THE PICK APRIL 2021
T H E - P I C K .C O M . AU
López says Lotus ready for uranium surge page 26
Estrella on the hunt for the next big nickel discovery
LITHIUM MAKET FO R E C AST TO BE ENTERING PERIOD OF U N D E R S U P P LY
N OW I S T H E T I M E FO R G LO B A L C O M PA N I E S T O AT T R A C T U.S. I N V E STO R S - OTC MARKETS
P E LOTO N C A P I TA L NAMES THEIR G O L D STO C KS TO FO L LOW
FOSTER STO C K B R O K I N G : BEST ON OUR BOOKS
SHAW AND PARTNERS TIP STRONG URANIUM TURNAROUND page 4
TABLE OF CONTENTS The Pick Magazine is published independently for executives in the resources sector.
11 Eagle Mountain charging towards production
13 European Metals advances in the European lithium race
07 Golden Rim aims for golden growth 08 Celsius hotting up in the Philippines 09 Altan Rio’s stars are aligning at Southern Cross 10 OTC Markets says now is the time for global companies to attract U.S. investors
Colin Hay firstname.lastname@example.org
Design/Production Egg Design
Journalists/Contributors Alex Baker
19 Nickel X lodges ASX float to explore the Albany-Fraser Belt
20 Peloton Capital’s gold stocks to follow
Digital edition in partnership with Metrix Publishing
24 Davenport eyes potash potential
25 Foster Stockbroking looks at the best on its books 26 Lotus ready for uranium recovery
68 Milligan St, Perth, Western Australia Australia 6000 Tel: +61 433 112 936
27 RIU Explorers event wrap-up
16 Estrella Resources on the hunt for the next big nickel discovery
06 Challenger Exploration receiving lots of interest
Consulting Publisher David Tasker email@example.com
15 BMC Minerals outlines major silverzinc polymetallic opportunities in Canada’s Yukon
04 Shaw and Partners says uranium sector recovery underway
Chapter One Advisors
12 Elementos powering ahead on tin surge
14 Perennial Value Management takes a look at High Purity Alumina
03 Lithium market tipped for period of undersupply
18 Red River benefitting from diversification
Chapter One has taken care to collect and publish this information in good faith but makes no warranties or representations as to the accuracy of any facts or representations, and has relied upon information provided to it in doing so. Chapter One does not accept any responsibility for the accuracy of any facts or representations published, or for any opinions expressed. Chapter One is not a financial adviser, and nothing within the publication is financial or other advice whatsoever. Subject to any terms implied or expressed by the law, Chapter One does not accept any responsibility for any reliance, loss, damage, cost or expense incurred by any reliance upon this information or anything published by Chapter One herein, or by acting upon it or for any error, omission or misrepresentation conveyed. The information published is general only and does not take into account any individual objectives of investors. Front Page image provided by Lotus.
This publication has been produced independently of the Australian Financial Review newsroom.
THE PICK APRIL 2021
Front cover image: Marcelo López, Senior Portfolio Manager at L2 Capital
To be featured in the next edition contact David Tasker: firstname.lastname@example.org
EV demand driving new growth opportunities for the lithium market
ondon-based RK Equity is predicting strong market and pricing growth for the global lithium market after a period of downturn.
In a recent online interview with “The Limiting Factor” RK Equity’s lithium specialists Howard Klein and Rodney Hooper, presented a bullish forecast for the lithium market based on strong EV and battery market growth. However, they also offered a warning, that investors need to undertake in-depth research into what stocks to follow in this improving market. Asked where the global lithium market is at and where it may be headed, Rodney Hooper highlighted that market followers must take into consideration the lithium market is a fraction of the size of the nickel or copper markets. “The entire lithium market last year was probably roughly US$3 billion, and within that you had specialised products for specific suppliers and specific customers and there are contracts as well,” Mr Hooper said. “So, the amount of lithium that actually trades openly in the market is very small. So, we’ve come from a place where the pricing hasn’t been sufficient enough to incentivise incumbent producers or new projects to get into production. “And now, with EV sales hitting, let’s call it 3.2 million, last year, and now we are looking at, in our estimate, five million this year and suddenly you’ve got these big models, high nickel batteries, enormous battery packs, suddenly now a market that has been in marginal over supply is going to be in under supply,” he revealed. Mr Hooper added that lithium prices had plummeted on a marginal over supply. “Now what will they do in an under supplied market? We are at the start of a rise in prices to incentivise more production to come on,” he said.
“In terms of demand, we are definitely seeing a demand uplift and we are likely to see some kind of a price uplift.”. Mr Klein stated that it is definitely a good time to invest in lithium, adding, however, that investors will still need to be more selective. “We are in a very bullish, euphoric market, and there is a lot of, less good projects that suddenly come to market. It makes it very important to be very careful. These stocks are prone to commodity type volatility.” Mr Klein said RK has seen a market focus on North America and European supply for North American and European demand. “We used to like Argentinian brines and Chilean brines, but in general those brines make carbonate. Hard rocks make hydroxides more cheaply, or are the preferred route to make hydroxide. “So the hydroxide that is going into the cyber truck and the semi – that’s where we
want to be. We see the South American brines as being carbonate focused and most likely to be sold into the China market.” He suggested that hard rock lithium may have an advantage over brines in the EV market and that if the market followed the Tesla lead, then they will be getting into spodumenes. One hard rock lithium developer RK is particularly bullish on is European Metals Holdings Ltd (ASX:EMH). European Metals has a very large resource on the Czech border, right on the doorstep of the European EV and battery market. The company has a world-class hard rock lithium resource and a State-owned utility JV partner, which is expected to be of benefit when the project hits the permitting stage. RK is forecasting a massive jump in European market growth. “So last year, the entire lithium battery market demand was around 200,000 tons, maybe a little more, so Europe on its own, just for EVs, is going to be 1.6 times bigger than the entire global demand last year.”
APRIL 2021 3
Glowing up: uranium sector recovery underway, re-investment required BY MICHAEL CLARK OF SHAW AND PARTNERS Michael Clark joined Shaw and Partners in July 2020 as an analyst covering the energy and mid-cap mining sectors. Previously Michael spent four years as a research analyst at a mid-tier broker covering the energy and mining sectors. Michael’s background is in the oil and gas industry. This includes over seven years’ experience in engineering roles with Woodside Petroleum and Schlumberger, in Western Australia, UAE, Saudi Arabia and Canada.
ranium is a mined heavy metal which is predominantly used as a feedstock for the nuclear power industry. Nuclear power forms ~10% of the world’s electricity generation. Since the Fukushima earthquake in 2011, there has been a lack of investment in uranium mines and the nuclear power sector – a 10-year cyclical downturn. In our view the time has come for reinvestment and uranium markets are beginning to respond. We believe this presents an appealing opportunity for investors.
URANIUM PRICES INCREASING DUE TO INVENTORY DRAWDOWNS Over the past 12 months, uranium inventories have been heavily drawn down. This is primarily due to COVID-19 induced production curtailments from the globe’s two largest uranium suppliers Kazatomprom and Cameco. In combination, they are usually responsible for producing ~55% (gross) of the globe’s 175Mlbs/yr uranium demand. Currently, the two companies are producing at half of their normal capacity. This has put pressure on spot prices, which increased 25% through 2020 to US$30/lb.
FAVOURABLE POLICY CHANGES POSITIVELY AFFECTING URANIUM DEMAND Uranium demand is highly sensitive to Government policy settings. This is due to its geopolitically sensitive nature (uranium can be enriched to build dangerous
weapons) and the fact that there is a geographic imbalance between supply and demand centres (~80% of supply comes from countries that consume little to no uranium and ~90% of consumption occurs in countries that have no production). The United States is responsible for 25-30% of global uranium demand. We believe recent policy changes in the US will have a lasting positive impact on uranium demand. •T he US-Russian Suspension Agreement was extended for 20 years. This is an anti-dumping trade agreement that is intended to minimise the US Utilities’ dependence on cheap Russian supply. We believe the extension effectively incentivises investment in non-Russian jurisdictions. •T he US election passed, which removes uncertainty for investors. The victory by Biden and his decision to re-join the Paris climate accord has been welcomed by the industry. The Democrats clean energy policy includes endorsement of existing nuclear energy generation and funding for development of nuclear technologies. • The US President signed off the establishment of a strategic uranium reserve. This is a buying program, initially US$75m in fiscal year 2021, with an intention to be extended through to 2030.
BUYERS READY TO ENTER THE MARKET In our view US and European utility companies now have the clarity and bandwidth to think about uranium procurement; existing stockpiles are not inexhaustible. We think utility companies will have to purchase more volumes of uranium in 2021 to cover a shortage of term contracts over the coming years. This may put upward pressure on prices.
