Little-known Draig Resources, now with former Gryphon Minerals chief Steve Parsons at the helm, is hoping to do a Northern Star with its plan to revive the high-grade Bellevue gold mine in WA. And analysts see scope for significant profits at Silver Mines once it brings Bowdens into production.

There are plenty of examples of ageing mines in Western Australia’s goldfields enjoying a second, third or fourth wind thanks to new resources being found at depth or in adjacent locations.

Northern Star’s Paulsens and Jundee come to mind, as does Gold Fields’ Agnew/Leinster and Granny Smith/Wallaby operations. And more recently, there has been the success of Dacian Gold’s Mt Morgan project.

It is a thematic that investors are switched onto, prompting a one step-back search by investors for junior explorers which control old gold mines with rich production histories that are no longer in operation.

The idea is that old mines are the best indicator that you’re in gold country. And with all the encouragement that comes from a $A1,675/oz gold price, a concerted modern-day exploration effort with all the bells and whistles might just come up with the goods.

It is against that backdrop that some of the smarties around town have put Draig Resources (ASX:DRG) on their watchlist. The formerly sleepy Draig picked up the old high-grade Bellevue gold mine, 175km north-west of Laverton, last year.

But it took the recent appointment of a new management team led by Steve Parsons to really get interest in the stock up.

Parsons was previously managing director of Gryphon Minerals, the ASX-listed West African gold explorer which was taken over by Canada’s Teranga Gold last year in a $100m bid which delivered Teranga the 3.6moz Banfora gold project.

Parsons must like the Draig story because he has backed up his executive director appointment by pumping $200,000 of his hard earned into the company in a placement at 3c a share. Draig has since moved on to 5c for a market cap of $13m.

Discovered back in the 1890s, Bellevue has a recorded production history of about 800,000oz at a grade of 15 grams of gold a tonne. It produced its last gold in 1998 and not much has happened there since.

That means it’s coming up to 20 years of sleep for Bellevue. It is a long time. Just how long is nicely reflected in a picture contained in Draig’s recent investor presentation on the Bellevue opportunity.

It shows an air-leg miner doing his stuff underground in the last days of the mine operating. He has his hard hat on and ear protection, but no safety glasses. What’s more, the guy’s having a smoke.

Now it has to be said that the high-grade lode mined in the past is truncated by the offsetting Highway fault at 450m deep. Conceptual work though has given good reason to think that offset and extensions of the high-grade lode can be found with some targeted drilling.

If that was all Bellevue in 2017 was all about, it could be said Draig’s current market rating is about right.

But there are other legs to the story. Draig has listed five initial priority drill targets – historic tailings, remnant mineralisation in open pits and underground, exploration along strike in the shear zone and the Southern Belle prospect, where high-grade hits have been returned in the past.

After the recent placement the company has $2m in the till to get on with things, meaning there will be strong news flow for the rest of the year.

Exploration silver lining at Bowdens

While there are more gold stocks than you can poke a stick at, pure silver production plays in this market are few and far between. There’s none actually.

Silver Mines (SVL) is out to change that in a big way under its plans to get the Bowdens project near Mudgee in NSW into production.

It has been a long time coming given Bowdens was a discovery by CRA some 40 years ago. The CRA/RioTinto link continues on courtesy of a royalty on production held by ASX-listed Royalco.

Silver Mines has set a cracking pace since picking up the project from poor old Kingsgate (KCN).

Kingsgate and other previous owners spent more than $60m on Bowdens to get it to the point where its resource base stands at 134m ozs (182moz on a silver-equivalent basis after counting zinc and lead).

That’s kind of interesting given that at its current price of 13.5c a share, Silver Mines has an undiluted market cap of $53m.

A feasibility study is due to be completed in the second half of this year, as is an all important environmental impact statement given Bowdens’ NSW location. On that latter point, it is worth noting Bowdens has “state significant development” status.

Previous work by Kingsgate pointed to costs of around $US10 an ounce. That compares with the current silver price of $US17.20 an ounce, itself up 6 per cent on its level of a year.

Mining investment heavyweight BlackRock is on board with a 10.7 per cent shareholding while the savvy fund manager Paradice has a 5.12 per cent stake.

At the end of day, it doesn’t matter if a precious metals mine is producing gold or silver. What counts is the ability to throw off cash.

On that score, the early assessment ahead of the feasibility study is that Bowdens passes the test.

Peter Arden at Bell Potter has given a feel for all that by taking a stab that a development at Bowdens could see Silvers Mines post a $64m profit in 2020, or more than its current market cap.

On the same basis, BHP would have to post a profit of more than $130 billion in 2020. And guess what, that’s not going to happen.

Arden likes the several exploration successes at Bowdens since Silver Mines hit the ground. Drilling has extended the high grade zone as well as pointing to a bulk tonnage/low-grade opportunity on the deposit’s western flank.

But the real kicker has been the discovery of high grade mineralisation below the main zone in what was previously regarded as barren Ordovician sediments.

Arden’s take is that while the extent of the sulphide-rich base metals mineralisation in the Ordovician (four holes) is yet to be fully defined, it is not just an isolated occurrence. “Early considerations indicate it could support a potential underground mining proposition.”

Arden values Silver Mines at 34c a share.