Red Crescent Resources Limited (RCB-TSX)

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July 9, 2012 Issue

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With “First Mover” Status in Turkey, a Growing Nation in Need of Industrial Base Metals and other Mineral Commodities, Red Crescent Resources Limited is Well Positioned for Future Growth

Company Profile:
www.redcrescentresources.com

Red Crescent Resources (TSX:RCB; Frankfurt:7RC) is a Turkey-based junior mining company targeting historically inaccessible areas with ‘First Mover’ status where generally no modern application of exploration techniques, mineralogical and metallurgical assessment or technology has been applied, with potentially significant base metal deposits under development.
 

RCR’s strategic and operational focus is fundamentally under-written by virtue of its situational geography, i.e. within Turkey as one of the fastest growing industrial economies. The sustainability of this growth is dependent upon Turkey’s ability to fund the growing balance of payment deficit caused by its continued and accelerating growth in consumption of the main industrial base metal & other mineral commodities; four of the top six are Copper, Zinc, Lead, and Ferro-metals. RCR is the leader in the drive for Turkey to be as far as possible self sufficient by virtue of its ability to produce the key industrial base metal commodities required by 2023. For more information, please visit: www.redcrescentresources.com

Alan M. Clegg
Founder, Director and Consultant – Strategy & Technical

Mr. Clegg, a British and South African citizen is a mining industry professional with over 30 years experienced in mining and minerals projects in over 150 countries worldwide. He is a registered Professional Mining Engineer (Pr.Eng), a registered Professional Construction Project Manager (Pr.CPM), a registered Project Management Professional (PMP), and carries professional fellowship status with the South African Institute of Mining and Metallurgy (FSAIMM) and the Institute of Quarrying (FIOQ) as well as professional memberships of all the major mining institutes globally. In addition he is a recognized mining technical assessment, reporting and project valuation expert with experience in stock exchange listings and capital raising.


Mr. Clegg has been involved with feasibility studies and the construction of over 60 mining and mineral projects with a combined value in excess of US$8 billion over the last 30 years.


Mr. Clegg has been appointed to the board of directors to 5 other companies who were involved in mining, engineering, mining equipment and construction. He is an active member of the Institute of Directors keeping fully up to date with the highest standards for Corporate Governance. He currently holds 6 directorships in the mining and energy related sector, of which RCR is one.


Resources
Base Metals – Zinc, Copper & Manganese
(RCB-TSX)


Red Crescent Resources Limited
Mahatma Gandhi Cad.
No: 102 / 1 Gazi Osman Pasa
06700, Ankara Turkey
Phone: +90 530 662 8964
www.redcrescentresources.com

 

Interview conducted by: Lynn Fosse, Senior Editor, CEOCFO Magazine, Published – July 9, 2012
 

CEOCFO: Mr. Clegg, would you give us a little background on Red Crescent Resources?
 

Mr. Clegg: Red Crescent is a corporation which I founded in late 2007- early 2008 with a focus on developing the essentially untapped base metal and related mineral potential of Turkey, utilizing today’s appropriate technologies, which have really never been applied before in the areas we are operating in Turkey. The founding of the company was initially through the use of my own personal funding followed by private equity from a number of high net worth investors predominantly in London, and thereafter we moved ahead to take the company public and selected the Toronto Stock Exchange for this and we listed the company in November of 2010.


CEOCFO: What is the potential in Turkey, and why has it been overlooked?

 

Mr. Clegg: I think that Turkey as a country is essentially known as a strong trading economy with a trading culture. People never really target it as a destination where the potential for world-class resources of any type could be found. It is however known that in the past, major mineral resources were exhibited and exploited in Turkey by state controlled enterprise, these were predominantly in the industrial minerals area but later in Chrome, Copper and even Aluminum. These remained under state control until ten years ago. Turkey still has the world’s largest reserves of BORON chemicals and is the world’s main supplier with 70% of known reserves. In precious metals historically under state control such as silver have been privatized also, and today there is a buoyant gold industry with many junior companies listed in Canada, London, and Australia, operating here. Turkey is the biggest producer of gold in the European area right now. Additionally to that, its base metal potential was pretty much known from the operations here, predominantly artisanal in nature, no beneficiation applied and materials sold as DSO (Direct Shippable Ores) through traders predominantly for beneficiation in areas like China and Taiwan.


