Farming for Gold in the Wheatbelt of Western Australia.

Farming for Gold in the Wheatbelt of Western Australia.

Late 2017, I met up with an associate of mine who told me that he was working on a very interesting project, conceptual in manner, using new theories and using recently released information from the Mines Department. He told me that it was in the Wheatbelt areas.

I was thinking that this is farm land… people grow wheat on these farms… sure there were some history but there are a lot of these isolated discoveries that were there but nobody would have thought to go and chase them…..

As usual, we parted ways and i never followed up…cause I was too lazy or just did not think that it was such a great thing… mind you, at the at that time, the small cap sector was running hot and everything was about Cobalt and the Conglomerate Gold in the Pilbarra.

On 15th January, Cygnus Gold Limited (CY5) commenced trading on the ASX. I heard that they raised AUD6M and had over-subscription of another AUD6M. Now I did some research and after another meeting with my friend on another matter, I found that my friend traveled with well healed people…. I am glad he still takes my phone calls 🙂 I met my friend in March 2018 and I remember the stock was still north of 30c.

Now, what is most fascinating for me is that the whole concept reminded me of the Gold Road Resources journey. How they ventured into and area that was of similar unloved territory. Now if they made that wild story work, this could be very interesting.

Gold Road Resources went after the Yamarna Belt and locked up the whole region. The Yarmana Greenstone Belt was know as something that will not have the endowment of the Norseman-Wiluna Greenstone Belt as it was not of the same age. There were some mineralisation but the believe was that it will never be of the same scale as the Kalgoorlie Norseman-Wiluna Belt (Figure 1). Even the almighty Western Mining thought it was not going to happen because there was no water…..

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Figure 1 : Comparisons of the Greenstone Belts in the Yilgarn Craton. (source: http://www.goldroad.com.au/media/2018/07/5b513be36926f879697038.pdf)

The Yamarna is approximately 1hr and 45min by air from Perth. There is now no argument that it is major goldfield (Figure 2). The resources that they have found is rather amazing. Remember that the company owns nearly the whole 180km of strike…..Yes, the whole belt…………

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Figure 2 : Gold Road Resources Yamana Project and Gold Endowment.
(source: http://www.goldroad.com.au/media/2018/07/5b513be36926f879697038.pdf)

There are two main players in this wheatbelt region, Cygnus Gold Limited (ASX:CY5) and Explaurum Limited (ASX:EXU). CY5 was an IPO and i believe EXU was a RTO done in mid 2015 (I could be wrong on EXU).

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EXU

Last Traded 10th August 2018 : $0.086 (MC 41M)

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CY5

Last traded on 10th August 2018 : $0.089 (Market Cap : $4M)

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Figure 3a : ASX share price chart for both CY5 and EXU.
(source: www.commsec.com.au)
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Figure 3b : ASX share price chart for both CY5 and EXU.
(source: www.commsec.com.au)

The concept for Cygnus was that the Wheatbelt region geologically was similar to the Kalgoorlie goldfields and this area has largely been overlooked. As in most early exploration strategies (many times this is due to the money telling the geologist what to do), the theory was to chase the low hanging fruits. With so much attention given to the Kalgoorlie Goldfields, Leonora-Leinster-Laverton region, the Murchison, and then the Yandal Belt, the rate of exploration in the Wheatbelt area was lost in space.

Like the discovery of the Boddington gold mine in the Darling Range in the early 1980s, good explorers with the sense of adventure will find what they are looking for in the end. Think about Tropicana, Sandfire, and Nova. These are all exploration success stories in the last 10 years.

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Figure 4: CY5 project tenement plan.
(source: https://www.cygnusgold.com)

The story for Explaurum is very interesting and as I discovered in my research, the company’s history has a connection to me …. this is so wierd…. Explaurum is basically Auzex Exploration, which was one of the previous owners of the Kirwan Tungsten Project (NZ) which I picked up in my past life as the MD of Siburan Resources Limited.

The Board of Explaurum has done this before and they come from the land of the Long White Cloud. While writing this, I am now seeing the familiar names of Chris Baker, John Lawton, Gregor Partington. What a small world. Good to see them have the continued success. I know Chris from my doings in NZ during the Siburan days.

