Alliance’s combination of high-grade gold hits, the prospect of a maiden resource and abundant exploration upside sounds like opportunity knocking. Plus, this column’s instincts about emerging mineral sands miner Strandline are shaping up as spot on and Stavely gets to the pointy end of its hunt for a copper-gold porphyry.
Former uranium producer Alliance Resources (AGS) is making a good first of being a gold explorer.
So much so that just 30 months after the start of embarking on its new life as an explorer for the yellow metal, it is likely to publish a maiden resource later this year for its flagship project, the Wilcherry project, 40km north of Kimba in South Australia’s Gawler Craton.
Planning for a smallish but high-grade development (something around 25,000-30,000oz annually would not surprise) will follow the maiden resource estimate, meaning Alliance looks set to re-establish its producer credentials in a hurry.
Alliance was once the proud owner of a 25% stake in the Four Mile uranium mine in SA.
But it never got on with the 75% owner and manager, the privately held US defence contractor General Atomics, and traded its stake for $74m in 2015. Given uranium prices have been smashed in the time being, it was a good call.
So too was Alliance’s decision to return $58.3 million of the proceeds to shareholders, leaving it with more than enough to fund its new direction, as well as take up some strategic investments.
Wilcherry was the main push and has come up trumps. It is a joint venture with Tyranna Resources (TYX) and is structured so that Alliance can earn an 80% interest (it’s currently at 61.36%).
The Wilcherry project has been explored for various commodities since the 1970s. Most recently it was explored for magnetite, even though plenty of high-grade gold hits were recorded by past explorers.
Initial work by Alliance has been focused on the Weednanna project where $2m was spent on exploration last year. Another $3m is earmarked for this year, mainly for resource definition drilling of four high grade shoots, strung along strike like pearls on a string.
For simplicity purposes, Alliance has dubbed them Target 1, 2, 3, and the newest of the bunch, Target 4. Drilling at the latter returned 15m at 18.2g/tonne gold from 107m, confirming it as a new shoot which is open down plunge, another pearl if you like.
Like the other shoots, the width of the high-grade mineralisation impressed. More discrete high-grade targets remain to be tested within the 1.3km mineralised magnetic skarn and in the granite to the west.
After a share consolidation post the uranium exit, Alliance has (only) 104m shares on issue. So while its shares have been moving up in response to the Weednanna results, its current market cap of $12m is hardly challenging.
High-grade gold shows don’t need to be big to be sweet, particularly for a company of Alliance’s size.
Remaining funds held back from the uranium exit mean it is comfortably funded for the next push to make Weednanna a development project rather than an exploration play and to push things along at its West Australian projects.
At Nepean South, 26km south-west of Coolgardie and within spitting distance of the old Nepean nickel mine, an aircore drilling program has just been completed below a gold-in-soil anomaly as a vectoring tool towards a possible primary gold deposit. Results should be back in a month and could be worth watching.
Investors have got behind the mineral sands demand and price recovery story in a big way in the past couple of months, with industry leader Iluka up a handy 48% on its 2017 low.
In its latest market update, industry expert TZ Minerals International (TZMI) said further price increases for zircon could be expected in 2018 given the “continued tight supply conditions”.
And for the titanium dioxide feedstocks, TZMI continues to expect demand growth to outperform supply growth during the next few years unless new supply becomes available from new projects.
“New supply will need to be brought on-stream from 2019 to avoid supply deficits,” it said.
That’s all good stuff for the juniors out there looking to break in to the market. They too have enjoyed strong share price gains in response to the demand/price recovery yarn.
Strandline (ASX-STA) is one of those to benefit. Mentioned here back here in November as a stock likely to benefit from the recovery, Strandline’s market cap has since grown from $20m to $45m.
Helping push things along was Monday’s “binding” offtake deal covering 100% of the rutile (and the rare earth monazite) planned to be produced at its Fungoni project in Tanzania.
It means that about 62% of the forecast revenue from Fungoni is in the bag. Fungoni is a proposed $US30m zircon-rich development which is very much a starter project for Strandline in the country, with more projects to be brought forward for development as they are proved up by the group’s exploration efforts in the north of the country, and in the south in a joint venture funded by Rio Tinto, no less.
More telling than all that is that the Fungoni offtake deal is with Chinese mineral sands processor and rare earths consumer, Hainan Wensheng. Like other consumers, it is obviously worried about securing future supplies, particularly as China’s environmental crackdown squeezes domestic supplies.
Does have Wensheng want to secure even more of its supplies against the backdrop of TZMI’s forecasts of emerging supply deficits? It need look no further than Strandline’s development-ready Coburn project in WA.
It has had $30m spent on it over the years and when it was held by Gunson Resources (which became Strandline through the backdoor listing of the privately owned Jacana), it was once considered good enough - during a period of strong prices - to give Gunson a $65m market cap.
Coburn is a big and long-life development opportunity. Probably too big for Strandline, which is right-sized to handle smaller and modular developments like Fungoni in its own right.
Strandline has previously said it was looking for a strategic partner to get Coburn in to production. Nothing was said on Monday about Wensheng, or any other Chinese group for that matter, in relation to Coburn.
But you’ve got to wonder.
If you sensed a bit of crowing there on Strandline’s performance since November, here comes a double dose courtesy of Stavely Minerals’ (ASX:SVY) share price rise from 16c when it was mentioned here in September to 44c this week.
The story hasn’t changed. It’s just that Stavely is now at the pointy end of confirming whether it has a copper-gold porphyry at depth below its Thursday’s Gossan project in Victoria.
A drilling program of “sighter” holes there has just been extended by another hole following more indications that Stavely is getting close to hitting what might or might not be Victoria’s version of NSW’s Cadia Valley porphyry riches.
Stavely stopped short of saying the additional (17th) hole should be looked upon as something of a litmus test. But it stands to reason that it has only added another hole (the rig was originally meant to test another regional porphyry target) because it likes its chances.
At 44c, it is now a $53m company. That’s nothing in the world of big porphyry discoveries. But it is also a value that is susceptible to any disappointment from hole 17.