CEOCFO: How did you decide that the time was right?

 

Mr. Clegg: It is an interesting story. I was one of the founding members of a significant consulting engineering house focused on the mining and minerals sector in South Africa and as part of our growth plan and looking forward to business development for the future, we realized we needed to expand the horizons. We were looking for territories, which we could enter, we were very dominant in Africa at the time and so we looked north. Somehow, Turkey popped up on my radar screen, more than anything because it is geologically highly prospective, but most people assume that because none of the major companies were operating there, that there would be no ‘elephants’ as we call them or large world-class resources. I think that is why it has remained predominantly under-explored. In 2004 however, I decided to go have a look at Turkey as a business development mission, and was pleasantly surprised at the lack of competition in the consulting engineering arena. That was the start of the upward growth period in the development of the industry in those days. We decided that we should start a business there which subsequently we did, but although we were in consulting, an opportunity arose to become directly involved in developing mines and minerals, so I decided that I would start Red Crescent Resources and focus on the relatively untapped base metal sector. That happened in late 2007/early 2008.


CEOCFO: Would you tell us about your projects?

 

Mr. Clegg: The projects we have currently are separated into operational three areas. We are focused 100% on Turkey, in Turkey, and for Turkey. We have the western area, which focuses in what we call western Anatolia in the Asian part of the country. Turkey is generally known for having two parts, the European part to the west of the Bosphorus channel that separates the Marmara Sea from the Black Sea, and then on the eastern side, which we call the Anatolian, or the Asian side, and within Greater Anatolia west of central we have an area. We have other projects in central Anatolia, and in far eastern Anatolia or far southeastern Turkey close to the Iranian and Iraqi border.
 

We have two flagship projects, the first one in which the company was founded is in the far southeast of Turkey in the Province of Hakkari, which is a very large zinc/lead/silver resource, currently predominantly oxide resources under development, but it also has great sulphide resource potential at depth and we have already identified some of this potential.
 

Also in Hakkari, which is undoubtedly an emerging metals province given the results we have from our very early remote sensing and satellite imagery studies that we have completed. We highlighted a number of very interesting signatures from that exercise, which following ground proofing has proven to be very significant potential within hydrothermal and epithermal alteration zones for copper/gold projects and other significant polymetallic mineralised resources with large extent. We also have other very large types of resources in the Hakkari area such as medium grade Chrome hosted in granitic massifs and Asphaltite/Anthracite coals, and potential for hydrothermal and epithermal gold resources. Therefore, it is a veritable treasure chest for geologists and mining engineers alike, and it is really underdeveloped, so we are the “First Mover” in that area.
 

The second area of focus where our other flagship project is situated is really in north/central Turkey close to the major city of SIVAS, where we have a large copper project under development and exploration, which we believe could be an “elephant” so to speak. The SIVAS project could be world-class with several hundreds of millions of tons of mineralized materials, and it is polymetallic, predominantly copper but also with nickel, molybdenum, and gold, while the surrounding area is also very much underdeveloped.
 

In our western region, we have a zinc deposit called the Tufanbeyli Project, which is also under development now. This is not by any means an elephant, but it could be quite a profitable project in production for a junior company like ours.


CEOCFO: What is happening on the ground today at the various projects and where will you be in the next year or two?
 