LONGER-TERM DEMAND TAILWINDS Longer-term, we believe fundamentals are increasingly appealing for the sector. Nuclear Energy is recognised as an essential
Shaw uranium spot price assumptions (US$/lb) Source: Factset, Shaw forecasts element of the clean energy mix; a low carbon source of energy generation that ensures electricity grid reliability. This potentially enables nuclear power to increase its contribution from a current ~10% of global electricity. Consensus believes uranium demand needs to increase by over 100% from current levels by 2050 if decarbonisation is to take place. We use BP’s Annual Energy Outlook to help illustrate the trend of increased nuclear generation. It considers three main scenarios to 2050. (1) Rapid – carbon emissions from energy use in 2050 fall by ~70% from 2018 levels. (2) Net Zero – emissions in 2050 fall by >95%. (3) Business-as-usual - emissions in 2050 fall by <10%.
INCENTIVE PRICE ENVIRONMENT FOR URANIUM MINE INVESTMENT TO OCCUR Since we initiated interest at the end of November, the sector is up over 100%. Equity markets are recognising the requirement for further investment in uranium mines. We note in 1Q21 alone, two mines - Australia’s Ranger and Niger’s Cominak – reached their end of mine life and shut down. These mines produced ~6% of 2019 global production. Our uranium price deck includes an upcycle – an incentive price environment for re-investment to occur. We assume a multi-year price spike at US$80/lb, before settling to our long-term spot price assumption of US$46/lb (2021 Real) in 2028. In our view this is on the conservative side of where most industry forecasters see longterm sustainable cost curve support.
Global nuclear generation (TWh) Source: 2020 BP Annual Energy Outlook
We have a positive view of the sector, and have Buy recommendations on Paladin Energy, Boss Energy and Vimy Resources. Each company is looking to bring their uranium mines into production as uranium prices improve.
APRIL 2021 5
Majors on the phone to Challenger Exploration
hallenger Exploration (ASX: CEL) chief executive Kris Knauer has been fielding some interesting phone calls from some major mining companies.
The big players haven’t been inquiring about his health, rather they are kindly offering any “assistance” he might need in developing the company’s Hualilan Gold Project in Argentina.
“We are getting noticed but it has been a polite no from us so far – we are not interested in becoming a hostage to a big player,’’ said Mr Knauer. The interest is understandable given the flow of excellent drilling results that have been coming from the project, which suggest a significant discovery, with the only remaining question being how big that discovery will be.
RESOURCE ESTIMATE ON THE WAY “You can suffer if you get a resource estimate out too early,’’ explained Mr Knauer. “We have a fair idea of what is there and that is driving our drilling so that we can get enough info there to do justice to what we are sitting on.’’ The uncertainty is understandable given the new high-grade zone of mineralised intrusives at Hualilan extends over 500 metres of strike north and south of the Magnata Fault and remains open in both directions. Apart from excellent results near the surface, there have also been some repeats of high-grade mineralisation at depth and they now look to have found a second trend of mineralisation to the west.
FIVE DRILL RIGS TESTING THE DEPOSIT Certainly, Challenger can’t be accused of sitting on its hands with five drill rigs turning and no shortage of assays from the results. All told, the drilling campaign will extend to about 45,000 metres across the 26 square kilometres project, which lies 120-kilometres north-northwest of San Juan in Argentina. “My approach has always been that you pay a lot to drill and getting an assay only adds a bit to that, so you may as well know what you are dealing with,’’ said Mr Knauer. It is an approach that has paid off with some recent assays on shales that did not look likely to carry gold coming up with good results. THE-PICK.COM.AU
GOLD POURED INTO THE EMPTY SPACES While the exact nature of the gold mineralisation is a little complex, with a distal skarn and vein-hosted mineralisation, Mr Knauer said the best way to understand it was that the gold was deposited “wherever you had an empty space.’’ That has led to different concentrations in the various rock units. Larger lower grade zones in the intrusives which had less open space and much higher-grade material in the permeable limestone beds and the faults. This sort of deposit allows for a range of different mining solutions with the possibility of extracting the high-grade gold and also for processing large, low grade areas later on. That all lies in the future once all of the drill results are in and there is a better understanding of Hualilan but for now the project has produced more than enough promise to appear on the radar of many gold players. However, Mr Knauer is not in any particular hurry – although the pace of exploration is certainly directed at an outcome rather than chipping away for years to produce a long-term period of suspense. “I paid for all of my stock and my attitude is that this is a 3, 4 or 5 year journey so we just need to get the best information we can about this deposit,’’ he said. “That can be difficult when you try to close off the deposit, only to find mineralisation in the hole, but it is a nice problem to have,’’ said Mr Knauer.
Golden Rim aims for gold growth
EST Africa has played host to an incredible list of success stories for mining companies and is home to gold operations of majors including Barrick, B2Gold and Newmont.
Following this success, junior explorer Golden Rim Resources (ASX: GMR) is hoping to embark on a similar journey after recently raising $5 million to advance exploration of its Kouri and Kada gold projects in Burkina Faso and Guinea respectively. Golden Rim has impressed through exposure to two high-potential projects which form an exciting West African gold portfolio. Kada is a relatively new addition to Golden Rim’s portfolio, but I am looking forward to seeing how the company will deliver value from a project previously explored by Newmont. It is an advanced stage project and there is excellent potential for Golden Rim to rapidly define a maiden resource at Kada, by completing infill drilling to add to the promising data already to hand. At this stage, GMR has a 25% stake in Kada, but it has the ability to earn up to 75% interest if early exploration goes well. Guinea is better known for iron ore and bauxite production, which has left an abundance of gold-prospective geology largely untapped. In fact, Guinea’s Ministry of Mines has previously estimated that the country’s potential gold reserves are approximately 630 tonnes, with current annual production of 5-7 tonnes. Golden Rim has acquired a stake in the 200km2 Kada project to increase exposure to this under-explored geology. This covers exciting looking geology and geochemisty along strike from the Kada prospect.
JOHN FORWOOD John Forwood is one of Australia’s leading resource fund managers and currently the Chief Investment Officer at Lowell Resources Funds Management. John has more than 25 years of Australian and international experience in the resources industry, spanning exploration geology and resource finance. A qualified lawyer and geologist, John has played an instrumental role in providing financial solutions to junior mining companies globally. Here John explains why a West Africa gold explorer is one of his top picks for 2021.
“I am looking forward to seeing how the company will deliver value from a project previously explored by Newmont.”
In addition, Golden Rim’s 2Moz Kouri Gold Project is a fascinating deposit that is delivering significant growth in gold resources. While security issues restrict operations in some parts of Burkina, the success of neighbouring West African Resources in developing its Sanbrado gold project on time and under budget in 2020 bodes well for the Kouri project. I expect that Burkina Faso will continue its emergence as a world class gold producer. While Golden Rim aims for a Scoping Study for the Kouri project in Q2 of 2021, preliminary metallurgical tests at the site have indicated recoveries of over 95% with standard gravity and cyanidation. The Kouri project also provides noteworthy exploration upside, as multiple regional targets span the 325km2 site. Led by experienced geologist and Managing Director Craig Mackay, the Lowell Resources Fund looks forward to Golden Rim Resources maximising the discovery upside at both these promising gold projects.
APRIL 2021 7
Philippines’ action hotting up for Celsius with MCB drilling underway
ust weeks after finalising the acquisition of the JORC-resourced project located on the Philippines largest island of Luzon, Celsius’ subsidiary Makilala Mining Ltd is already drilling at the Maalinao-Caigutan-Biyog (MCB) project.
This is despite challenges related to COVID-19 travel restrictions, the rugged terrain at the MCB site in Kalinga Province and the need to import a specialist rig in from China to meet the demands of the current drilling campaign. A maiden JORC compliant Mineral Resource of 313.8 million tonnes @ 0.48% copper and 0.15 g/t gold for 1.5 million tonnes of contained copper and 1.47 million ounces of gold was declared for the project in January 2021, The current drilling programme will investigate a high-grade core of 93.7 million tonnes @ 0.80% copper and 0.28 g/t gold as the company begins its focus on initial scoping studies for an MCB development. Within the first year of the current work programme, six drill holes are planned to be drilled on a single 12- hour shift at an approximate total aggregate meterage of 4000m. The programme includes: •T wo drill holes (MCB-033 and MCB034) will be drilling in key locations to confirm high grade boundaries and get a better spread of copper assays which will enable conversion of the high-grade core (should be over 30Mt) into the Measured category. •T wo drill holes. (MCB-035 and MCB-036) will test for possible deeper extensions of the high-grade ore plunging steeply in an east-north-east direction and will be located around 100m apart. •T wo drill holes. (MCB-031 and MCB032) will test for high-grade extensions on the western side of the MaalinaoPanyaw Fault.
