ONE OFF THE WOOD: On his way home from the Cambodian gold project Renaissance Minerals (ASX: RNS) managing director Justin Tremain stopped by to update us on the company’s recent activities.

 

If we were to have had this conversation six months ago we would be discussing Renaissance Minerals as an Australian-focused exploration play, now you’re all about Cambodia, what happened?

We listed two and half years ago on the back of our large Western Australian landholding, the Eastern Goldfields project, which is located northeast of Kalgoorlie.

It is an early stage exploration project and we had always been looking for another, more advanced project; one that offered excellent exploration potential that would reflect the expertise and track record of the people involved in the company.

Cambodia is a long way from Kalgoorlie. What attracted you in that direction?

We had been looking at Southeast Asia, as we considered a lot of countries there to hold some great geological opportunities, but some of those countries do have their challenges.

We became aware of the Cambodian gold project that OZ Minerals had – it was an old Oxiana project – and for various reasons it didn’t really sit within the strategy OZ Minerals has, which is now more focused on large scale copper projects.

So the project had been sitting unloved with OZ Minerals for some years.

Cambodia is a democracy with a stable government that is pro-foreign investment, whether it is mining or other industries, with one of the world’s most favourable foreign investment policies in place.

This means it is possible to obtain security of tenure and the country is highly-prospective.

Due to its unfortunate history, however, it has remained one of the most under-explored countries in the region.

It sounds like it is one of those projects that could be wasted in the portfolio of a larger company as it can too easily be denied the attention it deserves, which a smaller company, such as Renaissance can give it?

That’s right. The project is not big enough to capture the interest of a bigger company like OZ Minerals and, being a gold project, is the wrong commodity.

For us the opportunity was one that just doesn’t come up all that often.

Why was it such a great opportunity?

The project came with a significant resource of 12.6 million tonnes at 1.8 grams per tonne for 729,000 ounces of gold that is contained within just one deposit, the Okvau deposit.

Not only does the potential exist to grow that one deposit, potential also exists to make further discoveries as well.

Was the Okvua deposit identified by you or by OZ Minerals?

OZ Minerals was really the first ‘western’ exploration company to explore and identify the potential of Cambodia.

They picked up two exploration licences, the first of which was Okvau, and the adjoining licence.

Those two licences cover around 400 square kilometres, and we would argue, given the early recognition by Oxiana, OZ Minerals were able to go on and pick up some of the most prospective ground in the country.

Subsequent to that more ground was added, eventually giving us around 1,000 square kilometres in that prospective ground.

When was the Okvau deposit first discovered?

In 2007; Okvau was the first prospect OZ Minerals drilled, which they drilled out to the current resource, which we inherited.

Was there any reason they didn’t expand their drilling of the project?

The company went through some corporate restructure during the GFC, resulting in a shift of focus to pure copper assets.

This meant they really only conducted limited drilling beyond Okvau, despite the exploration potential that existed there.

 

How have you approached operating in a different jurisdiction?

One of the beauties of the acquisition was the project came complete with an, in country, operation team, all of which we have been able to retain.

They have ready-established local relationships with the government and local service providers.

Most importantly they have an intimate knowledge of the project. Some members of the team have been working on the project from day one.

That allowed us, pretty much from the first day we became official owners of the project, to commence drilling straight away.

That sort of team usually takes a long time to establish at home, let alone in a foreign jurisdiction.

How much drilling have you been able to do so far?

OZ Minerals conducted around 24,000 metres of drilling within the Okvau licence, of which about 22,000 metres accounted for the resource.

Since May, when we assumed ownership of the project, we have completed a further 6,000 metres of drilling.

So we have increased the amount of drilling at the project by around 25 per cent in the first six months we have been there.

 

Are there any seasonal restrictions to working in Cambodia?

The west season runs from May / June through to around October / November, which has restricted us in what we have been able to achieve so far.

It curtailed any opportunity to get out and enjoy free access to the rest of the ground, which has meant that although we have been active, the drilling we have completed has mainly been step-out drilling around the Okvau deposit.

We haven’t, as yet, been able to drill other targets, which we consider have the potential for further discovery success.

Is that what you intend to do with the funds from the recent capital raising you completed?

We raised $10 million, combined with our existing cash balance allows us to take care of a couple of matters.

The first is the finalisation of a payment we still have owing to OZ Minerals.

It also provides ample funds for the next 12 months of drilling we intend carrying out, the majority of which will be on regional targets throughout the upcoming dry season.

OZ Minerals have managed to maintain a strong presence?

Part of the deal was that OZ Minerals came in as one of our major shareholders.

They still see a lot of value in the project, which is probably why they have been a strong supporter of the raising we have just completed.

I think they want to keep their foot in the door and participate in the upside of the project; it’s just that it didn’t fit in their current strategy, which is to be a copper company.