Mr. Clegg: In Hakkari, we initially had a strategy in the corporation, which is pretty standard for junior mining companies. We would explore and develop NI43-101 compliant resources, and in such a way, we build the value of the corporation through its asset base. Given the global financial crisis has driven the terrible state of the capital markets, in particular with investing in base metals and of course with the volatile commodity prices and the strong downturn we have seen in the infrastructural commodities such as zinc, led, copper, has made it very difficult to raise capital.
 

Fortunately, for RCR we are a company not looking for blind resources, we actually have them, they are in our face, we can see them at surface, and they are predominantly outcropping over many tens of kilometers. Therefore, given the exceptional grade profile shown within these resources and reserves expressed at surface we are able to mine immediately. The corporation changed its strategy and this year we have started to develop our production operations in Hakkari and with a view to producing significant amounts of direct shippable ore (DSO) with high-grades. We are talking about zinc ore grade of +25% zinc, shipping that direct to through our marketing agent direct to the Asian Smelters, and other markets. We also have very significant manganese resources in Hakkari and have a developing manganese operation that is currently mining and putting direct shippable ore of between 45% and 48% manganese on the stockpile again for shipping in 2012 so that we can produce revenue.
 

Rather than having to face the market with raising investment capital, which is very difficult and very expensive, we have taken the view that we have the resources, so we should mine them, sell them, and then reinvest the net cash generated into exploration and further resource development.
 

Effectively, we are mining for exploration and resource generation purposes, which is a different strategy, but we have been forced into it because of the dearth of capital available, and also because the terrain we are operating is fairly aggressive and makes it rather difficult to grid it out and drill it in the conventional sense. Particularly on the zinc deposits in some of the areas, we are putting in underground drilling platforms (tunnels/adits) in by developing within the mineralized zone, producing revenue from development ore to pay for those tunneling operations, and at the same time, we will do diamond drilling operations to develop our resource base from the underground positions created.
 

In the central project area, the SIVAS Copper Project will continue for some time to be a conventional exploration project.
 

In the western area at Tufanbeyli, our licenses have already been converted to mining licenses. We have already done conceptual mine designs for a number of open pits, and we are refining these with a view to starting up production operations before the end of the year. We have an opportunity where these areas were historically mined by artisanal miners, and the direct shippable ore is gone, but they left behind significant stockpiles of ore that was not directly shippable grading between plus ten and up to eighteen percent zinc and were classified in the past as “waste materials” but still with relatively high-grade mineralization.
 

In order to convert this “waste” to revenue we have designed, engineered, and constructed a couple of semi portable DMS processing plants. One of the plants is going to be deployed in Tufanbeyli later this year, and one is already in the process of being deployed in Hakkari for processing these materials into a salable concentrate of between 24% and 38% zinc.


CEOCFO: Is the infrastructure that you need in place?

 

Mr. Clegg: Absolutely! This is one of the great joys that a mining company has in Turkey. The infrastructure is well developed even in far southeastern Turkey where the area is aggressive and mountainous. We have very good roads, 3G cellular telephone communications at very high altitudes in the mountains, and all our communications are easily attainable. We have hydroelectric power and significant sources of water, so we are not short of any of the major infrastructure one requires to develop these resources to their full potential. SIVAS is pretty much the same. Grid power, water, and road access is available and in the Adana Province where our Tufanbeyli Project is, we have a similar scenario with general good infrastructure in place.


CEOCFO: Do you foresee any challenges?

 

Mr. Clegg: Every mining destination has its challenges. In Turkey, some of the biggest challenges we face is pushback within the investment community through misperception about what Turkey is.
 

Very few people know and realize that Turkey is the center of the world not only geographically speaking, but geopolitically, and it has a growing role in the geo-economics of the world today, particular in the eastern European Middle Eastern/Asia Minor region, and it has a growing picture there.
 