The company’s drilling work programme during the second year will see up to an additional three holes with a total approximate aggregate meterage of 2000m. This will be undertaken as part of a sterilisation drilling programme in order for the company to confirm future locations of mine infrastructure. Makilala country operations director, Peter Hume, said the company greatly appreciated the support of community leaders, the local government and the project’s ground team in being able to have activities already underway, particularly in the face of COVID-19. Makilala Mining’s drilling contractor, MEGA Philippines, was able to successfully source the newly designed portable rig (1000BX), which was not readily available in-country, from a manufacturer in China. The state-of-the-art rig was imported to deal with the difficult terrain and the depth of drilling necessitated for the ongoing drilling campaign. Tracking down and importing the new rig was not the only challenge for the Makilala Mining ground team which also had to establish a tram line across the Pasil River to support the mobilisation of the drill rig to help deal with the difficult terrain in the area and an absence of access roads leading to the drill site. With the rig in action, Celsius is also making good progress with the implementation
of technical work programmes that will contribute to the scoping study. The company has already awarded a number of key contracts including the hiring of ALS Testing laboratories in Perth, which will undertake a metallurgical and flotation test work programme. Core samples will be sent to Intertek Philippines in Muntinlupa for multi-element assaying. PSM Brisbane has also been engaged to develop a conceptual Hydrological Model with information taken from the Vibrating Wire Piezometers that will be fitted in the four main drill holes located in the main ore body. In parallel with the commencement of the MCB’s drilling programme, the company has also begun implementing environmental and community development work programmes, which are mandatory conditions of the MCB exploration permit. Things are certainly hotting up for Celsius Resources.
The stars are aligning for Altan Rio in WA’s golden Southern Cross
anadian-listed gold explorer Altan Rio (TSXV:AMO) is looking to fast-track gold exploration as part of its plan to apply for dual listing on the ASX.
Altan’s focus is the Frasers-Corinthia Shear Zone (FCSZ) in Southern Cross, Western Australia. The company has 18 tenements covering a significant strike component of this laterally extensive gold rich structure which has been proven to host significant gold mineralisation and where Altan is now delivering on its promise of early exploration success. Altan’s advanced regional exploration programme benefits from a significant database including geochemistry, aeromagnetic and radiometric surveys completed between 1980 and 2012 when the project was held by a series of large companies which were ultimately consolidated by Sons of Gwalia. First pass drilling has already delivered impressive results confirming continuation of high-grade mineralisation some 40 to 60 metres beneath the historical workings, including recently announced exciting hits such as: PARC010 10m @ 4.21 g/t from 182m, including 7m @ 5.69 g/t PARC005 13m @ 4.48 g/t from 160m, 4.0m @ 7.51 g/t from 176m, Including 1m @ 19.14 g/t; and 8.0m @ 9.65 g/t from 199m, Including 5m @ 13.93 g/t Altan Rio’s CEO, Paul Stephen, said the Southern Cross Greenstone Belt has a significant gold endowment with mine production in excess of 10 million ounces. “The belt has a history of high-grade production, the geology and structures are well understood and there has been such a significant amount of work done on data collection from the previous owners. This is providing Altan with a competitive advantage when it comes to drill targeting, which has a direct corrolation to the results we are achieving.
“We understand the mutual benefits of working with the local farmers and community.” Mr Stephen said Altan Rio’s agreement with the local mill owner at Marvel Loch to partner on the development of its Pilot gold project is another key point of differentiation when comparing peer companies. “This not only removes the need to fund a significant up front capital cost, but also dramatically reduces the timeline to production.” Toll treatment of this ore has the potential to generate a near term return for shareholders whilst driving regional exploration. “Our team has identified the significant potential for a new ‘Blind Ore body’ to be discovered and that will drive the 2021 exploration programme.” Mr Stephen said Altan Rio has three core directives over the next six months. • Brownfields drilling development of the Pilot gold deposit. • Regional exploration including the Aries Project which has EIS government co-funded drilling and is approved and scheduled for Q2, 2021; and • Listing on the ASX Given the company’s focus on its Southern Cross assets and the demand from Australian Shareholders, the company has begun the process of applying for a listing on the Australian Stock Exchange (ASX). Mr Stephen said Altan Rio will retain its listing on the TSXV and operate as a dual-listed company as it progresses into production and near term cashflow.
“Some of our best prospects are underneath operating wheat farms. With our chairman John Jones and myself both having strong links to agriculture in WA, we have been successful in completing land access agreements with local farmers.”
APRIL 2021 9
Why now is the time for global companies to attract U.S. investors JASON PALTROWITZ Jason Paltrowitz is Director of OTC Markets Group International and Executive Vice President of Corporate Services at OTC Markets Group, operator of financial markets for 11,000 U.S. and global securities. email@example.com
If there is a “new normal,” as the pundits are fond of saying, it involves learning to live with the risk of the unknown. For foreign companies that are adaptable and tolerant of today’s macroeconomic uncertainties, it can provide an opportunity to diversify their shareholder base beyond their home market.
venue of choice for both their sponsored/unsponsored American Depositary Receipt and ordinary shares. These companies have taken the reins to achieve greater global visibility, benefiting from the transparency and high disclosure requirements of a premium U.S. established public market.
Investors, investor relations officers and C-suite executives alike appreciate certainty and predictability. Yet, in these unprecedented times, there’s a silver lining for global companies seeking to expand their shareholder base to engage U.S. investors.
“Firms like MCAP make markets in several thousand different securities – most of which are non-US based – for their clients.“ Stefan Spath, Managing Director at MCAP, describes his ﬁrm’s role as ‘a conduit between US investors and non-US securities that are traded in non-US markets’ and says the role of markets like OTCQX has ‘hugely simpliﬁed’ the post-2002 trading environment. Spath describes the advent of more sophisticated OTC Markets as arriving in the wake of a sweep of corporate regulatory reforms – more familiarly known as the SarbanesOxley (Sox) Act – put in place by the SEC in 2002. - Stefan Spath, Managing Director at MCAP
A MORE GLOBAL ECONOMY Geopolitics are complicated, but business principles are straightforward: whether you’re an investor or company executive, the more capital you can attract, the more successful you’re likely to be. For an expanding company, engaging the same small pool of local investors means minimal visibility, higher volatility, and limited growth potential. That’s why hundreds of companies with primary listings on 26 foreign exchanges and markets cross-trade on the OTCQX Market: a transparent, SEC-recognised, regulated trading venue where some of the most highly respected global companies benefit from reduced cost and complexity, without compromising their shareholders’ experience or value.
GLOBAL LEADERS CHOOSE TO CROSS-TRADE ON OTCQX Securities of large Australia/New Zealand issuers, including, Alumina Limited, Fortescue Metals Group Ltd, Novonix Ltd. and PointsBet Ltd., have selected the OTCQX Market as the trading THE-PICK.COM.AU
INTERNATIONAL COMPANY GROWTH: 2020 AND BEYOND Foreign companies that trade over-the-counter represent a multitude of sizes, industries and geographies spanning Western Europe, to Latin America, Asia, and Australia. Notably, the majority of the most actively traded securities on OTCQX in the first half of 2020 were foreign companies. With $445 billion traded on OTC Markets Group in 2020 (a 35% increase from the previous year), OTC Markets Group is poised to engage the breadth of foreign issuers seeking efficient shareholder expansion opportunities. Now is the time for global companies to access U.S. investors–recognising that despite uncertainty, there is nothing to lose and everything to gain.
Eagle Mountain charging towards production
agle Mountain (ASX: EM2) is charging towards production after strong exploration results at its Oracle Ridge underground copper mine in Arizona, USA.
To accelerate exploration, the company has completed a successful placement to sophisticated and institutional investors raising $11 million, including money from interests associated with legendary mining entrepreneur, major investor and Eagle Mountain managing director Charlie Bass. On top of that news, Eagle Mountain has also secured the services of Manuel Ramos as CEO of US operations – a strong statement of intent given Mr Ramos’ significant experience, most notably as former president and chief operating officer of Arizona’s prolific copper producer ASARCO LLC. Mr Ramos’ appointment should accelerate Oracle Ridge from exploration to feasibility and potentially operations and his experience in Arizona also has the potential to help identify and assess further growth opportunities. According to chief executive Tim Mason, Eagle Mountain is now ideally placed for the current market conditions with a significant JORC Resource of 12.2 million tonnes at 1.5 per cent copper, 16.3 grams per tonne silver and 0.19 grams per tonne gold. That is not too surprising given that it sits in a strong copper region which includes mines run by major players BHP, Rio Tinto, ASARCO, Freeport McMoRan, South 32 and Hudbay.
BRECCIA ZONES ENCOURAGING While Oracle Ridge already has a large resource, it is adding to it through exploration with the recent discovery of highly mineralised breccia zones, the possibility of a deeper copper-rich system and excellent exploration drilling all supporting the successful revival of what Mr Mason described as an “underdone” mine. One hole intersected 6.67% copper, 63. grams per tonne silver and 0.87 grams per tonne gold in 2.95 metres of breccia, with other breccia zones showing excellent assays as well. What the breccia zones miss out on in tonnes, they more than make up for due to high grades and their presence is an example of opportunities that were missed with the earlier mine. Drilling on the western extension of mineralisation at the Leatherwood-sediments also uncovered a thick zone of high-grade mineralisation with results including 2.8 per cent copper, 18.75 grams per tonne silver and 0.61 grams per tonne gold over 8.4 metres and 1.35 metres at 9.14 per cent copper, 52.5 grams per tonne silver and 0.69 grams per tonne gold from 275.23 metres. The excellent results led to an extension of exploration drilling which will now include upgrading the status of existing resources along with drill testing other prospective near mine targets. While a burst of cold weather resulted in minor delays to drilling, Mr Mason said if anything exploration was ramping up to help the quest to add to the existing JORC Resource estimate of 12.2Mt at 1.51% copper for 184kt contained copper.
