Red 5 wins a plug from Gold Fields and Saracen over its deal to acquire the Darlot and King of the Hills gold projects in WA, Metal Bank highlights big potential for its Triumph gold find, Blackstone buzzes on back of its cobalt buy and Allan Kelly returns with Riversgold.
Kalgoorlie turned on the weather for this year’s Diggers & Dealers bash which was just as well given the difficulty which the more hardy of the 2200 delegates had finding a taxi after 2am.
A few of the stragglers came up with some innovative solutions, including leaning on the locals for a lift.
Ball handling skills also came in handy as some delegates taking in the air outside the bustling pubs were to find out when they suffered the ignominy of being pelted with eggs by drive-by toothless types not happy with their watering holes becoming clogged with interlopers.
Back at the forum itself, the thick heads from the night seemed to pass quicker this year, with the rollicking array of good news stories over the three days proving a better fix than a Berocca.
Red 5 pivots to Aussie gold
One of the busier booths at Diggers was Red 5 (RED), which unveiled a dual $34.5m acquisition of the Darlot and King of the Hills gold projects, respectively from South African gold producer Gold Fields and local mid-tier Saracen Mineral Holdings (SAR).
Apart from being on the receiving end of some handy plugs from the CEO’s of both vendor companies during their presentations (both will end up as cornerstone shareholders), the Red 5 team found that their "consolidation" play flushed out interest at a number of other levels.
Some punters compared the bold deal to the early-stages of Northern Star (NST), with its acquisition of the Paulsens gold mine proving to be the foundation stone for what has become one of the standout success stories of Diggers over the past seven years.
New discoveries and the application of technology such as state-of-the-art 3D seismic has returned ageing mines such as Northern Star’s later Jundee acquisition back to their "world-class status", thanks to new discoveries at depth.
Red 5 appears to have every chance of replicating this strategy at Darlot, which has produced 2.7Moz over its 28-year life. Gold Fields recently completed an extensive seismic survey at Darlot, using the same cutting-edge technology which assisted Northern Star in making its recent "Zodiac" discovery at Jundee.
Outside of that, Darlot gives the company a central processing hub in one of Australia's hottest gold districts, with the ability to leverage this via a regional consolidation strategy - beginning with ore from the King of the Hills deposit. Saracen boss Raleigh Finlayson said his company was happy to become a 10% shareholder in Red 5 as part of what he described as a "win-win" consolidation deal.
The ability to move straight back into production and consolidate other deposits in the region is likely to give Red 5 strong impetus as the market digests the deal.
At the same time, it retains what some observers describe as essentially a "free option" over what remains a fully-developed mine and 500,000oz resource base at Siana in the Philippines.
It was of course the craziness of the Philippines Government’s mining policy which prompted Red 5 to suspend operations at Siana. The firebrand behind that craziness has since been booted out and there is hope among the country’s mining industry that sanity will return.
And apart from anything else, the rights of Australian companies are supposed to be protected under a free trade compact with the country.
Buzz for Metal Bank’s Triumph
It was a shame that Metal Bank chair Ines Scotland could not be at the D&D bash. Her attendance would have helped to address the yawning gender imbalance at the conference – except behind the bars at Kalgoorlie’s watering holes - and the mining industry generally.
Scotland is Australia’s most successful self-made female miner, having sold off her ASX-listed Citadel Resources creation to Equinox Minerals in 2011 for a cool $1.3 billion on the strength of its Jabal Sayid copper in Saudi Arabia, another place they need to address the gender imbalance.
Since the Citadel days, Scotland has dabbled in a few things, including today’s interest, Metal Bank (ASX:MBK) which was nobly represented at Diggers by its managing director and seasoned geologist, Tony Schreck.
He was a busy boy too given there was a bit of a buzz around the stock on the strength of the latest drilling results from its Triumph gold project, an easy one hour drive south of Gladstone in Queensland.
The drilling program had the aim of testing geophysical / geochemical targets within a 1.5km by 400m target corridor which is almost entirely concealed by shallow cover of about 10m which kept the corridor’s secrets largely hidden from prospectors who swarmed in to the area for a while back in the 1890s.
Four drill holes were completed for a total of 285m at Big Hans and Super Hans prospects within the new target corridor. Best results included 18m at 4 grams a tonne gold and 15g/tonne silver at Big Hans and 3m at 6.5g/tonne gold and 13g/tonne silver from Super Han
Schreck reckons the latest results, and those returned last year, point to the potential for Triumph to shape in to a major gold discovery. While it’s early days, it certainly shares geological characteristics with a whole bunch of multi-million-ounce gold deposits in Queensland.
Others seem to agree, with the junior resources investment arm of Canada’s savvy Sprott group believed to have taken a lick of shares in Metal Bank’s $5.5m equity raising last year.
Metal Bank is trading at 2.6c for a market cap of $18.5m and is funded for the Triumph push with cash at bank of $3m.
Battery materials buzz for Blackstone
Talking about things buzzing at D&D, it was nice to see an endorsement for the lithium-ion battery revolution from no less than the thinking-big people at BHP.
It was not that investors in the battery material stocks have been waiting on BHP’s okay, it’s just that it is a little comforting for the lithium, graphite, nickel and cobalt punters that BHP for one reckons that they are not charging down a hole.
BHP outlined a strategy pivot by its Nickel West division. By spending money and tinkering with its chemistry set at its Kwinana nickel refinery, it plans to convert nickel powder into the high purity nickel sulphate that battery makers covet.
Away from the big end of town, it was Blackstone Minerals (ASX:BSX) which was attracting a bit of its own buzz at D&D thanks to its acquisition of the Little Gem high-grade cobalt (and gold) project in British Columbia, Canada.
And we’re talking serious high-grade cobalt and gold – 5.7% cobalt and 50oz gold from surface channel sampling if you don’t mind. Early days but one to watch was the commentary around the conference.
Blackstone had a good share price on the Little Gem scrip-funded acquisition being announced. It traded on Thursday at 26.5c, giving it a market cap ahead of the scrip being issued to consummate the deal of $9.5m.
Kelly returns with Riversgold
Allan Kelly kept himself neat and tidy throughout the D&D bash as he was pacing himself ahead of next week’s eastern states road show for the $5m-$8m float of Riversgold, marking his return to ASX-listed life after leaving gold producer Doray Minerals (ASX:DRM) last year.
Doray was the boom exploration float of 2010 and after seven years at the helm and two mine developments to show, Kelly was itching to get back to his exploration geologist roots.
The Riversgold float is chock-a-block of exploration interests in WA, South Australia, Alaska and Cambodia. It has got off to a cracking start with Jake Klein at Evolution (EVN) kicking in $2.5m, gaining a right of first refusal over any projects in Australia that Riversgold ends up selling as part of its support.
Evolution said partnerships with exploration companies which have a strong technical team and a strategy was an important part of its own discovery program. “Evolution’s investment in Riversgold is consistent with this objective,” it said.
Depending on the amount raised, Evolution will hold between 13.6% and 16.2% of Riversgold.
One of Australia’s leading business journalists, Barry FitzGerald, highlights the issues, opportunities and challenges for small and mid-cap resources stocks, and most recently penned his column for The Australian newspaper.