De Grey’s gold shows Pilbara fast becoming more than just iron ore

Another round of outstanding drilling results fires up De Grey and its leading shareholder DGO Gold while Kairos reminds investors it has a gold project just down the road
6th March 2020
Barry FitzGerald

The Pilbara Craton’s ranking as a gold province has long suffered in comparisons with the Yilgarn down south.

Its 8 million-ounce gold endowment compared with the Yilgarn’s 200Moz says as much, even if the Pilbara has all the same ingredients that has made the Yilgarn one of the world’s great gold regions.

But things are stirring in the Pilbara, ignoring for the time being the over-promotion in 2017/18 of its Witwatersrand conglomerate gold potential.

Leading the way is De Grey (ASX:DEG), which has been the talk of Perth exploration circles since its Hemi gold discovery late last year.

Hemi is about 80km south of Port Hedland and is part of De Grey’s broader Mallina gold project, where it has already established a 1.7Moz gold resource (due for an upgrade soon) and where it has previously set a 3moz target to underpin a mining project.

Hemi looks as if it could get De Grey there in a hurry. Latest drill results reported on Thursday included 93m at 3.3g/t (including 21m at 4.7g/t) from 39m, which correlated nicely with shallower gold results immediately above in earlier reconnaissance drilling.

The hit was from the Brolga Zone (previously section B) while over at the Aquila Zone (previously section A) there was an 11m hit at 3g/t from 193m which finished in higher-grade mineralisation (4m at 6.5g/t).

Exploration manager Phil Tornatora summed it all up with the comment that the early drilling at Hemi is producing “some of the best discovery intersections that I have seen”.

“Drilling to date shows exceptionally wide, continuous and good-grade mineralisation,” Tornatora said. “We have three rigs advancing this exciting new discovery.”

He added that Hemi might be an intrusion-related style of gold system rather than WA’s more typical shear-hosted style.

All that was good enough to send De Grey shares 4.5c, or 24%, higher to 23c for a market cap of $238m.

Basking in the glory of De Grey’s Hemi success is Melbourne-based DGO Gold (ASX-DGO), mentioned here in November last year when it was a 96c stock. The thinly traded stock – it is pretty much by appointment only – is now $2.

DGO holds a 10.7% stake plus options in De Grey which was one of two investments it made in the ASX gold junior space (the other was a 12.1% stake NTM Gold, ASX:NTM) after screening more than 90 projects held by juniors against three criteria.

They were projects where the finding cost was assessed to be below the brownfield average of $25/oz, they had a resource potential of more than 3Moz and they come with upside.

The idea behind all that was to capture the value lift that comes for a cost of less than $25 an ounce, becomes valued by the market at $50 an ounce at the resource level and $500 an ounce or more at the development stage.

It’s all quite neat and is the work of DGO lead guys, veteran geologist Ed Eshuys of Plutonic, Bronzewing and Jundee gold deposits discovery fame and Bruce Parncutt of analyst/investment banker fame with McIntosh Securities and Merrill Lynch, and a geologist to boot.

As DGO’s $85m market suggests, it is much more than its De Grey and NTM investments. Apart from its own adjoining tenements to De Grey’s Mallina, it has a bunch of other interesting projects – and the IP that resides with Eshuys and Parncutt.

Kairos Minerals: (ASX:KAI)

Talking about Pilbara gold, Kairos Minerals (ASX: KAI) put its hand up as a player earlier in the week by announcing the low-cost growth in the resource at its Pilbara project from 643,000oz to 873,500oz (20.9mt at 1.3g/t across three deposits).

That was interesting enough for a stock trading at 1c for a market cap of about $9m. But what caught the eye was an accompanying reference in the resource update to one of its prospects elsewhere in the Pilbara.

Kairos said it was re-evaluating a number of intrusion-hosted targets at its Kangan project in light of the Hemi discovery, some 20km to the north.

As suggested at the outset, things are stirring in the Pilbara.

Antipa (ASX:AZY):

Things are also stirring in the Paterson in WA, what with both Rio Tinto (ASX:RIO) and Newcrest (NCM) in recent weeks suggesting the rapid-fire development of their respective Winu copper/gold and Havieron gold discoveries in the region, the latter in a joint venture with London-listed Greatland Gold (LN:GGP).

Neither Rio nor Newcrest has released maiden resource estimates but they obviously think the finds are of sufficient size for them to be planning to get them into production as soon as possible.

Today’s interest though is the hardy junior explorer Antipa (AZY) which had the Paterson as its sole focus long before the Winu and Havieron excitement came along.

Its share price (1.6c for a $32m market cap) does not reflect it yet, but Antipa is amazingly well-placed in the hotter-than-hot Paterson hunt courtesy of the big land package (under shallow cover) it put together since 2011.

The “amazing" bit there is not a big call as who in recent times have become its partners in the Paterson hunt through big spending exploration farm-ins?

Rio and Newcrest no less, with the latter signing up a $60m farm-in agreement under which it could earn a 75% stake in the southern portion of Antipa’s Paterson ground position, down around Newcrest’s Telfer gold-copper mine and Havieron.

Newcrest will also be taking up a 9.9% Antipa stake from a placement of shares at 1.7c. The new joint venture with Antipa covers 2,180sqkm and is known as the Wilki project.

The Newcrest farm-in follows the much earlier one called the Citadel project which is the subject of a $60m farm-in deal with Rio.

It covers 1,316 sq km of Antipa’s northern temements, up near Winu, and is already home to the Calibre and Magnum gold/copper deposits, which could well benefit from a development across at Winu come 2023, and the recently outlined Reaper-Poblano-Serrano gold-copper trend.

As things heat up exploration wise across the Wilki and Citadel joint ventures, and at its own central project area, little Antipa gets to rightly think it could be in for the best of times in coming years.

LUCAPA (LOM):

An exploration story that resonates with investors can be guaranteed to remove the funding roadblocks that junior miners and explorers face. And it doesn’t matter much about the commodity involved, as long as there is lots of big blue sky on offer.

That has just been highlighted by African diamond producer Lucapa (ASX:LOM). Despite the pain in the broader market, it has been able to pull in $2.8m from a share a placement, as well as setting out to raise an additional $3.9m from a 1-14 non-renounceable rights issue, both at 11c a share.

The raising was all the more notable because it was against a backdrop of weak but improving diamond market conditions, all of which goes to the point that the right sort of story can find funding independent of doom and gloom elsewhere.

In Lucapa’s case, the story is around its hunt for the source of the high-value alluvial diamonds it has been mining for five years or so in the Cacuilo river valley at its 40% owned Lulo operation in Angola.

Lulo has been self-funding a $US12m expansion in production from the alluvial operation, putting a squeeze on funds available for the hunt to find the hard-rock (kimberlite) source of Lulo’s high-value sparklers.

The placement/rights issue now makes that possible. Lucapa chairman Miles Kennedy will be pleased. Finding the big mother lode source of the alluvials gets him excited. That came through loud and clear at last year’s AGM.

Kennedy told the assembled at the May meeting in Perth that he knew some shareholders would rather Lucapa focus on its two African mines (Lulo, and the recently developed Mothae kimberlite mine in Lesotho).

“(But) to me, the main game in Angola for many years has been to find the kimberlite diamond pipe or pipes which, about 100 million years ago, erupted within our Lulo concession, and in doing so shed the world’s most valuable alluvial diamonds down into the terraces we mine today,” Kennedy said.

“And while kimberlite exploration can by nature be painstakingly slow, I am equally of the view that we are closer than ever to finding the mother lode at Lulo.

Recent sampling of the Canguige tributary in the catchment area recovered 45 diamonds of up to 3.75cts and included top quality whites and a light fancy yellow.

The stones came from a kimberlite source somewhere in the catchment area, with Lucapa now drilling five of them to determine which of them is worthy of a bulk sampling program in May-June, with the material to be run through the Lulo treatment plant. Exciting times for the 12c ($57m) stock.

On the subject of diamonds, Rio was recently expansive on why it wants to stay in the business. Its Argyle mine in WA closes at the end of the year and Diavik in Canada has 3-5 years ahead of it without investment in new kimberlite sources.

“It’s a great business to be in,” Rio said at last week’s profit briefing.

“So our strong desire is to sustain the diamond business because it's highly profitable business and we've got to create value for shareholders.” So it’s not all about iron ore (85% of current earnings) after all.

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