There are also mineral processing plants in the area. Mr Mason said the size and expansion of the resource was helpful if the copper price continues to strengthen while the excellent grades provided protection if the copper price was to go through some volatility.
LOW EMISSION COPPER AN ADDED ATTRACTION Another factor that adds some extra excitement for the company is that it ticks the ESG (Environmental, Social and Corporate Governance) box that has become a key factor for many institutional and private investors. Mr Mason said because the Oracle Ridge underground mine in Arizona is near the top of a mountain, it may be very practical for potential future production to use hybrid and electric equipment to produce copper with much lower carbon emissions. “Our aim is to be a low emission copper producer, supplying the raw materials necessary for the emerging green energy sector. This potential low energy consumption may also assist in achieving our goal of being a low-cost producer at the same time,” he said. APRIL 2021 11
Tin surge powers Elementos
urging tin prices and promising drilling results at its key Oropesa project have given emerging producer Elementos (ASX: ELT) a promising start to 2021. And with its share price heading steadily north, the market appears equally bullish.
The hard work we have put in over the past three to four years is starting to be understood. Investors can now see value in Oropesa and Elementos,” said Elementos’ Executive Director, Chris Dunks. In mid-February, the tin price on the London Metal Exchange (LME) hit a 10-year high above US$30,000 per tonne, amid tight supplies and accelerating demand for the silvery metal. Stocks of tin metal in LME warehouses shrank to just one day’s consumption for the global market. “Supply is simply struggling to keep up with demand,” said Commonwealth Bank of Australia analyst Vivek Dhar.
“Prices [have] increased this year on the back of declining stockpiles and strong industrial demand, particularly for semiconductors and electronics.” Concerns over potential disruptions to production in Myanmar following its military coup have added to the upward price pressures. The Southeast Asian nation is the world’s third-largest producer behind Indonesia and China. Even with new projects such as Oropesa underway, the International Tin Association predicts a “significant deficit” after 2023.
Elementos is currently undertaking a drilling campaign at Oropesa in Spain. Elementos aims to fill some of the supply gap with Oropesa, located in southern Spain. A May 2020 economic study described it as a globally significant new tin development, with prospective annual production of 2,440 tonnes over a 14-year mine life. The project’s estimated net present value of US$92 million was based on a tin price of US$19,750, well below current levels. In February, Elementos announced significant zones of mineralisation had been detected as part of a new drilling campaign. The program encompasses 5,000 metres of diamond drilling across 47 holes, aimed at increasing the overall resource, production rate and mine life. “The drilling is going very well – we’re getting some great numbers and we’re really happy with progress,” Dunks said. “We’re about halfway through the program, looking to finish around mid-April, and we’re gaining a growing understanding of the resource and its mineralisation.” However, Elementos is more than a single-project company. Closer to home, the company’s Cleveland Project in north-west Tasmania also holds a significant resource of tin-copper, considered amenable to both open cut and underground mining techniques, with the benefit of being located in a world-class mining district with excellent infrastructure. Elementos plans to conduct further exploration at Cleveland and submit a new development proposal for the mine design, as investors reappraise the historic mine’s potential. Looking ahead, Dunks sees additional drilling results and a new economic model for Oropesa driving further gains. “If we redo the model at Oropesa with an increased tin price, a reduction in the stripping ratio and a much larger resource, it will put a materially different value on the project,” he said.
The Oropesa project is located in the mining friendly Andalucian region, home to some of Spain’s largest mines. THE-PICK.COM.AU
For one of the only tin explorers on the Australian stock exchange, Elementos sees plenty of upside as it rides the global recovery through to production.
Cashed-up European Metals advances Cinovec
ith cash in the kitty and the backing of a major European green energy fund, European Metals Holdings (ASX: EMH) is in a strong position to aggressively develop the largest hard rock lithium
resource in Europe.
In February, EMH raised A$7.1 million before costs via a private placement to fund further development of the Cinovec project a globally significant hard rock lithium deposit in Czech Republic and within 250km of a large number of existing or proposed end users of battery grade lithium chemicals. Importantly, EMH attracted substantial support from Luxembourg-based green energy fund Thematica Future Mobility who threw in a $5 million contribution. Thematica Future Mobility is a UCITS fund with exposure to companies that are focused or will substantially benefit from the transition to clean and sustainable transportation and energy storage solutions. The fund invests in companies globally and across all market caps.
“It is very pleasing in particular to welcome Thematica Future Mobility to the Company,” EMH Executive Chairman Keith Coughlan said. “Thematica is a specialist investor in the Electric Vehicle supply chain, based in Luxembourg. As such, Thematica recognises the unique opportunity presented by investment in the Cinovec Project against a backdrop of unprecedented EU support.”
According to a Thematica representative, the strong growth in European EV sales and the rise of domestic battery cell production is going to require substantial lithium supply in the future. “The European Raw Material Alliance (ERMA) has stated its ambition is to have 80% of lithium supply sourced locally – we see European Metals Holdings, that should reach final investment decision in early 2022 post the completion of a definitive feasibility study, as one of the first producers of battery-grade lithium chemicals on the continent and given its large resource, a meaningful contributor to the ERMA target,” the representative said. Cinovec hosts a globally significant hard rock lithium deposit with a total Indicated Mineral Resource of 372.4Mt at 0.45% Li2O and 0.04% Sn and an Inferred Mineral Resource of 323.5Mt at 0.39% Li2O and 0.04% Sn containing a combined 7.22Mt Lithium Carbonate Equivalent and 263kt of tin. An initial Probable Ore Reserve of 34.5Mt at 0.65% Li2O and 0.09% Sn has been declared to cover the first 20 years of mining at an output of 22,500tpa of lithium carbonate or 25,267tpa of lithium hydroxide monohydrate. A Preliminary Feasibility Study indicated a return post tax NPV of US$1.108 billion and an IRR of 28.8% and confirmed Cinovec to be a potential low operating cost producer of battery grade lithium hydroxide or battery grade lithium carbonate as markets demand.
APRIL 2021 13
High Purity Alumina – a new energy metal SAM BERRIDGE Sam Berridge is a portfolio manager at Perennial Value Management. Sam began his career in mining and exploration before transitioning to the investment industry in 2008. He has more than 15 years of experience covering the mining, oil and gas, hard commodity and small industrial sectors. Since launching the Perennial Value Microcap Opportunities Trust alongside Andrew Smith in 2017, the fund has outperformed the benchmark by a total of 121.6%. Sam writes about high purity alumina (HPA) and his best pick in the sector – ASX-listed FYI Resources – for this edition of The Pick.
he rapidly growing thematic of ‘new energy metals’ is one which will drive demand for a suite of well recognised commodities such as copper, nickel and zinc. It will also create significant markets for metals which are relatively unknown, one of which is high purity alumina or HPA.
DEMAND DRIVEN BY LITHIUM BATTERIES AND LED’S The opportunity in HPA is born from rapidly growing demand from its use in lithium batteries and LED lighting. In lithium batteries, a thin film of HPA, located between the anode and the cathode acts as a heat disperser. This is critical to the battery’s function, safety and durability. HPA is well suited to this cause due to its high levels of thermal conductivity. In LED lights, HPA is the raw material from which sapphire glass is made, a core component of LED manufacturing. The demand for LED lights for everything from car headlamps, to home lighting, to TV screens is driven by an 80-90% power saving, and an operating life 9-10x greater than traditional halogen globes. So has wholeof-life operating cost and carbon reduction appeal.
ALCOA JV Aiding FYI through the development process is Alcoa (US$5.8bn market cap), which agreed to participate in a joint pilot plant trial of HPA production. The trial was a success, consistently producing product in excess of 99.99% purity. Now that feedstock and product quality have been confirmed, the JV is progressing discussions on plant design and ultimate ownership structure prior to progressing to commercial scale development. We would view the revised definitive feasibility study to be a reasonable starting point for discussions on valuation for Alcoa’s share of the JV, which in turn would contribute to funding FYI’s share of development capex, which currently sits at US$189m on a 100% basis.
COMPELLING DFS RESULTS
AN EMERGING INDUSTRIAL CHEMICALS BUSINESS
One of the handful of ASX listed companies which are progressing projects to meet the rising demand for HPA is FYI Resources (FYI). FYI has refined, trialled and verified a process for producing HPA from its 100% owned Cadoux Kaolin Project in Western Australia. A DFS study, published in March 2020 detailed production of 8kt pa of 4N (99.99%) HPA over 25 years, with a forecast NPV of A$700m. Since then further pilot plant trials and industry demand have improved on DFS assumptions, and we expect an improved financial outcome from a revised DFS due out in the near term.
While FYI still has some hurdles to clear on its way to project development and production, we view the partnership with Alcoa as a positive. We believe the production of HPA has the potential to be a meaningful contributor to Alcoa’s earnings, while also offering exposure to a commodity with positive ESG credentials. Should FYI successfully navigate imminent negotiations on JV structure, financing and development, a reasonably short construction period should see FYI becoming a material industrial chemicals business in its own right by 2023.
