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The New Criterion: The gold play

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By Tim Boreham

Impact Minerals (IPT)

Like any self-respecting miner, Mike Jones experienced his Pilbara gold epiphany at the front bar of Kalgoorlie’s Palace Hotel late one night during August’s Diggers & Dealers bash.

The Impact managing director had been shown photos of the Pilbara nuggets unearthed by the Canadian-listed Novo Resources and the ASX-listed Artemis Resources (ARV), the parties credited with starting the fossicking craze in the district better known for iron ore.

“I phoned the office and said take any available ground,” he says.

Impact thus can claim to be a leader among the dozens of explorers now expressing sudden interest in the district.

“We were able to peg 1300 square kilometres of ground in the East Pilbara probably two months before the big rush started,” Jones says.

First mover benefit aside, Impact’s other advantage is that Jones has closely studied South Africa’s Witwatersrand, the mammoth formation that has produced half the world’s gold (and to which the Pilbara discoveries have been compared).

In the early 1990s Jones – Dr Jones, actually --completed a PhD on gold formation in an age-equivalent sandstone basin adjoining the Witwatersrand.

The conundrum with the Pilbara is that while the distinctive ‘watermelon seed’ nuggets has been equated with the nearly three billion year old Witwatersrand, a formation similar to the 7km thick South African basin is yet to be found.

Jones says the Pilbara explorers so far have found numerous nuggets transported as fragments from somewhere else.  “But from where and from how far? That’s the question no-one has yet has an answer to.”

Some spoilsports claim that with the Pilbara’s gold endowment much less than that of the Kalgoorlie region, there’s unlikely to be enough source material to emulate a Witwatersrand.

Jones contends the Pilbara nuggets weren’t exactly nuggets in the first place, having been chemically leached from a source vein and turned into nuggets by complex geological forces.

The gold could have been transported into the basin by hot geothermal fluids and dumped into algal ‘mats’, where they were re-worked as nuggets.  This theory was also a driver for Novo’s president and leading explorer Quinton Hennigh.

The significance is that with Mother Nature dispersing the gold far and wide in fluids, the nuggets don’t necessarily have to have come from older veins and this obviates the reliance on a source rock.

“Some may have come from algal mats only a few kilometres away in the basin itself and have been re-worked by complex forces of geology,” Jones says.

 “I have to say I am quite amused by some of the uninformed opinions I have seen on the web concerning the source of the nuggets and the limitations this places on the exploration potential.”

While viable deposits based on dispersed gold are quite possible, it still would be jolly nice to find another Witwatersrand.  Novo and Artemis continue to drill Purdy’s Reward, the nuggety El Dorado that kicked off the excitement.

It is hoped that deposit will turn into a Witwatersrand clone at depth, bearing mind the South African deposit has produced grades of more than 1000 grams per tonne towards the core.

Nova and Artemis have scraped off 932g of nuggets from the top metre of the conglomerate style structure – a feat beamed live and theatrically to the Denver Gold Forum in late September.

The trouble is, nuggets make for great pics but they make it had to determine how much gold is actually there for the purpose of determining a resource.

“It’s actually called the Nugget Effect,’’ Jones says. “The bigger the nugget, the worse the effect.”

Not wanting to waste an opportunity, Impact this week completed a $2.5 million placement at 2c, an 11% premium.

This takes Impact’s cash balance to $5 million, to be used in the Pilbara as well as further drilling on the Commonwealth gold, silver and base metals project near Orange in NSW.

Jones says the latter will remain Impact’s number one priority, although hyperventilating subscribers to the oversubscribed raising may think otherwise.

Gold rush form guide

When it comes to counting the number of Pilbara gold aspirants, your columnist is running out of fingers and toes.

At least 20 ASX-listed explorers claim to have Witwatersrand-style ground in the vicinity, some with existing tenements and some with hastily-acquired ground.

With newcomers announcing their plans almost by the day, it won’t be long before we get to a Melbourne Cup sized field, but expect some scratchings as funding costs mount.

Aside from Artemis, De Grey Mining (DEG) is at the front of the field because it had existing Pilbara ground, with management waking up to the potential when Novo and Artemis pegged nearby.

De Grey unearthed 91 impressive ‘watermelon seed’ nuggets at its Loudens Patch project, which hopefully points to a conglomerate hosted gold mineralisation.

De Grey is backed by de $US2.7 billion ($3.5 billion) market cap Canadian miner Kirkland Gold, which subscribed for $5 million in a recent share issue.

De Grey also has an existing resource of 1.2 million ounces, grading an average 1.6 grams a tonne gold.

In a similar vein – and excuse the pun – Calidus Resources (CAI) has a separate JV with Novo, which is earning into a number of its projects.  Calidus also has an existing resource, 410,000oz grading 2.2 g/t.

Calidus is also linked with Haoma Mining (HAO), the plaything of pollster Gary Morgan that has seven existing tenements covering 650 hectares.

Calidus is exploring Haoma’s Warrawoona and Klondyke leases and has the option to purchase them. The Pilbara gold rush is rare good news for Haoma, which bats on courtesy of a $39 million loan from Morgan’s Roy Morgan Research Centre.

Coziron Resources (CZR) was hunting for magnetite but it duly has dusted off old soil samples for traces of gold.

But with Coziron professing its main focus to remain on iron ore, don’t expect a name change to Cozgold in a hurry.

Venturex Resources (VXR) remains committed to its Sulphur Springs copper-zinc project, but its Whim Creek tenements have the fortune to be wedged between Novo/Artemis and De Gray ground.

Not surprisingly, soil samples have been despatched to the lab.

In no particular order, other Pilbara participants include Kalamazoo Resources (KZR), Chalice Gold Mines (CHN), DGO Gold (DGO), Marindi Metals (MZN) and Southern Hemisphere Mining (SUH) and Kairos Minerals (KAI).

(Kairos Minerals, Venturex Resources and Marindi Minerals are covered by IIR)

Kairos also has Canuck backing, in the guise of billionaire precious metals guru Eric Sprott’s Sprott Capital Partners, which subscribed for $5 million of a recent $7 million raising. The fund also owns 9% of Novo.

As with the crowded listed cannabis sector, it will take some time for the genuine stayers and the rank opportunists to emerge.

Like the listed dope plays, a degree of pot luck is also involved.
 
Tim Boreham edits The New Criterion

Disclaimer: The companies covered in this article (unless disclosed) are not current clients of Independent Investment Research (IIR). Under no circumstances have there been any inducements or like made by the company mentioned to either IIR or the author. The views here are independent and have no nexus to IIR’s core research offering. The views here are not recommendations and should not be considered as general advice in terms of stock recommendations in the ordinary sense.

Published: Friday, November 10, 2017


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