Mukuba Resources options land next to Tenke-Fungurume

At just 19.5¢ a share and 57.4 million shares outstanding, Mukuba Resources (MKU-V) may have slipped under the radar of many investors. But a recent option and joint-venture (JV) agreement on a tenement adjacent to the Tenke-Fungurume mine operated by Freeport-McMoRan Copper & Gold (FCX-N), Lundin Mining (LUN-T) and Gecamines, may change all that.

The junior signed the agreement in April with Benzu Resources on the copper and base metals project in the Democratic Republic of the Congo (DRC). The project lies in the Katanga copper belt, which by some estimates contains nearly 10% of the world’s copper and almost 50% of its cobalt resources.

Trevor Richardson, Mukuba’s president and chief executive, noted in a press release that geophysical work carried out by third parties “has confirmed anomalies along the same trend as Tenke-Fungurume.” Richardson said he looks forward to combining Mukuba’s regional knowledge – the junior has two projects in neighbouring Zambia – with Benzu Resources’ “in-country experience in the DRC.”

Under the terms of the agreement, Mukuba can earn up to a 51% stake in the JV company. To do so, it must spend US$3 million on exploration and project maintenance within three years, and issue US$1 million worth of Mukuba shares to Benzu, to be priced based on Mukuba’s next financial raise. Further development of the project would be funded by both parties on a pro rata basis. 

The JV will have a 70% interest in the project as the initial operator, with the board consisting of four directors: two nominated by Mukuba, and two by Benzu. 

The Katanga copper belt contains 90 known deposits varying in size between 90 million tonnes and 550 million tonnes, at an average grade of 3.6% copper, Mukuba estimates.

Copper production at Tenke-Fungurume, 177 km northwest of Lubumbashi, began in 2009 on the approximately US$2 billion initial development project. Operations are designed to produce 290 million lbs. copper and 18 million lbs. cobalt a year.  

In addition to the DRC, Mukuba has a 100% stake in a Northcore project in central Zambia that is licensed for copper and cobalt, and spans 2,274 sq. km of ground in the Domes region of the Zambian copper belt. Mukuba also has an option agreement for an 85% interest in the Nyimba project, a 500-sq.-km licence area 300 km east of Lusaka. Nyimba’s polymetallic deposits host zinc with copper, lead, molybdenum, silver and gold, and were partially drilled in the late 1970s and 1980s by Minex (Mindeco), a Zambian government department. In 1994 they were acquired by Rio Tinto-Zinc, now Rio Tinto. The most prospective area appears to be Chipirinyuma, where soil sampling by Minex and Rio Tinto defined a surface anomaly measuring 3.5 km by 1.2 km, and drilling by Mukuba confirmed base metal mineralization. In January Mukuba released drill results at Nyimba, including an intersection of 4 metres holding 3% zinc.

Over the last year, Mukuba has traded between a low of 19¢ per share (June 17, 2011) and a high of 48¢ (Nov. 22, 2010).