2,841 square kilometres, includes advanced exploration targets, brownfields exploration and a number of high quality greenfields prospects.
Combined with Trafford’s existing tenements in the area – some of which it swooped on soon after the federal and state governments opened the Woomera Prohibited Area – the company now holds more than 8,300sqkm in the greater Gawler Craton region.
This includes Trafford’s other land holdings within the Wilcherry Hill project, which Finch describes as “Aladdin’s cave” due to its rich mineralisation.
The initial attraction for Trafford when it acquired Wilcherry in 2006 was its gold prospects at Weednanna, which after being deflected by China’s insatiable demand for iron ore in 2006/07, is now being aggressively explored.
In 2012, a total of 1,566m of drilling was completed at Weednanna with a number of broad gold zones intersected, including:
- 174m at 0.40g/t gold; and
- 93m at 1.59g/t gold containing 22m at 5.25g/t.
The company considers these results indicate potential for a large scale, near-surface gold zone on the western end of the project.
Trafford will also follow up its Paris silver-gold discovery within the Wilcherry tenements later this year following successful first pass qualitative drilling, which showed the potential of a high-grade silver deposit.
That discovery prompted Trafford to conduct an internal review of its silver prospects within Wilcherry, widening the scope of the precious metal to outside of the only previously identified silver target at the Telephone Dam project.
Finch said Telephone Dam’s scope has now been broadened to include lead and zinc, however this would not be aggressively explored until Trafford’s investments come good.
Trafford Resources Ltd (ASX: TRF)
TRF Price at posting:
12.5¢ Sentiment: LT Buy Disclosure: Held
