Gold in the Pilbara- The Players and their Story

Gold in the Pilbara- The Players and their Story

Gold mining in the Pilbara has been hit and miss for the previous decades.  If you look into the history of gold in the Pilbara, there is no doubt there have been many “gold mining” events.  However, I would never describe gold mining in the Pilbara as a provincial size.  I would call it spotty and sporadic over the many decades.  The focus back onto the Pilbara as a source for gold mining is only recent.  The re-focus is due primarily to the last gold conglomerate rush that was created initially by Artemis Resources Limited (ASX: ARV) and Novo Resources Corporation (TSX: NVO).  That gold rush has since disappeared, but the remnant debris is the appearance of some exciting gold stories.  These are not new stories but more rejuvenation of some old projects that may now become interesting due to the rising gold price.

 

Pilbara Craton (source: Geoscience Australia)

In amongst the myriad of stories, some have interesting aspects.  The Pilbara is a callous place for juniors with a tradition of shallow pockets and long arms, but it does bring some signs of possibilities to the process.  The only real producer was the Paulsens’s gold mine, and that is now a shadow of what it was.  In 2001, AGSO (Geoscience of Australia) quoted the following,

“Bamboo Creek deposit (7.05 t Au total production; Williams,1998), the Golden Spec deposit (2.06 t Au to 1987) and the Lynas Find district (3.8 t). More importantly, however, significant Au resources have been defined at the Golden Eagle deposit (6.67Mt @ 1.96 g/t Au for 10.1 t Au), the Klondyke deposit (9.95 Mt @ 1.0 g/t Au for 10.0 t Au) and the Indee area (4.96 Mt @ 2.08 g/t Au for 10.3 t Au).”

In some past conversations, I was told that the Paulson mine never really made money. It was marginal at best and creative accounting made it better than it was in reality.  I don’t know how much that was the truth and how much was a creative conversation… 🙂

Let’s have a look at some of the participants that I think is worth discussing.

 

Kairos Minerals Limited (ASX: KAI)

(source: www.kairosminerals.com.au)

In the Pilbara, Kairos’ flagship asset is the advanced Mt York deposit which is located ~100km south-east of Port Hedland. Together with the nearby Iron Stirrup and Old Faithful deposits, this forms the cornerstone of the Company’s Pilbara Gold Project.  These deposits, some of which were mined historically in 1994-1998 by Lynas Gold NL, are located directly adjacent to the world-class Pilgangoora lithium mining complex (Pilbara Minerals and Altura Mining).

Location of the Kairos Gold Projects (source: Kairos Minerals Limited)

On 23 May 2018, Kairos announced an updated Resource for these centrally located deposits, including Mt York, Iron Stirrup and Old Faithful.  The global Mineral Resource estimate at the Pilbara Gold Project is now 14 million tonnes at 1.3g/t gold for 643,000 ounces of contained gold.

Mt York Project. (source: Kairos Minerals Limited)

I was at one of the presentations and I was pretty impressed with the story.  Kairos suffers from the stigma of being one of the “conglomerate companies” which is common for all the players during that period of time.  In fact, almost every company in the Pilbara chasing gold suffers from that even if you were not involved.  Terry Topping, the Managing Director strikes me as a true exploration geologist and I was impressed with the presentation.  I took notice of the story so that makes him a great presenter and I like the way he thinks.

Although Mt York is the main attraction, they have another project called Croyden that I liked. Croyden is an exploration stage play and will be far from the word “production” but it has a story worthy of some DYOR.

Kairos Croydon Project. (source: www.kairosminerals.com.au)

The story is that there are a series of nuggets that are found along a ridge that seems to be NOT “Conglomerate” related.  In the valley, there are “watermelon seed” shaped nuggets found but these nuggets are definitely of different genesis.  There is a major regional structure that is striking NE-SW which could be a source of “primary” mineralisation, well at least a source of cooking ingredients.  In generality, I agree with Terry’s comments that this is most likely to be a sedimentary primary gold story.  It’s not a conglomerate story.

 

Calidus Resources Limited (ASX: CAI)

(source: www.calidus.com.au)

The Warrawoona Gold Project is in the East Pilbara district of the Pilbara Goldfield of Western Australia, approximately 150km south-east of Port Hedland and about 25km south-east of the town of Marble Bar.

Historically fragmented ownership has held back the development of the area. Calidus now controls the entire Warrawoona Greenstone Belt with a total of 780km² under its control. Since listing in mid-2017 with a resource of 411kozs, the Company has undertaken a systematic modern approach to exploration and tripled the resource base to its current 1.25 million ounces.

Location of the Warrawoona Gold Project (source: Calidus Resource Limited)

Calidus completed a Pre-Feasibility Study (PFS) in early July 2019 confirming the Warrawoona Gold Project will be a robust operation with strong financial returns. The compelling technical and economic outcomes of the PFS have led the Board to immediately approve the commencement of a Definitive Feasibility Study (DFS), which we are aiming to complete by Q3-CY2020 to allow an investment decision to be made in late CY2020. The DFS will incorporate results from an extensive resource drilling programme (infill and extensional) to expand the current resource base and increase its confidence.

I know very little about this deposit but from what I have read, this is a story that is developing slowly.  The research does show that the basaltic and ultramafic rocks of the Warrawoona Group are one of the most important hosts to gold mineralisation in the Pilbara.

The Warrawoona Project. (source: Calidus Resources Ltd)

Looking at the latest presentation where the Feasibility cost of AUD1,159oz appears to make this operation very interesting.  With what is happening in the world events, and the inflationary nature of paper money, there is not much chance of the gold price going too far south of the current level of AUD2,200 oz. What I like about the nature of this project is the length of the strike.  Interestingly, all the four companies that I have chosen have these great strike length of mineralisation.  I don’t see many of these kinds of projects in other areas.  What is good in the Pilbara is the lack of cover. For example, the Klondyke project is mineralised from the surface.

Klondyke Resource (source: Calibus Resources Limited)

 

Artemis Resources Limited (ASX: ARV)

Carlow Castle is located 28 km north-east of Artemis’ Radio Hill processing plant, via gazetted roads, and approximately 45 km by road east of the city of Karratha. Access is via the Northwest Coastal Highway and then by the unsealed Cheratta road which passes through the Project area.

 

The gold-cobalt-copper mineralisation at Quod Est and Carlow Castle South is hosted in chloritic shear zones within the predominantly Archean mafic sequence. The ore zones appear partially oxidised above 20m with sulphides extending to depth. The primary sulphides are chalcopyrite, cobaltite and pyrite. The presence of chalcocite in some samples indicates supergene enrichment in the upper portions of the sulphide zone.

The structural environment of the area is complex; Quod Est strikes north-south and dips steeply to the east whereas Carlow South strikes east-west and dips steeply to the north.

Artemis has redrilled the deposit with a total of 24,721.6 m drilled on regular grids during 2017 and 2018.

I have always said that gold is where you find it.  How it got there can be worked out when you have the time and money to have that luxury.  I am not sure why but Carlow Castle has me intrigued as there are no gold deposits that have copper and cobalt associated, especially in this part of the Pilbara. I was introduced to Carlow as a cobalt project and later learned that it is maybe more a gold deposit.  As a cobalt project, I think it is the only one that is of significance in Australia.  How this deposit differs to the other companies in this comparison is the lack of drilling to test the strike length.  Like all the other projects we have mentioned, there is a strike of 30km that Carlow Castle sits on.  Only 1.2 km of that strike has been drilled.

Carlow Castle Project. (source: Artemis Resources Limited)

Carlow has a current resource of 7.7 million tonnes (Mt) at 1.06 g/t Au, 0.51 %Cu, and 0.08% Co.  I think that the significance of the CU-Co-Au mix makes this deposit interesting.  As most readers of my Insights will know, I am a big fan of the “base-metals” suite.  Carlow castle sits in a known nickel province, and a well-known prospector has an adjacent tenement that is prospective for PGE.  Hence, the base-metal part is not significant, but to me, the gold piece is a bit out of the ordinary.  There are numerous reports of nuggets discovered and small miners in the area, but there have been no significant discoveries recorded.

 

One of the key issues with this deposit is the separation of the gold and the copper.  Artemis has completed a preliminary metallurgical test work and has shown that this could be done efficiently.  A large portion of the gold component ranging up to 48% is recoverable using gravity separation.  The non-gravity gold is recoverable in sulphide concentrates as a by-product using standard floatation.

 

DeGrey Mining Limited (ASX: DEG)

(source: De Grey Mining Limited)

De Grey’s Pilbara Gold Project is approximately 60km south of Port Hedland in the Pilbara Region of Western Australia.

The Company’s current exploration program is focused on the upgrade and expansion of known resources, as well as in the discovery of new deposits. Overall, the Pilbara Gold Project has excellent potential to define significant additional resource ounces along the 200 km plus strike length of mineralised shears zones, throughout the greater than 1,500 km² landholdings. To date, approximately 10% of the shear zones have received detailed shallow RC and diamond drilling to a nominal depth of 100-150m defining ~ 1.7Moz (JORC 2012*) of gold resources (ASX Announcement 16 July 2019).