BMC outlines major silverzinc-polymetallic opportunity in Canada’s Yukon
rivately-owned BMC Minerals have been quietly developing the Kudz Ze Kayah silver-zincpolymetallic project in Canada’s Yukon, but as the mammoth project approaches final investment decision it is unlikely to remain quiet for much longer. Since acquiring the project in 2015, BMC has been steadily drilling and completing technical studies, releasing a feasibility study in late 2020 that outlined a mine which, once operational, will sit amongst the global top twenty producers for both silver and zinc – independent of other gold, lead and copper credits. The project – which holds probable mineral reserves of 15.7 Mt at 138 grams per tonne of silver, 1.3 grams per tonne of gold, 5.8% zinc, 1.7% lead and 0.9% copper – is fast approaching a development decision with the feasibility study anticipating maiden production in late 2023. Annual steady-state production at the project is estimated to consist of 7.8 million ounces of silver, 56,500 ounces of gold, 235 million pounds of zinc, 32 million pounds of copper and 56 million pounds of lead. The high-grade deposit is anticipated to facilitate a mostly openpit mining operation that will have a predevelopment capital cost of US$376m. With an NPV of US$617 million and after-tax IRR of 45.9%, the Kudz Ze Kayah mine is expected to have a payback period of under two years. Commenting on the impressive feasibility numbers, BMC CEO and Executive Director Mr Scott Donaldson said: “The updated Definitive Feasibility Study confirms the Kudz Ze Kayah Project is expected to be an internationally significant silverzinc project with strong, copper and gold credits. “Its low operating costs are anticipated to deliver excellent operating margins and cashflows, plus the region continues to hold potential for further exploration success.
“This is one of the most compelling projects I have been associated with and I look forward to continuing to work with the Kaska First Nations, businesses and the Yukon Government assessors and regulators to deliver it into production.” Following the release of the feasibility study, the Company has proceeded to appoint renowned international financial advisory firm Cutfield Freeman & Co. Cutfield, which has advised on over 150 mandated transactions in the mining industry across more than 50 countries, will assist in the financial structuring of the project. Although no word has yet to be given about the financial structuring of Kudz Ze Kayah, BMC is believed to be mulling a public listing on the ASX, with Donaldson noting that the Australian market is a preferred destination for polymetallic projects.
APRIL 2021 15
Estrella on the hunt for the next big nickel discovery
strella Resources (ASX: ESR) set the share market alight last year with the discovery of high-grade nickel-copper sulphides at its Carr Boyd project north of Kalgoorlie in Western Australia. Since then, the company has accelerated exploration and built camp infrastructure, suggesting the company expects big things from its flagship asset.
Located only 80 kilometres north-northeast from the mining mecca of Kalgoorlie in WA’s mineral-rich Eastern Goldfields, the Carr Boyd project has a rich history. Discovered back in 1972 by Great Boulder Mines Ltd and North Kalgurli joint venture, the project then fell into the hands of Western Mining (WMC) who produced some 200,000 tonnes of ore at 1.43% nickel and 0.46% copper producing a 9.7% nickel concentrate over five years between 1973 and 1977. The project was then mothballed while WMC focused on its Kambalda and Leinster operations. In the ensuing years, a number of juniors kicked rocks around in the region without much success. Then in 2017, Carr Boyd fell into Estrella Resources hands. Despite the previous mining and exploration work, Estrella managing director Chris Daws always still felt there was significant potential at Carr Boyd. “Going back a few years, I saw a photograph which was of the old mine workings when Western Mining were working the Carr Boyd nickel mine and that showed there was quite significant remobilised primary massive sulphide at Carr Boyd Rocks,” he told The Pick. “That excited me because it meant those sulphides which were being mined were just a small portion of what could exist at depth in what we now see in nickel exploration worldwide in these magmatic nickel sulphide complexes is a source or chamber where these massive sulphides settle. “That to me was the catalyst for wanting to get involved with exploring at Carr Boyd rocks and looking for a major new nickel sulphide ore body.”
That dream of a nickel sulphide discovery became a reality in September 2020 when Estrella intersected 2.9 metres of massive nickel-copper sulphide mineralisation at the southern end of T5 Prospect in diamond core hole CBDD0030 from 435.9 metres. “The market was set alight with the discovery in hole 30,” Mr Daws said. “The discovery allowed us to generate and raise capital to fund further drilling programs and it is with every drill hole that we put into the ground that we are getting more knowledge of the immediate geological environment that is allowing us to unravel where this particular source or chamber sits.”
“What we are taking out of the ground in each drill hole has never been seen by the human eye before,” Mr Daws added. “Every single hole is exciting for us and our shareholders and hopefully over the next few months ahead that excitement will build into a world-class discovery.”
Since then, the company has stepped up its drilling of the T5 prospect as it hunts for the source of the massive nickel and copper sulphides at Carr Boyd. Hole CBDD0041 intersected nickel sulphides just prior to the Christmas shut-down and most recently its first diamond drill hole of 2021, CBDD0042A, intersected a broad zone of nickel, copper and PGE mineralisation on the basal contact of the T5 target area, 300m below hole CBDD0041. Both CBDD0041 and CBD0042A are located some 150 metres south of the discovery hole CBDD0030 at T5. “With every drillhole, putting that into the software packages and applying modern geophysical tools, what we have been able to see - and it’s even from the holes that haven’t hit mineralisation is the immediate geological environment,” Mr Daws said. “We will continue to drill more holes and that will firm up that geological knowledge. That will allow us to then pinpoint and take us to the source of where these magmatic high grade nickel sulphides have originated from.” In addition, Estrella is currently trialling a world-first hard rock seismic exploration program which the company expects will aid in its targeting of the “source” nickel sulphides that the company believes exists at depth. While exploration at T5 continues to ramp up, Estrella has been busy in ensuring it has the infrastructure in place at Carr Boyd. “We have a firm belief in Carr Boyd to deliver a major world-class ore body and that belief has driven us to put in infrastructure to ensure that our staff can actually do the work in a safe environment,” Mr Daws said. “We have an exploration camp with all the mod cons, we have running water and we have an air strip at our fingertips.” Importantly, the company should be cashed up to continue exploring with some $11 million of additional funding via unexercised options expiring in June this year.
APRIL 2021 17
Diversification paying off for Red River Resources ARUN SENGUPTA Arun Sengupta has more than 30 years of experience working in the financial markets, private equity, and the corporate finance sector. Arun started his career in 1987 working in Treasury at Westpac Banking Corporation as a graduate trainee. In 1992, Arun started his own trading business and in 2017 Arun became a founding director of Canary Capital. Arun has participated in a broad range of corporate advisory, funds management and principal investment activities. He has been involved in the establishment, fundraising and operation of both ASX listed companies and in private equity.
ver the past few years, I have watched Red River Resources (ASX:RVR) develop an impressive diversified, multi-commodity mining portfolio with projects based in Queensland and New South Wales. RVR has geared its focus towards base metals and gold following the acquisitions of the Thalanga and Hillgrove projects. While RVR’s foundations were built at Thalanga, its 2019 acquisition of Hillgrove continues to be understated. One of the underrated aspects of the Hillgrove project is the fact that it hosts a tremendous source of antimony. In fact, Hillgrove represents the largest known antimony resource within Australia, including a total of 6.7Mt @ 1.5% Sb and 4.9 g/t Au. This strategic diversification of assets is why I continue to back in Red River. Antimony from this project is expected to deliver significant value to investors in Red River, following the Australian Government’s reclassification of antimony as a strategically important critical metal for a number of Australia’s international trading partners. Antimony was also recognised in the Australian Critical Minerals Strategy in 2019. Basically, demand for antimony is only going up. In the meantime, RVR has commenced its gold operations at Hillgrove. Stage 1 of the project commenced in late 2020 and involves the processing of the Bakers Creek Stockpile. The team didn’t even need to go underground to begin producing valuable
commodities, after yielding great early results processing what was formerly waste material. The low-cost project is expected to deliver 225,000 tonnes @ 2.5 g/t Au over its 12-month lifespan. However, what will get investors really excited is the underground operations at Hillgrove. Stage 2, will commence at the Metz Mining Centre by the end of 2021. This is a long-term production facility that has substantial upside. Red River anticipates this mine will produce gold doré, gold concentrate and antimony-gold concentrate. There will be potential for multiple additional mining centres at Hillgrove. Since the company controls the entire Hillgrove Mineral Field, it holds more than 200 known gold-antimony deposits. RVR expects to explore other future prospects, particularly at Eleanora and Brackins Spur. You wouldn’t be blamed for thinking that the mammoth Hillgrove project is the only one in the Red River armoury. However, RVR’s Thalanga mine acquired in 2014 has been an overwhelming success. Thalanga historically served as a base metals operation after original production began in 1989. Red River saw an opportunity to acquire the mine after being placed on care and maintenance in 2012. Following the 100% acquisition of Thalanga for $6.5 million, RVR officially commenced production in 2017. Since operations began, Thalanga has primarily produced zinc, copper and lead with small-scale gold production. However, Red River is determined to increase gold production at this site and is working to bring its third deposit, the gold-rich Liontown, online in FY23. General advice disclaimer: The information in this article is general advice only and does not take into account your personal objectives, financial situation or needs. You should therefore consider whether the information is appropriate to your investment objectives, financial situation and needs before acting upon it, seeking advice from an authorised financial adviser if necessary. Not all investments are appropriate for all people. It’s important to remember that investing in shares can lose you some or all of your money. Investments in ASX companies do not include taxes, brokerage commissions, or associated fees. Past performance is not a reliable indicator of future performance. The value of any investment and income derived from it can go up or down.
Red River’s Thalanga Base Metal Operation in Northern Queensland. THE-PICK.COM.AU
Disclosure: The author, his family and associates or other entities associated with the publishers, may at any time have holdings in some, or all of the stocks mentioned in this article.
IPO Watch: Nickel X lodges ASX float to explore the Albany-Fraser Belt
ith a buoyant market for Initial Public Offerings (IPOs) and rising demand for battery minerals, Perth-based explorer Nickel X is striking while the iron is hot.
As the name suggests, the nickel exploration minnow has lodged an IPO to raise $5 million via the issue of 25 million shares at an issue price of $0.20 per share to accelerate discovery efforts at its Biranup project in the Albany-Fraser belt in WA. Nickel X may also accept a further $2 million in oversubscriptions of a further 10 million shares also at an issue price of $0.20. The Biranup project, which is prospective for Nova-style nickelcopper as well as Tropicana-type gold targets, sits in good company with the southwestern tenement boundary located less than 10km from the globally-significant Tropicana gold mine. The project sits in an emerging nickel belt which hosts other major operations, such as the Nova-Bollinger mine, the Creasy Group’s Silver Knight deposit and Legend Mining’s up-and-coming Mawson prospect. Experienced mining executive Matt Gauci holds the reigns as Managing Director and believes the Albany-Fraser belt has much more to give. “The belt, which was really set alight by the discovery of NovaBollinger, is only ten years old and continues to support new discoveries,” he said.
“Historic drilling at the Fire Dragon and Silver Dragon nickel targets have intersected massive sulphides and ultramafics determined to contain several massive sulphide minerals. “The Black Dragon and Red Dragon gold targets are co-located with a 9km × 3km gold-in-soil anomaly, while other areas of the project have received limited to no drilling at all. “The nickel market is also cause for optimism. While everyone is focussed on increasing demand from both traditional sources as well as the battery market, the less understood side of the story is the emerging shortage of new nickel production. There has been a major absence in new nickel operations and events such as Indonesia’s ban on nickel exports really tightens the squeeze.
“It is this combination of factors which makes Nickel X a truly compelling opportunity”. Nickel X has designed a staged exploration program at each of the targets at Biranup, which includes a combination of diamond drilling, reverse circulation drilling, geophysical data re-processing, ground moving loop EM surveys and additional drill target generation. Funds raised from the IPO are anticipated to support this active exploration campaign, which will see Nickel X poised for a busy schedule throughout the remainder of 2021.
“Canada’s Thompson nickel belt is the only known equivalent to the region’s unique geology and the Thompson has total known resources of about 140 million tonnes spread across more than ten major projects. “The Biranup project is really exciting not just because of the prospective region but because it has so many other things in its favour as well. We have determined four high-priority targets and 16 priority electromagnetic targets all of which straddle a crustalscale gravity ridge.
APRIL 2021 19
Ian Spence, resources analyst at Peloton Capital, reveals what gold stocks the firm is currently behind GOLD MINING KAISER REEF LIMITED (ASX: KAU) KAU has recently completed the acquisition of what we believe to be a very exciting portfolio of gold assets in central Victoria. Centre stage to the acquisition is the high grade operating A1 Gold Mine and Maldon gold processing plant. The acquisition was a very rare opportunity for a company like KAU and we at Peloton have viewed the near “perfect fit” very favourably with substantial upside potential. We believe the portfolio to be highly prospective, instantly elevating the Company’s status from “Explorer” to “Producer”. A1 Gold Mine is a well known, high grade, operating gold mine, located in the Walhalla – Woods Point Goldfield, 120km west of Melbourne, which has operated for 159 years with >620koz gold prtoduced to date. With the last 2 years of operation under the direction of an administrator, starved of capital, the mine has still consistently and profitably produced circa 10,000oz per annum on a substantially reduced production basis, with ore processed through the Porcupine Flat mill located 320km away at Maldon at a head grade of ~11gpt. Whilst the mineralisation at A1 certainly has a significant component recognised as classic Victorian structurally controlled quartz reef style mineralisation, I acknowledge the importance of the mine’s diorite host units. Noting the most recent big stories and successes in Victoria such as
Fosterville are now gold deposits recognised as being hosted in diorite or similar units. These are able to host bulk tonnage targets rather than the classic saddle-reef gold targets which have historically dominated the Victorian Goldfields in the likes of Bendigo and Ballarat. This line of thinking can also be applied to the Company’s Maldon Goldfield. From first hand experience, mining underground narrow vein shear hosted deposits, I note a surprisingly significant portion of the mineralisation at A1 has sizeable widths and strike extents which is amenable to mechanised longhole stoping (as opposed to small tonnage manual airleg stoping), which is able to provide significant tonnages. This observation is highly encouraging to me in that it indicates that the mine has a strong potential capability of producing a sizable increased volume of ore beyond what is currently being produced. Put that potential with a mill that is massively underutilised currently and we have a very strong recipe for potential near term increases in ounces produced. Commenting on the Maldon mill, noting the now immense difficulties mining companies now face when trying to attain permits to construct new cyanide treatment plants, I place a considerable amount of value on a strategically located operating plant like Porcupine Flat and note that the Company is in a very strong position to consider approaches from third parties for toll treatment of their ore,
or even approaching those companies to potentially acquire those companies “stranded” resources. Porcupine Flat has an official nameplate throughput capacity of 150,000tpa. However, current throughput from A1 stands at <80,000tpa with circa 6,000tpm planned by August. It is therefore very obvious that if any additional ore to treat becomes available through A1 production increases or by toll treatment opportunities, the facility will comfortably be able to accommodate this for negligible cost. Importantly, we also note that historically, for some prolonged periods of time, the plant has comfortably operated at an increased throughput of up to 180,000tpa. We are therefore confident that assuming A1 will deliver ore on an increased production basis and toll treating third party ore (both scenarios very likely), there still remains significant potential capacity for some additional supplementary ore feed from the Company’s Maldon assets (Union Hill or Nuggety mines) in the medium term. Taking into consideration a likely 7 year planning application time, the intangible value of a cyanide treatment licence, purchasing the land and the milling facility as well as construction of the mill and tailings facility and commissioning, we estimate the replacement cost of the facility to be circa $20 million. When considering the acquisition cost for the entire Victorian portfolio was only $17.5m inclusive of costs, we simply point out the outstanding value the transaction was for KAU. KAU has a current EV of $38m, underpinned with modest, but consistent high grade production. There is real near term potential to see a substantial increase in ounces produced from A1 initially, then Maldon. The Company is already starting to release a steady strong flow of good news this year, as KAU beds down the Victorian portfolio acquisition. It is also starting to look for additional efficiency improvements to ramp up production as well as undertaking its own in-mine and brownfields exploration of which we have already seen some outstanding intercepts.
GOLD EXPLORERS KINGWEST RESOURCES LIMITED (ASX: KWR) Since acquiring the historic high grade Menzies Gold Project (MGP) and Goongarrie Gold Project (GGP), located 120km and 90km north of the Kalgoorlie Super Pit respectively, in late 2019, KWR has undertaken several thousand metres of drilling, mainly at MGP initially targeting extensions to known mineralisation beneath existing historical high-grade workings.
So why do I get so excited about KWR and its projects you may ask? Quite simple really... Quite simple really. Firstly, MGP and in particular GGP are considered by us as two of the last chronically under explored parts of the 90Moz Bardoc Tectonic Zone BTZ, the projects are both underlain by the same contact structure and rock types that host the Super Pit and Paddington and a number of other commercially significant deposits and new discoveries along the BTZ. Secondly, with the projects so advantageously located close to the sealed highway, power and water, the shallow depth and high-grade nature of the mineralisation and the choice of multiple (at least six we know of) toll treatment options in the project’s area, which we consider is better than the majority of gold projects on the WA goldfields, makes even a small resource delineation significant for potential exploitation and early cashflow. Consider it a bit like having an insurance policy or fallback position if the multi-million ounce discovery(s) eludes the company for the time being, there is still plenty of revenue to be had from the shallow mineable ounces now defined. Whilst MGP has largely taken all of the limelight to date, worthy of mention is the company’s sister project Goongarrie Gold Project (GGP). Following an absence of any significant exploration activity for circa 10 years and production for over 30 years, first pass aircore drilling testing new gold-in-soil anomalies and following up historical previous drilling intercepts has intersected a wide zone of strong new mineralisation previously unknown. Results from this new discovery include 6.0m grading 17.2gpt Au from 94m within 38m grading 3.1gpt Au from 62m with the hole ending in mineralisation. Whilst it is still early days, this to us is nothing short of a fantastic result for a first pass reconnaissance aircore programme. The mineralisation is located only 2km NNW from Ardea Resources’ 2020 Gold discovery at Aphrodite North and approximately 7km north of Bardoc Gold Limited’s Aphrodite Gold Deposit (22.9Mt grading 2.3gpt for 1.66Moz). The early discovery success bolsters our firm belief that the GGP which covers one of the least tested parts of the prolifically well-endowed Bardoc Tectonic Zone (BTZ) is highly prospective for one or more multi-million ounce discoveries.