What does all this mean for your domestic projects?

Our focus is on Cambodia because that’s the project we recognise as being the one we can bring to development quickest.

We have divested our Southern Cross project via a joint venture with Southern Cross Goldfields.

That leaves our Eastern Goldfields landholding as our other major asset.

We still consider it to be of much value to the company simply because anybody would struggle to put together such an impressive land package.

We’re definitely not looking to divest, or sell it of at this stage, even though we have had some interest in that regard since we announced our focus shift to Cambodia.

At this stage, it would appear the Cambodia gold project is the best chicken to place your eggs in?

The Cambodia gold project is ahead of the Eastern Goldfields by 729,000 ounces of gold and the relatively small amount of drilling we have completed so far has demonstrated there is more to come from the Okvau deposit.

We can see those ounces a lot more clearly in Cambodia than what we can in WA.

There is no doubt, especially in this current market, that when embarking on a rebuilding phase a company requires two important components.

The first is a clear idea of its current situation and a precise plan of what it wants to achieve.

The second, and some may say the most important, is a bank balance healthy enough to support its aspirations.

Pioneer Resources (ASX: PIO) began its journey of renewal last year when it commenced the sale of its Mt Jewell project to Carrick Gold (ASX: CRK).

“We knew the Mt Jewell to Carrick Gold transaction made sense from late last year, so during the first six months of this year we looked for new targets and we looked at some acquisition opportunities,” Pioneer Resources managing director David Crook told The Inside Story.

“The sale of our Mt Jewell project to Carrick Gold was for $8 million cash.

“We have already received $4.5 million on the fall of the hammer with the remaining $3.5 million to be paid in instalments over the next three years.”

Cash in the bank breeds confidence and armed with a good deal of both, Pioneer quickly moved to generate new targets and acquisitions to fill the gap left by the sale of Mt Jewell.

The company’s initial focus centred on its large landholding, situated within a 75 kilometre radius of Kalgoorlie in Western Australia.

This included the buyout of its partner’s share of the Golden Ridge gold and nickel project.

“Buying out our partner at Golden Ridge took us from owning 56 per cent of the nickel to delivering a 100 per cent outright interest in commodities, including gold, plus the old Blair nickel mine,” Crook explained.

“The crucial part of the Golden Ridge deal was that it delivered some very exciting gold targets originally identified by WMC.

“Under the nickel joint venture we didn’t have access to them.”

 

The advanced exploration targets at Golden Ridge include the Flying Squirrel, Gold Star and Duplex Hill South gold prospects, and the Norton, Anomaly 11 and Duplex Hill priority nickel targets.

Pioneer recently commenced its first 10,000 metre RAB drilling program targeting gold at the Gold Star prospect.

“WMC was very successful undertaking geochemistry and RAB drilling programs to identify gold, but just outgrew the project,” Crook said.

“As a consequence there are some great gold drilling intercepts that haven’t been followed up since the 1990s.

“We have now started that process.”

Pioneer’s commitment to exploration, despite the uncertain financial times, is well demonstrated by the $3 million it spent during the 2011-2012 year.

This included successful target generation work undertaken at its Gindalbie and Juglah Dome gold projects.

“One of the original aspects that drew our attention to Juglah Dome was its proximity to the Majestic gold discovery of Integra Mining,” Crook said.

“Local Kalgoorlie prospectors were coming into town with nuggets indicating the existence of gold in a number of places around the Juglah Dome tenement.

“As well, there is evidence of a structural corridor running between Juglah Dome and the Majestic deposit.”

Throughout 2011 and 2012, Pioneer completed programs of soil geochemistry, RAB drilling and geophysics at its core projects, which included:

–    15,000 soil geochemistry samples from the Gindalbie, Juglah Dome and Golden Ridge projects;

–    490sqkm gravity geophysics at the Gindalbie project;

–    33.5 line kilometres EM geophysics at the Golden Ridge project; and

–    18,500m RAB drilling at Gindalbie, Juglah Dome and Golden Ridge projects.

Pioneer continued to demonstrate its acquisition acumen by entering an agreement with private exploration play, National Minerals to acquire 75 per cent interest in the Fairwater project, located in the Albany-Fraser mineral province of Western Australia.

 

“The Board has always wanted a project situated in real, high-risk but high-reward, elephant country,” Crook said.

“The discovery of the world-class Tropicana gold deposit and the Nova nickel deposit has shown that the Fraser Orogenic Belt falls into that category.

“We like to think there could be some more elephants out there.”

The Fairwater acquisition delivers Pioneer a 75 per cent interest on all commodities within the 338 square kilometre project.

“We were approached by a group of highly-competent people who had targeted and pegged the project two and half years ago – not as a reaction to the current hubbub that is going on in the region,” