Five 'Undiscovered Gems' from Diggers

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Livewire Markets

One of Australia’s biggest mining conferences, Diggers and Dealers, has just wrapped up in Kalgoorlie. Scores of mining juniors present to the 2,000+ strong audience, and it is a well known hunting ground for new ideas and opportunities. Livewire reached out to a panel of contributors that are experts in the space to get their take on which stocks were the absolute standouts from the event. We asked them what was the most impressive presentation, which undiscovered gems caught their eye, and what their pick of commodities is. Read on for the good oil from Hedley Widdup, Lion Selection; Matt Langsford, Terra Capital; Steve Thomas, Katana Asset Management; and Sam Berridge, Perennial Value.   

The standout presentations 

Matt Langsford, Terra Capital: Tawana Resources NL (ASX:TAW)

There’s a lot to digest with Tawana really; recent new high-grade drill results outside the starter pit (resource upgrade due October), the appointment of the acclaimed Bob Vassie (incredible job at St. Barbara) and the fact that the company will be producing next year. This final point is of critical importance, given Tawana needs only minor modification to an existing plant, they’ll be in production before the vast majority of their peers and at a volume comparable to Galaxy’s Mt Cattlin.

Hedley Widdup, Lion Selection: Northern Star (ASX:NST) 

Northern Star's management have convincingly answered the question the world had about their larger assets - how much longer will they go on? Very impressive extension to Reserves and also sight of future conversions and extensions, they have obviously invested substantially in a geological understanding which is only just starting to pay dividends.

Sam Berridge, Perennial Value: Perennial Value: Metals X (MLX) 

Metals X reported an exploration intercept 1000m down plunge from the existing reserve, which highlights substantial upside to mine life and gives some validity to the long term sustainability of MLX's 40ktpa production target. Further, MLX's presentation highlighted numerous high caliber exploration targets. Most of which have had mineralisation already confirmed. Further drilling needs only to determine tonnage and grade. 

Steve Thomas, Katana: Northern Star (ASX:NST) and Saracen Minerals (ASX:SAR)

Northern Star's exploration budget of $150million over the last few years has been more than rewarded with a leap in reserves to 3.5 million ounces of gold (up from 2.3Moz). This firmly addresses any concerns about longevity to the current bumper 500-600koz production rate - taking mine lives out towards 10 years.  The commitment to exploration has been rewarded with a substantial high grade gold discovery at Zodiac just below the current Jundee workings. The discovery hole at Zodiac has a spectacular 200m (down hole depth) of mineralisation; which should convert to another meaningful addition to reserves in due course.

Following up closely is the success that Saracen Minerals (ASX:SAR) has had with the drill bit at their Carosue Dam operations not to far from Kalgoorlie.  The deeper drilling below the Karari underground mine has had some terrific results and underpinned a leap in reserves to 2.1Moz for the group (up 40%). With a 2Moz resource between the Karari and Whirling Dervish deposits and an increase in endowment at depth (up to a eye catching 3,000 ounces per vertical metre) looks like underground mining will be continuing for a long time into the future. 

The commoditIes with the best outlook 

Matt Langsford, Terra Capital: Cobalt and lithium

It’s hard to go past the ‘battery’ commodities of lithium and cobalt in terms of supply and demand dynamics. Clearly on both commodities the risk is on the supply side rather than risk of demand not increasing dramatically. With both commodities, I am investing in those companies that have the potential to be in production sooner rather than later. 

Hedley Widdup, Lion Selection: Tin and Gold 

I think tin is the metal that hasn't moved yet in the battery / semi conductor thematic, and it's pretty well recognised that there is little new production approaching whilst some older sources of supply are dwindling.  Gold - I love investing in gold mining because the commodity bestows fewest risks on the project. It's generally very easy to liberate and simple to sell, and requires no logistics infrastructure so projects can be scaled according to capital availability and deposit understanding. The fundamental looks positive too - gold tends to do well in low or negative real interest rate environments or uncertainty.  

Steve Thomas, Katana: Gold

Gold is our favourite commodity also in these turbulent times and with the Forum’s guest speaker from the US expecting a return of inflation as QE is gradually removed - that should see gold go north also.  There were also commodities featured to a larger extent than previously including a number of emerging lithium, diamond and ruby players. 

Sam Berridge, Perennial Value: Base metals 

Government policy changes been having a much greater impact on the supply side dynamics of numerous commodities than previous years. So commodity prices and relative preferences have been changing on a monthly basis. However, on balance the outlook for the base metal complex (copper, nickel, zinc) remains reasonably positive 

The undiscovered gems 

Sam Berridge, Perennial Value: Finders Resources (ASX:FND)

Many a great opportunity can come from going booth to booth, talking to the smaller companies which don't present. Of those, Finders Resources (FND) was a standout for me. This company has built, commissioned and is running a copper mine in Indonesia. Based on the last two quarters, FND is annualising EBITDA of roughly A$100m pa. This compares with a market cap of $162m.

Finders produces copper metal rather than a copper concentrate, thus the ore and concentrate export restrictions which have hampered Freeport McMoran and the nickel laterite miners in Indonesia hasn't impacted Finders. The company is rapidly repaying is debt, which means cash sweep provisions which have restricted exploration spend to date are likely to end next year. There are existing resources which await reserve conversion.  

Matt Langsford, Terra Capital: Oklo Resources Ltd (ASX:OKU)

Oklo continues to impress with recent drilling results including 66m @ 2.2g/t and what will hopefully shape up to be an exceptional deposit. If investors remember the Papillon (ASX:PIR) discovery in Mali which was sold to B2Gold for $680m, this project is nearby and has the same geological team working on the exploration program. 

Hedley Widdup, Lion Selection: Egan St (ASX:EGA), Calidus and Riversgold

Around half a dozen companies caught my eye - they are either new or have been rejuvenated by fresh people or projects. Generally speaking it feels as if there is a large proportion of motivated entrepreneurs that are high on willingness and capability promoting these new ventures - as opposed to just spruikers. Several of these were unlisted. In the listed space I'm interested to watch Calidus (gold in the Pilbara) and Allan Kelly's new IPO Riversgold which has attracted $2.5m backing from Evolution. Whilst it wasn't a discovery to me - I observed a fair few ears turning toward small gold hopeful Egan Street Resources who delivered high grade discovery results on day two. 

Steve Thomas, Katana: Breaker Resources (ASX:BRB)

On the new players it was Breaker Resources that captured much of the limelight with its Bambora discovery just north-east of Kalgoorlie.  The company has been delivering some great drilling results over the last 6 months, which has now been augmented with this weeks release of deeper drilling results suggesting the discovery may be of size.  A maiden resource is eagerly awaited for and is due by the end of the calendar year.  The other up-and-comer features a high-grade gold discovery by West Africa Resources at Sanbrado. Recent drilling has delivered a number of 50-60metre drill intersections at +10 grams per tonne gold.  These sorts of widths and grade haven't been seen in Australia for quite awhile so it may be worth the extra risk involved in West Africa.  They expect and updated resource shortly incorporating the latest of their successful drilling.


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