Former nickel darling Mincor is set for gold production next year. And the exploration upside is immense, with drilling underway between the multi-million-ounce South Kalgoorlie and St Ives mining camps. Plus, highly-regarded Canadian fundie hoovers up stock in another emerging gold producer, Kin.
Mincor (ASX:MCR) had a good run as a Kambalda nickel producer between 2001-2016, as was reflected in the $133 million in dividends paid to shareholders in the period after a single $5m capital raising for the nickel push.
But alas and alack, the plunge in nickel prices to 14-year lows forced the decision to place the Kambalda operations on care and maintenance back in February 2016 pending a recovery in nickel prices from the current distressed $A12,000 a tonne level to something like $A20,000 a tonne.
The nickel business has a 99,000-tonne resource to get back to when nickel eventually turns and plenty of remaining exploration upside. The stated resource represents $A1.2 billion of metal in the ground (ignoring mining and treatment costs).
But as Mincor’s 14c share price, for a $12m enterprise value (after deducting $14m in cash), demonstrates, no one much cares at the moment - not even the straw-hats-in-winter type of investor.
Mincor knows all that and fully accepts that a mining company’s fortunes are very much dictated by the commodities cycle, as managing director Peter Muccilli put it recently. So instead of hitting the golf course while the wait for nickel price improvement goes on, Muccilli has set Mincor on a pathway to build a long-term gold business.
Mother Nature has come to Mincor’s aid because the Kambalda region is not only one of the world’s great nickel provinces, it is also one of the great gold provinces. Some 22 million ounces of gold has been plucked from the region along with 1.6m tonnes of nickel, sometimes from the same mine.
Mincor’s presence there since 2001 – it got in to nickel courtesy of WMC’s historic exit – means it lays claim to 500sqkm of prospective nickel/gold ground, or gold/nickel ground, depending on where we are in the pricing cycle for the two metals.
And while nickel may be down in the dumps at the moment, gold has roared past $A1700 an ounce in recent days. Against that backdrop, it could be argued that Mincor’s ground position alone justifies its enterprise value, with the nickel coming for free (there are holding costs though).
But Muccilli, a seasoned geologist who was previously Mincor’s exploration manager and chief operating officer, is not one to simply point to the big blue sky over Kambalda. Instead, he has got cracking on turning Mincor’s Kambalda gold position in to a cash flow-generating reality.
In the last year or so, Mincor has worked up an initial reserve base of 800,000 tonnes grading 2.7 grams of gold a tonne (about 73,000 ounces contained) across 10 shallow pits at five prospects at Widgiemooltha to the south of Kambalda and is now drilling its North Kambalda Dome ground which is where its frozen nickel operations lie.
The Widgee reserve base is very much the start of the story as five of the pits remain open. And apart from anything else, it is an area where the gold potential has been overlooked because it has been held since the mid 1960s by companies with a nickel focus (Anaconda, WMC and then Mincor).
The oldtimers left behind 811 shallow shafts from their gold mining activities starting back in the 1890s and it is as if they are now whispering in Muccilli’s ear that with the gold price where it is, it is time to revisit the gold potential.
Muccilli wants to be producing gold in the March quarter next year. At a flat $A1,600 an ounce gold price, the 19-month life of the operation (based on the current reserve base) would yield its gold at an all-in sustaining cost of $A1,126 an ounce.
At $2.8m, the capital cost is as low as it gets, with the plan to have the material toll treated at one of the dedicated toll treatment plants in the region, or one of the three which do take on toll treating dirt when it suits them.
On that score, Mincor’s 16-year record as a nickel producer will stand it in good stead when it comes to gaining access to toll treatment of its ores. As might be expected with the strong gold price, there are lots of less well-credentialed types knocking on the doors of the toll treaters.
The NPV of what should be seen very much as a starter project has been put at $26m, and the pay-back period at nine months.
The near-term excitement could come from the current drilling program up at the North Kambalda Dome ground. It roughly sits between the multi-million ounce South Kalgoorlie and St Ives mining camps.
The drilling campaign at North Kambalda is initially focussed on seven historic gold intersections. They were generally high grade hits and in the current gold price environment, certainly worth following up. First results can’t be too far off now.
1832 buckled up at Kin
Despite its weird moniker, Canadian fundie 1832 Asset Management has built a reputation both in the North American market and the ASX gold space of being able to pick winning gold stocks ahead of the pack.
So it was of interest to see 1832 puts its hand up as the owner of 5.4 per cent of Kin Mining (ASX:KIN), acquired at an average price of 35c a share.
Readers will remember last week’s item on Kin and the excitement in a presentation by its managing director Don Harper on the game-changing potential of its high-grade Lewis discovery in April, part of its 50,000 ounce-year Leonora gold project (LGP) development, with first production slotted for mid-2018.
Lewis was previously regarded as being prospective for supergene mineralisation, handy but no game changer. But the April hits of high-grade primary gold suggests it could represent the top of a large mineralised shear system in a part of the world where they are known to go to great depths.
The beauty of Lewis is that it has the potential to sweeten the grade of material to be fed to the LGP. So with the same mining and treatment rates, gold production could be much higher than the base case of 50,000 ounces a year. How much higher is guesswork at this stage.
But given the high grade nature of the hits reported to date, 75,000 ounces and more would not surprise. More drilling is underway and Harper was left last week to suggest people buckle up for the ride.
Kin was a 20c stock before the April discovery at Lewis. And when Harper spoke last week it was 38.5c. It has since edged higher to 40c, delivering 1832 a nice little earn at this stage.
More results from Lewis can’t be far off now. And if latest drilling points to repeat discoveries of similar high-grade structures to Lewis along the 12km shear zone under Kin’s control, 1832 will be rightly pleased with itself.