More recently KWR has been targeting along strike near surface extensions to known historical resources and unmined deposits, with the intent to rapidly add incremental shallow ounces to the then historical resource base. Both strategies in a short time have proven very fruitful with significant exploration success on several MGP prospects with the company releasing in early March 2021, a new 446,200 oz resource estimate and within three weeks of this a very positive Scoping Study assessing a 31 month mining campaign, surface mining and toll treating at nearby mills for a strong near term cash flow. APRIL 2021 21
PROSPECH LIMITED (ASX: PRS) BOLNISI GOLD NL MARK II ? Recently listed just before Christmas and a little bit unloved at the moment due simply to a lull in drilling activities coming out of the European Alpine winter, this is a company, whose potential should not be underestimated. Prospech has actually been in existence for over 6 years, quietly exploring with considerable success on its lead Slovakian project Hodrusa-Hamre. Hodrusa-Hamre is an under explored, low sulphidation epithermal gold-silver system – of which circa 90% of the goldfield is now held by the Company – located within the largest extinct strato volcanic caldera in the region. The first thing I noticed when I was introduced to the project was the mineralisation has scale, with a very similar area footprint to the likes of Lihir (PNG) and Emperor gold mines (Fiji). The currently producing goldfield, despite historical production >2.4Moz gold and 120Moz silver is largely unknown on the global stage despite its very strategic European location situated at the northern end of the prolifically well endowed Tethyan Mineral Belt and historically supplying the majority of the silver for the coins of the old Hapsburg Empire Treasury. Complementing what I believe to be a high quality exploration portfolio, I view PRS to be in experienced hands with key members of the board having an outstanding exploration and development success track record in discovery & development of globally significant epithermal deposits. Over recent years, this includes Bolnisi Mine (Georgia) & Palmarejo Mine (Mexico) culminating with Bolnisi Gold N.L. holding Palmarejo at the time of being taken over by Coeur D’Alene in 2007 for $1.3 billion. Missed by the markets, we understand that PRS management have observed HodrusaHamre as having very similar early comparables to what Palmarejo had in the early days of exploration. With over 90 holes planned to be drill tested for multiple targets in the coming weeks commencing early March, we are expecting a positive flow of news over the coming quarter. Could this Company THE-PICK.COM.AU
be the long awaited “Bolnisi Gold Mk II”? Only time and future drilling results will tell. Certainly the potential of Hodrusa-Hamre to be another Palmarejo is present. For the silver bugs amongst you, PRS provides considerable exposure to silver.
CHALLENGER EXPLORATION LIMITED (ASX: CEL) Having an opportunity to provide some stock tips, it would be a “challenge” at the moment to walk past Challenger Exploration Limited without making comment. Challenger is an exciting aggressive explorer we are very closely following and I wouldn’t have any doubt that the majors are keeping an eye on it too. The Company holds two very large gold and base metal projects in Argentina and Ecuador. Current focus is the Hualilan Gold Project in Argentina. Hualilan located in the San Juan Province is an advanced gold project with substantial historical drilling and historical underground mine development. The project has a shallow (currently non JORC) skarn hosted high grade resource of 627koz grading 13.7gpt, which remains open in all directions. Subject of a commercial dispute for 15 years prior to CEL’s acquisition in 2019, the project had not seen modern exploration prior to CEL’s arrival. The company is now circa 30,000m into a 45,000m drilling program at Hualilan which has initially tested areas believed to host extensions to the high grade skarn mineralisation with tremendous success now demonstrating high grade mineralisation to extend over a 2km strike length. One of numerous high grade intercepts the company has reported within the skarn outside of the current resource boundaries is 6.1m grading 34.6gpt Au, 21.9gpt Ag and 2.9% Zn.
However, the story doesn’t end there. Most recent drilling has tested beneath the skarn mineralisation and has demonstrated the presence of a very large intrusion related gold system in the underlying porphyry dacites with a number of standout >200m intercepts including 227.0m grading 1.0gpt AuEq from 139m, 209.0m grading 1.1gpt AuEq from 59.0m and 207.5m grading 0.8gpt AuEq from 80m all with the deepest intercept which certainly hasn’t closed off the mineralisation currently down to 500m. The discovery and confirmation of a large gold system underlying the high grade skarn resource is a game changer for the project, potentially adding many years of minelife to what is starting to look like the makings of a multi million ounce project. The Company can even now look at the concept of the high grade skarn resource providing an excellent “starter pit” for early project payback, prior to large scale open cut, mining the lower grade intrusion related mineralisation. The company’s second project, El Guayabo Gold-Copper Project located in Ecuador, is a big one. Last drilled by Newmont in 1997 targeting only one part (the breccia part) of the gold copper system the project has demonstrated outstanding early prospectivity including 156m grading 2.6gpt Au, 9.7gpt Ag and 0.2% Cu and 112m grading 0.6% Cu, 0.7gpt Au 14.7gpt Ag, both intercepts the Company is keen to point out have never been followed up. What is very exciting to me is the potential sheer size of the mineralising system which has multiple targets defined within the breccia zone – a flat lying late stage vein system as well as the underlying porphyry system. Putting all this in the context of the project’s location in the southern end of Equador’s prospective porphyry corridor, this in my view appears to be a very exiting project prospective for major discoveries.
ABOUT THE AUTHOR Ian Spence has 27 years of domestic and international experience in the resources sector, having held numerous senior management and directorship roles in open cut and underground mining, resource development and exploration projects spanning multiple commodities. Complementing his extensive “hands on” resources career, Ian has over 10 years experience in mining analytics and corporate advisory which he has undertaken for a number of domestic and international capital firms, merchant banks and resource companies. He has had substantial exposure to project due diligence & risk identification, M&A, scoping and feasibility studies, capital raisings, and IPO’s, many of which he played an instrumental part in early recognition of those companies assets and management which went on to become very successful businesses. Ian graduated with a joint Honours degree in Geology & Petroleum Geology from the University of Aberdeen in 1993, holds a Master’s Degree in Mineral Exploration & Mining Geology from the University of Leicester (1994) and an MBA from the University of Western Australia (2002).
Disclaimer & Disclosure of Interests: This article is provided by Peloton Capital Pty Ltd (Peloton) (ABN 22 149 540 018, AFSL 406040) and the views expressed are those of the author named and are for informational purposes, are general in nature and are not intended to be personal, financial product advice. This article contains only general securities information and has been obtained from sources that were accurate at the time of issue, including the company’s ASX releases which have been relied upon for factual accuracy. Peloton does not warrant the accuracy or reliability of the information contained in this article. To the maximum extent permitted by law, Peloton disclaims all liability and responsibility for any direct or indirect loss that may be suffered by any recipient through relying on anything contained in or omitted from this article. In preparing this article, Peloton did not take into account the specific investment objectives, financial situation or particular needs of any specific recipient. This article does not contain a solicitation or an offer to buy, sell or hold any of the named companies in the said article. Past performance is not an indication of future performance. The analyst/author may receive compensation partly based on Peloton revenues as well as performance measures such as accuracy and efficacy of specific recommendations, stock commentaries and research reports. Peloton and its directors, officers and employees or clients may have or had interests in the financial products referred to in this article and may earn brokerage, fees or other benefits from financial products referred this article. Furthermore, Peloton may have or have had a relationship with or may provide or has provided, capital markets and/or other financial services to the relevant issuer or holder of those financial products.
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Davenport eyes potash potential CAMPBELL SMYTH Campbell Smyth specialises in resource development and venture capital. Following a career as a resources portfolio manager in London with Lion Resource Management, he relocated to Australia and set up Clariden Capital in 2008, which focuses on development capital companies on the ASX and TSX.
THE PICK: WHY DO YOU SEE AN OPPORTUNITY FOR POTASH AND ITS PROPONENTS? Potash increases crop yields using more limited land, which will be vital if burgeoning global growth continues and people’s dietary habits change. Potash demand is set to rise over the coming years as our need to produce more food also increases. Davenport Resources, soon to be known as South Harz Potash, is probably the most underrated potash stock on the ASX. It holds western Europe’s largest potash inventory, with a resource of 5.3 billion tonnes and at least four standalone projects, so the scale of its portfolio is enormous and technical work undertaken to date estimates a mine life of more than 100 years for some of its projects. Davenport’s ground hosted a huge mining effort before German unification and Davenport secured the ground with a perpetual mining licence, meaning no expenditure requirements and no royalties, which is very unique.
