Nippon Dragon Resources Inc. (TSX-V: NIP) (OTCQB: RCCMF) (Frankfurt: D5O) is both a technology company and junior gold miner, its exclusive and patented revolutionary Thermal Fragmentation mining extraction technology appears to be quickly gaining traction and is expected to translate to increased near-term opportunity from a multitude of interested parties. Thermal Fragmentation technology is expected to enter a serious commercialization phase this 2017, after ~8 years of vetting, some mining experts now believe the technology ushers in a new era of improved economics for underground miners chasing narrow gold veins. Nippon's process can reduce costs up to 60% for many mines in the world. The Company's other flagship asset is its 100%-owned, advanced stage, fully permitted Rocmec 1 Gold property in the prolific Abitibi region of mining-friendly Quebec which is near-turnkey ready, with 479,100 oz gold in all categories (3 gpt cut-off), and >$41M expended to date (5 levels + ramp + shafts).
The Thermal Fragmentation process uses powerful burners, powered by diesel fuel and compressed air, to fragment hard rock. A small (125 mm) pilot hole can be enlarged to just over 1 m in ~8 minutes, making it ideal for targeting gold-bearing quartz veins, resulting in dramatically less dilution, increased productivity, lower costs, increased safety, and less impact on environment.
NIP.V's current market capitalization is ~$14 million Canadian (~138M shares outstanding X ~10 cents (~190M fully diluted, with majority of warrants proximal 12 cents)). Its market cap is miniscule relative to the potential and the current share price presents an opportunity for shareholders to reap large returns as recent vetting of NIP.V's technology have yielded highly favorable results -- we expect Thermal Fragmentation to be formally adopted via strategic agreement by at least one, likely more, major miner(s) this 2017. NIP.V has exceptional risk-reward characteristics; Mining MarketWatch Journal sees a sizeable assent in share price near-term. Intellectual property fee revenue potential alone has the possibility for significant share price revaluation; NIP.V is apt to respond in multiples near-term as the inherent value and accomplishments are appreciated by the market.
Nippon Dragon Resources currently has Thermal Fragmentation units ('Dragons') in the field and distributors in Canada, Japan, South Africa, USA, and Australia. Its business model is based on intellectual property (IP) fees and rental, however expected upcoming long-term large contracts will likely be strictly IP fees for using the process with clients buying their own equipment. NIP.V is positioned to charge upwards of ~US$25,000/month per unit in IP fees, a deal for the client whose savings compared to old technology would be many multiples. The cost of using a dragon to extract 1 tonne of ore would be a fraction (e.g. drop to under $100/t), enabling the converting of marginal or non-profitable mining to efficient mining.
Monthly income is projected to increase exponentially:
NIP.V is making the rounds of select miners and having its Thermal Fragmentation technology tested/demoed. Mining MarketWatch Journal encountered, in passing, a few engineers of some majors that attended Thermal Fragmentation testing at their mine site in North America recently, the reviews of the technology were spectacular, and the names of the majors these engineers work for would impress you. You will not hear of the names of these companies doing the vetting because NIP.V is prohibited from talking about any of them as they insist on non-disclosure agreements. Understandably so, as disruptive technology might cause sore-spots; e.g. labor force (that might be reduced), unions, people resistant to change, and possibly regret about capital investments in technology that NIP.V would replace if adopted. The precision (within 2 cm) with which NIP.V's technology can extract makes it particularly advantageous for mineralized corridors under 2 meters -- over 80% of known precious metals resources available in the world are in mineralized structures under 2 meters. Anecdotally, Mining MarketWatch Journal notes that last year the COO of a major South African miner said in its quarterly review of production that it was experimenting with Thermal Fragmentation, they didn't mention Nippon Dragon Resources, but we know there is no other company in the world that makes Thermal Fragmentation -- he also said the testing was going well. Interesting enough, NIP.V still has a dragon unit in operation in South Africa. Some of the mines in South Africa have ridiculously high grades of gold (e.g. >100 g/t), the drawback is the veins are narrow underground, however ideal for NIP.V's thermal fragmentation. In such a scenario possible efficiencies may result in several hundreds of thousands of dollars per year per unit in the field -- this will have a major positive impact on their bottom-line. Not only would the South African mine benefit from improved economics, the actual miners themselves would benefit from increased safety, and new jobs in next-generation technology that will increase minelife. Independent mining equipment analysts have estimated that when adoption accelerates there could be demand for 5,000 - 10,000 Dragon units globally. Cost savings are too lucrative to ignore and mining MarketWatch Journal believes a major contract/strategic agreement is imminent, requiring numerous dragon units, each generating IP fees for NIP.V. This will create a tailwind for further steepening of the adoption curve and the share price of NIP.V.
Nippon is currently contract mining in Arizona:
Nippon entered into a gold production agreement with Au Consolidated inc., an Arizona Company. In Q4-2016 Nippon began Thermal Fragmentation operations on selected high grade narrow surface veins at Au Consolidated Inc.’s property located in Cochise County, near Willcox in the State of Arizona, U.S.A. To date, in excess of 480 six-inch holes were drilled all on the same mineralized structure, and thermal fragmentation operations have begun.
Nippon is using its own equipment and has also moved its portable 75 TPD mill onto the property, set-up is expected to be complete soon. In the interim material is being stockpiled. This mill was originally purchased new by NIP.V in 2008 for its Rockmec 1 gold project, it has a replacement value of ~$5 million. The mill has the capacity of one Dragon unit; one dragon unit has the capacity of ~100TPD (important to note is that precision of Thermal Fragmentation technology can often reduce dilution by up to 5 times, making the 75TPD mill the equivalent of 375TPD).