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Figure 5: Explaurum Limited Tampia project location. (source: www.explaurum.com.au)

In May 2018 the Company announced the completion of a Feasibility Study for the development of Tampia, which confirmed it as a high-margin gold project.  In addition, Explaurum announced an initial Ore Reserve of 7.2 Mt grading 2.09 g/t Au (485,000 oz contained).

The all-in sustaining cost (AISC) is A$896 oz for the first two years of operations and A$998 oz over LOM, with 104,000 oz Au produced for each of the first two years of operations.

Pre-production Capital Cost estimate is A$119 million (including a $10.8 million contingency) and payback in 18 months from commissioning.

As you can see in Figure 6, the resource is not too bad for a wheat farm… 🙂

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Figure 6: Explaurum Limited Tampia resource. (source: www.explaurum.com.au)

Tampia was first discovered by BHP in 1987 and exploration in the early to mid 1990s established a high grade, shallow resource. Since the mid 1990s, very little exploration was carried till Explaurum acquired the the project in 2012. Typically, the project was generally unloved due to a poor understanding (maybe lack of market perception) of geology, mineralisation and mettallurgy. Like the famous SAS motto, “Who Dares Wins”, Explaurum took on the challenge and has come up looking like a hero.

At this stage, things are looking good and I hope they make it good. I love this kind of stories as I am championing exploration. Its where all the added value are found.

The moral of this story is listen to good explorers, back companies that spend money in the ground, and companies that don’t pay their CEO $350,000, even if he is sitting on the drill rig, and doing the real geological stuff ( unless that guy is me….). There are no more easy fruits to pick, if someone is telling you that there is a project where you can easily go and mine it, think again.

When I look at all these stories of successful exploration I admire and envy them as that is what this game is all about. Being associated with the teams that had the discovery of Bronzewing and Merlin Diamonds in the first 3 years of my dislocated geological career, I had got the bug since then… the discovery. One day it will happen… 🙂

These are the kinds of investments that I like, cheap and have the potential of finding something substantial and when that happens the magnitude of added value will be high. Imagine that CY5 makes a discovery ? This is practically a virgin goldfield to be discovered. Look at the Gold Road story….

The biggest problem with the industry at this point is that lack of support for real exploration and this shows when you look at the fund raising process. investors like to believe that it is easier to re start a mine than to explore for something new. Remember why the mine shut in the first place. If it could not survive last time, it will not now. The cost of mining is at today’s inflation rate and not back 20 years of whatever years ago.

Till next time….
Note: I do not hold any shares in any of the companies mentioned at the time of writing.

Disclaimer:

The information contained herein is the writer’s personal opinion and is provided to you for information only and is not intended to or nor will it create/induce the creation of any binding legal relations. The information or opinions provided herein do not constitute an investment advice, an offer or solicitation to subscribe for, purchase or sell the investment product(s) mentioned herein. It does not take into consideration, nor have any regard to your specific investment objectives, financial situation, risk profile, tax position and / or particular, or unique needs and constraints. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of this information. Investments are subject to investment risks including possible loss of the principal amount invested. The value of the product and the income from them may fall as well as rise. You may wish to seek advice from an independent financial adviser before making a commitment to purchase or invest in the investment product(s) mentioned herein. In the event that you choose not to do so, you should consider whether the investment product(s) mentioned herein are suitable for you. The writer will not, in any event, be liable to you for any direct/indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials appended herein. The information and/or materials are provided “as is” without warranty of any kind, either express or implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials.

 

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25 Comments
  1. Disclaimer:The information contained herein is the writer’s personal opinion and is provided to you for information only and is not intended to or nor will it create/induce the creation of any binding legal relations. The information or opinions provided herein do not constitute investment advice, an offer or solicitation to subscribe for, purchase or sell the investment product(s) mentioned herein. It does not take into consideration, nor have any regard to your specific investment objectives, financial situation, risk profile, tax position and particular, or unique needs and constraints.Accordingly, no warranty whatsoever is given, and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of this information. Investments are subject to investment risks including possible loss of the principal amount invested. The value of the product and the income from them may fall as well as rise. You may wish to seek advice from an independent financial adviser before committing to purchase or invest in the investment product(s) mentioned herein.If you choose not to do so, you should consider whether the investment product(s) mentioned herein are suitable for you. The writer will not, in any event, be liable to you for any direct/indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials appended herein. The information and/or materials are provided “as is” without warranty of any kind, either express or implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials.
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