THE PICK: WHAT ATTRACTED YOU TO DAVENPORT IN PARTICULAR? In addition to its impressive project portfolio, Davenport has brought together an impressive management team which is an extremely important factor when you are in the exploration and development stage. Its CEO Dr Chris Gilchrist is a potash guru and is well-known in the industry, having been General Manager and Operations Director for Cleveland Potash Limited (UK) and he has significant experience in potash mining, processing and marketing. Chairman Ian Farmer served as Chief Executive Officer of Lonmin, the third largest platinum miner globally, between 2008 and 2012, so he has the corporate and operational experience Davenport needs to progress through development.
The company is working to convert its resource to JORC compliance and needs to drill only two holes to achieve this. It is well funded following an impressive $10 million capital raising last year so I expect that to be completed in the coming months, which I expect to generate significant interest.
THE PICK: WHAT DO YOU CONSIDER TO BE DAVENPORT’S VALUE PROPOSITION? The scale of Davenport’s portfolio is hard to ignore – there are very few projects of this size or potential mine life. Right now, Davenport’s potash resource is second to only BHP’s Jansen project in Canada, which could cost up to $10 billion to develop. Davenport can bring South Harz into production for a fraction of that. Its current valuation is about 0.5c per resource tonne of potash – the valuation on a developed project would be $2-3 billion in today’s markets, so I see plenty of upside here. With a scoping study already completed, but awaiting finalisation, showing potential for multiple mines with NVPs ranging from $400 million to $1 billion, IRRs ranging 30-50% and mine lives of 30 to 100 years, I see long term re-rating potential and a company that could offer institutional grade investment over the next few years.
“I have been following the company for several years, took an initial position in it, and then participated recently in the placement in November to build a position ahead of the value uplift I see occurring in the upcoming drill program.”
Foster best on our books ROB TELFORD Foster Stockbroking Head of Corporate Finance Rob Telford has more than 10 years’ experience in capital markets, having worked as an analyst and advisor prior to his current role. Stuart Foster established Foster Stockbroking 30 years ago and the company focuses on providing emerging companies with access to equity capital markets as well as its institutional client base with access to a high quality research product. Here Rob explains why these three resources companies are Foster’s top picks for growth.
SYRAH RESOURCES (ASX: SYR) Syrah has worked hard over the past few years to develop a diversified strategy. It’s now positioning itself as a vertically integrated producer of natural graphite active anode material (AAM) at its facility in Louisiana, USA and with graphite production set to restart at Balama in Mozambique following a COVID-19 related hiatus. We see plenty of upside here. The graphite market looks set for improvement this year and Syrah’s installation of a furnace at Vidalia is another important step towards its goal. The company has strong cash reserves to implement its strategy and we expect its share price will run hard through 2021.
GOLDEN RIM RESOURCES (ASX: GMR) This West African gold explorer has to be one of the most undervalued gold companies on the ASX. It has already defined a 2-million-ounce gold resource at the Kouri project in Burkina Faso and now it has picked up a stake in the Kada project in Guinea. This project was previously explored by Newmont but shelved due to other priorities, and Golden Rim is now looking to delve deeper to uncover its greater potential. Newmont did a fair bit of drilling at Kada so Golden Rim is ready to complete the infill needed to rapidly bring this project to a maiden Mineral Resource this year. It has also embarked on a work program at Kouri aimed at growing the resource and commencing a scoping study, so we expect it to achieve a re-rating this year.
Resources for $350 million. We think he’s onto another big opportunity here. There has been some impressive IPOs to hit the ASX over the past 12 months and we expect Genmin’s shares to re-rate strongly over the course of the year. The company quickly achieved the $30 million in commitments for its IPO in February after showcasing its plans to become the next premium, high-grade iron ore producer in Africa with a pipeline of projects in Gabon, a small country in central west Africa. Its Baniaka project already has a 152 million tonne hematite resource, with the next step a feasibility study while its Bakoumba project has drill-ready targets.
GENMIN (ASX: GEN) Genmin is a new iron ore play led by Joe Ariti, who founded the company in 2013 after selling African Iron Limited to Exxaro APRIL 2021 25
Lotus ready for uranium recovery MARCELO LÓPEZ Marcelo López is a Senior Portfolio Manager at L2 Capital. Prior to this, he worked in large international asset management companies, such as London & Capital and Gartmore Investment Management, both in London. Marcelo has a degree in Mechanical Engineering from PUC-MG, International MBA at IE Business School in Spain and specialisation in Finance from Helsinki School of Economics & Business Administration, Finland. Here he explains his rationale for investing in Lotus Resources (ASX: LOT).
WHAT LED YOU TO INVEST IN LOTUS RESOURCES? I have been an investor in Lotus for a while now, when it was known as Hylea Metals. Lotus and its Kayelekera project in Malawi seem to offer a compelling risk - return profile.
WHAT ADVANTAGES DO YOU SEE LOTUS HAVING OVER ITS PEERS? The company ticks many boxes for me, as a proven producer – Kayelekera produced more than 10 million pounds of uranium in the previous cycle when held by Paladin Energy; as a low-cost producer, the company has demonstrated low start-up costs and long life of mine. Also, there might be some exploration upside.
HOW DO YOU SEE THE OUTLOOK FOR URANIUM IN 2021 AND BEYOND?
WHAT DO YOU CONSIDER THE KEY FACTORS FOR IMPROVEMENT IN THE URANIUM MARKET? If people are serious about the environment and pollution, nuclear energy must be a part of the solution. It provides clean, safe and reliable baseload energy. Many countries are setting dates to be carbon neutral, and nuclear will benefit from this. In addition, the new trend towards ESG – or environmental, social and corporate governance – will help nuclear take centre stage.
According to UxC, the uncovered uranium demand by 2035 is about 1.4 billion pounds and utilities will need to contract pounds from a proven producer over the next few years.
General advice disclaimer: The opinions expressed in this article are for your information only. Any information provided does not constitute investment advice or investment recommendation nor does it constitute an offer to buy or sell or a solicitation of an offer to buy or sell shares or units in any of the investment funds, stocks or other financial instruments described therein.
In regard to uranium, the outlook has never been so bright. Demand has been increasing, whilst supply has been decreasing and the underinvestment in the sector has achieved ludicrous proportions. On top of that, inventories have been decreasing and secondary supply is reaching a limit.
It also does not take into account your personal objectives, financial situation or needs. You should therefore consider whether the information is appropriate to your investment objectives, financial situation and needs before acting upon it, seeking advice from an authorised financial adviser if necessary. Not all investments are appropriate for all people. It’s important to remember that investing in shares can lose you some or all of your money. Investments in ASX companies do not include taxes, brokerage commissions, or associated fees. Past performance is not a reliable indicator of future performance. The value of any investment and income derived from it can go up or down.
Utilities have delayed contracting for the long-term, for many reasons that have been put to sleep now, so I believe we are going to see the beginning of a new contracting cycle, starting towards the end of this year. THE-PICK.COM.AU
Disclosure: The author and funds under his management do not have significant holdings of the stocks mentioned in this article and his holdings may at times fluctuate.
Investors flock to 20th annual RIU Explorers Conference
n an age of zoom calls and webinars, the RIU Explorers Conference has stood the test of time notching up its 20th anniversary of the event this year – cementing its legacy and proving nothing beats face-to-face interaction when on the hunt for the next big investment. Emerging from a period of strict lockdown the RIU Explorers conference was held at the Esplanade Hotel in Fremantle, WA from the 16 – 18th February. Despite the logistical challenges, the event delivered in-person presentations from more than 70 ASX-listed junior and mid-cap minerals explorers. Companies were flanked by stockbrokers and retail investors, with the event reporting a total attendance over the three days of 1,700. Commenting on another successful conference, Vertical Events managing director Stewart McDonald said: “It is a humbling experience to look back across the twenty-year history of the RIU Explorers Conference and think of the connections, intelligence and insights which have been gained. These are clearly valuable tools in the arsenal of any investor and we try to foster a collegial environment where companies and investors can interact freely,” he said. “As an example, IGO Ltd (ASX:IGO), Western Areas (ASX:WSA) and Mincor Resources (ASX:MCR) all presented at the inaugural RIU Explorers Conference as junior exploration companies. They presented again at our 20th event as major producers that have delivered value above and beyond expectation for any shareholder that met them then.
“There are so many opportunities in the resources space at the moment with discussion about another commodity super-cycle, so you have to wonder which of the junior explorers that presented this year are going to take the leap to be the next success story. “Despite the challenges of the COVID-19 pandemic, demand for the Conference has seen us persevere to deliver our biggest event yet and I am excited to see what’s in-store for the 21st RIU Explorers Conference,” he added. This year’s event offered a wide variety of exposure to different commodities, with presentations from major gold producer Regis Resources (ASX:RRL), major copper producer OZ Minerals (ASX:OZL), Vietnam-based nickel-copper-PGE developer Blackstone Minerals, battery metals innovator Neometals (ASX:NMT) as well as highly touted Fraser Range nickel exploration plays Legend Mining (ASX:LEG) and Galileo Mining (ASX:GAL). Investors were also treated to some expert investing insights from the Sam Berridge, portfolio manager at Perennial Value Management and Paul Howard, mining analyst at Canaccord Genuity who both delivered keynote presentations.
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