Nippon has a partnership agreement on this Arizona project to produce 3,000 oz of gold. Recovered gold ounces on the first 2,000 oz will be shared on an 80/20 ratio. Nippon will be entitled to 80% of the gold ounces whereas Au Consolidated Inc. will be entitled to 20% of the gold ounces produced. 1,000 ounces of gold recovered will be shared based on a ratio of 60/40. Once gold production reaches the initial target of 3,000 ounces as stipulated in the agreement, a long-term agreement or sale of the thermal fragmentation unit(s) and Nippon’s treatment plant can be negotiated between the parties.
Funding for activities was secured by Nippon via a Forward Gold Purchase Agreement with European buyers. Nippon sold 1200 units at US$900.00 per unit, each unit representing one (1) gold ounce. The company intends to complete delivery of the gold ounces to the buyers ~14 months following on site mobilization. Nippon will also take the opportunity to showcase its technology to mining companies that have demonstrated a keen interest in implementing the technology within their own operations.
Nippon is advancing its flagship 100%-owned Rocmec 1 Gold Property toward a near-term mining scenario:
The Rocmec 1 Gold Project, located in the Abitibi region of Quebec, was acquired in October 2005. It has had >$41M expended on the project to date, ~$33M of that by NIP.V in rehabilitating the property, surface and underground infrastructure, diamond drilling, equipment, drifting and the acquisition of a 75 tpd treatment plant, designed for underground installation.
The property includes a 100 m deep two compartment shaft, an 844 m decline allowing access to five levels (50, 70, 90,110 and 130 m). On these levels a total of 1700 m (drifts and cross-cut drift) were driven.
Mineralized structure is characterized by narrow high-grade quartz veins, ideal for Nippon Dragon's thermal fragmentation technology to create an efficient low cost production scenario.
The current (2010) resource calc. (with a cut-off grade of 3 g/t.) for measured/indicated stands at 570,300 tons at 6.52 g/t = 119,500 ounces. The resource is close to surface.
The global 43-101 of just under 500K oz gold is from 2010 (seen above), the Company has since conducted drilling to build ounces. There is no shortage of additional gold, NIP.V has identified the mother structure (Boucher Structure/Labyrinthe fault, which runs ~3.5 km on the property), and the deposit is open in all directions. As is typical for other miners in the area, they often only keep enough resources on paper to keep their mine operating for 2 - 5 years and simply add to the resource as they go. The Company has since identified robust new gold vein sections not in the 2010 43-101; on each side of its Boucher 1 and Boucher 2 veins there are stellar values averaging near 15 g/t over very long distances, plus ultra-high 'jewelry-box' grades over a couple meters in some places.
Tremendous value will be added to the the Company's market cap by performing a prefeasibility study with a new 43-101 that includes the aforementioned new sections near surface and advancing the mine to operating cash flow status. The Company has the technology and the portable on-site ~100TPD mill necessary to ensure a highly economical operation. It is estimated ~$15 million Canadian is all that is needed to facilitate everything needed. Potentially another forward gold sale similar to what it achieved for Arizona would get it meaningfully towards that total, non dilutively. Once in operation at Rocmec 1, not only would the mine serve as a showcase and training location for the technology, the quarterly financial statements should impress.
Possibility to re-open closed mines which are deemed uneconomical with conventional mining methods:
Rocmec 1 Mine received its "1" to the name because the Company has identified ~45 past operating, now closed, gold mines in Quebec that it believes it can produce at for under US$500/oz with its thermal fragmentation technology. In time, and with the right backing/partners there could be a Rocmec 2, 3, 4, 5.... etc. These historic mines are valued using old technology and could be picked up for next to nothing right now.
Thermal Fragmentation technology shows immense promise in the construction sector also:
Nippon's Thermal Fragmentation technology is ideal for making openings without explosives, fast and cost effectively. In some areas like Manhattan explosives and jack-hammers are prohibited now and major engineering firms are looking for solutions and have been actively knocking on Nippon Dragons' door. A few years back NIP.V received an investment from a construction engineering firm in Japan, that led to demos with firms in Asia, however the real excitement is what is happening now on this front from major, world-wide/global, engineering firms that are actively vetting the technology. It is not unreasonable to envision, in the next year, Thermal Fragmentation being touted as the preferred solution by some of the largest construction engineering firms -- a potentially lucrative deal on this front is possibly imminent near-term.
Aside: The Company's distributor in Australia in an engineer and actively uses Thermal Fragmentation. He has two Dragon units that belong to NIP.V and pays a rental fee per equipment per month when he uses them. The Australian developed new technology for security exits in mines using Thermal Fragmentation technology to make it, and he won a prize for best technology in mines for it.
Nippon Dragon exploits the toughest geology
Wasted ounces found in pillars and structures, that would otherwise be damaged with conventional blasting, can be surgically removed with Thermal Fragmentation. In fact, Nippon’s technology is helpful in almost every underground mining activity. Nippon’s process replaces or greatly improves/complements:
- Room and pillar method (flat, reef or any angle).
- Small long hole method.
- Large bolder reduction (facilitate mucking).
- Shrinkage method.
- Drop raise.
- Blind raise.
- Ventilation raise (primary and secondary).
- Drainage hole of 30 cm and more.
- Vibration blasting control.
- Perimeter blasting and stress reduction.
- Drift cut.
- Ore recovery in drifting.
- Ore pass/waste pass.
Company website: http://www.nippondragon.com/index.php/en/
recent mining journal article: http://miningmarketwatch.net/nip.htm
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