 

De Grey considers the extensive strike length of untested and gold anomalous shear zones together with the discovery of gold nuggets associated with previously unrecognised conglomerate targets as one of the most under-explored and prospective regions of Australia.

The Project is well served by infrastructure since it is close to the regional centre of Port Hedland, a gas pipeline, two railways and is traversed by the Great Northern Highway.

 

Conclusion

I chose these four companies to have a discussion because I think they all seem to have similar projects and of a similar style.  They are all juniors and have a project with a decent amount of resource ounces.  There are a lot of similarities to each other.  I left Northern Star (ASX: NST) out of the list as they are a different beast.  What they have in the Pilbara appear to be refractory and only they can make it work.  If any of the four companies have the refractory factor you can take them off the list.

I wrote about DeGrey Mining in April 2019 entitled, Finally a Real Gold Project in the Pilbara?- De Grey Mining Limited (ASX: DEG), and I mentioned that this was a good project with A-Grade shareholders.  I still think that this is the case but I sense that the company is struggling to make this happen.  I have not looked at the logistics of the company recently but with the resources and the potential of the area, I am very disappointed to see the result.  There is talk about Board turbulences but I think this one may be heading for hard times.  This could be one of those instances when another owner or two is required to make the “7th company” theory true.

As I mentioned, I know the least about Calidus Resources but they seem to me to have the best looking numbers.  Their PFS seems to be pointing to all the right numbers and only time will tell if this is going to happen. Grades look good so they should avoid the Millennium Minerals Limited (ASX: MOY) tragedy (should never have happened).

The dark horse could be Kairos Minerals.  Their Mt York deposits have the numbers but I think this may not work.  I don’t mean that the deposit is not good, I feel they need a lot of money to make that work. Piecemeal fundraising in this part of the world is not going to go very far.  As opposed to my previous discussion (Coffee with Samso – Episode 026 – Blackstone Minerals Limited (ASX: BSX) Developing the Ta Khoa Nickel Project in Vietnam.) with Blackstone Minerals Limited (ASX: BSX), their dollar does go very far in Vietnam.

The project I like is the Croydon Project even though it is an early-stage exploration project.  I like it because they could actually bring something new to the table.  Unfortunately, that will take time and most importantly, money.   The potential of this project is what I am excited about.  The fact that there is so much free gold being found in samples makes this unique.  Nuggets that clearly appear to be from two different sources cannot be ignored.  The nuggets can be clearly observed to be fundamentally different in form and structure is going to be the hardest thing to understand.  If Terry and his team work this puzzle out, they could actually find their form of Lassiter’s Reef.

In my humble opinion, I think the strategy for Kairos Minerals is to try and get the production story happening for Mt. York and then go seek investors in Non-China Asia.  There are a lot of punters who want this kind of story.  My last roadshow there showed me that there are still many people who are waiting to invest in this sector.  When they get this funding and get Mt. York to work, they will have the funding to explore Croydon properly.

Carlow Castle is my favourite. I like it because it is a deposit that is different (Best undiscovered project: Carlow Castle an unconventional Gold-Cobalt-Copper mineral Project). A recent article in Economic Geology mentioned that this deposit is older and different from the others in the region.  I agree with them as I have mentioned earlier due to the chemistry.  Artemis has a very simple process, drill and drill and drill. They will absolutely get more resource and they have a highway as a mineralised strike.  When they have over the million-ounce stage, they have the Radio Hill Plant ready to go to work.

Carlow Castle and Radio Hill plant will be a joint strategy for the company as things move on.  Like many things in life, there is a Ying and Yang, and for Artemis, it is money.  They need money to drill and then it is a no brainer to production.  Unlike Artemis, the other three companies are not 28km from Karattha and have all the simple pleasures of logistics, utilities and low cost of manpower.  This is why Carlow Castle is my favourite of the three.  The project is well lined up. All they need is to upgrade the resource so that the PFS and the DFS will bring in the production investments.

Artemis Resources has taken a wild ride of late.  The recent capital raise to pay off the debt was a great success and Ed Mead must take a lot of that credit.  Speaking to Ed over the years, he is a creative guy and I am sure the forthcoming challenges of raising more money to develop Carlow Castle will be achieved.  This will be the next hurdle for the company.

Hence, apart from De Grey, there are going to be hard choices to make on which horse to bet.  Personally, I like Carlow Castle as I feel Artemis is undervalued for what they have. My second choice would be Kairos Minerals as discovery at Croydon and restructuring of strategy on Mt. York will definitely bring re-valuation of their share price. In third place is Calidus as they are prone to a revaluation when they get mining. Currently, they are in a hibernation mode as the market figures them out.

 

NOTE: Samso is not a shareholder of any of the companies mentioned.  Samso is also not commissioned to write this Insight.

 

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