The challenges we have with these misperceptions are the facts that on the borders of Turkey, in the southern border you have Syria, which as we know is currently engaged in what amounts to almost a civil war. That has an impact from the point of view of investor sentiment and on the southern border of Hakkari we have Northern Iraq and Kurdistan. On the eastern border of Hakkari, we have Iran, so generally the perception is that this is a volatile area and people are afraid of that. The reality is that on the ground, it is actually very peaceful, and in fact the city of Hakkari certainly to me very peaceful and certainly no more dangerous than many areas in downtown London, New York or anywhere else. The fact is that what conflicts do occur in that region are predominantly not civil conflicts but terrorist separatist movements operating from Kurdistan in Northern Iraq, and Iran engage them and the attacks are generally on the Turkish military or the Turkish state. Generally, it does not affect us physically.
 

In the years we have been operating there, I can probably say that if we have lost any time, it is probably less than two weeks in terms of having an inability to access our operations because of some incident that has occurred related to an attack on some military installation or whatever the case may be. Generally, it is no problem for us.
 

The other potential challenge one has is that it is a very seismically active country, and if one is proceeding to do underground mining operations, of course you have to bring those things into consideration in your designs for your mine. Other than that, the country is culturally and politically very stable.
 

We are blessed with the fact that we have a population where eighty percent of the working population is less than thirty years of age. We have literacy rates exceeding 98%, the average adult person has 1.4 degrees and is relatively high IQ, highly educated, highly motivated with a great work ethic, which is fundamental to when you are building a business in any country.


CEOCFO: There are not many places where you find that!

 

Mr. Clegg: Absolutely! We are very blessed in this regard and we are able to tap into the workforce particularly in the areas we are operating in southeastern Turkey.  The city of Hakkari has a population of around 85,000 and it has unemployment in the adult population of somewhere around 65% to 70%. A company like ours, a foreign direct investor and a primary employer, and potentially significant employer for the future, is really the sharp end of the spear in sustainable economic development because in that part of the world other than government funded infrastructural projects, one cannot see any major employment potential.
 

The only industry that will bring sustainable development to that area is in developing of the mineral and metal resources sector, because behind it follows all the supporting industries, equipment industries, spare parts industries, and consumable industries which will then employ people.
 

We believe and know that what RCR is doing in that part of the world is economically significant and should we develop the Hakkari projects to their full potential, we will probably end up employing directly upwards of two to three thousand of the adult population, and indirectly as many as fifteen thousand. What we do is significant and it is seen so by the authorities. We enjoy very great support from all stakeholders whether it is at village level or through into the local government, provincial government, or national government. It has been a very good experience for us.


CEOCFO: Why should potential investors pay attention to Red Crescent Resources today?

 

Mr. Clegg: The first thing would be the destination where we are, Turkey. Turkey is a country with a massively growing economy growing at the same or similar rates as China. It is a smaller economy, but it has the same growth rates, it has this huge demand because it is primarily a manufacturing economy, and it has a huge demand for raw materials. At the moment, it has a looming balance of payments problem, a major contributor is those raw materials being imported from outside. Turkey has a need therefore to develop its minerals & metals industry to become self-sufficient in minerals and metals, which is good news for the investor. If you invest in a company like Red Crescent, you will not be so strongly and indelibly linked to the ability to sell the final beneficiated product through the world market to the Chinese and the other BRIC countries, which are seen as the major consumers of all metals and minerals. Therefore, for the producer in Turkey, it is pretty much irrelevant what China does in the future. Why?, well because there will always be a market for what Red Crescent produces locally and most competitively in the lower cost quartile of the cost curve in Turkey because we have 100% of the market on our doorstep, which is a very comforting factor for any company to know that your market is fully secure.   

Generally as a destination, Turkey is going to be on the world map geopolitically and geo-economically for the future, so that should give great comfort to any investor who is looking for sustainability and the potential of sustainable returns in their investments.

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Generally as a destination, Turkey is going to be on the world map geopolitically and geo-economically for the future, so that should give great comfort to any investor who is looking for sustainability and the potential of sustainable returns in their investments. - Alan M. Clegg

 

 

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