Mukuba Resources options land next to Tenke-Fungurume

At just 19.5¢ a share and with about 57.4 million shares outstanding, Mukuba Resources (MKU-V) may have slipped under the radar screen of many investors. But a recent option and joint-venture 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.  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,” and said he is looking forward to combining Mukuba’s regional knowledge (the junior has two projects in neighboring 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 joint-venture company. It must spend US$3 million on exploration and maintenance of project 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 joint-venture will have a 70% interest in the project and be the initial operator, with the board consisting of four directors, two nominated by Mukuba and two by Benzu.

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

Operations at Tenke-Fungurume, about 177 km northwest of Lubumbashi, are designed to produce about 290 million pounds of copper and 18 million pounds of cobalt a year. 

In addition to the DRC, Mukuba has a 100% stake in the Northcore project in central Zambia that is licensed for both copper and cobalt and spans 2,274 sq. km of ground in the Domes region of the Zambian Copperbelt. Mukuba also has an option agreement for an 85% interest in the Nyimba project,  a 500 sq. km licence area about 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 Corp. (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 4.31 metres of  3.11% 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).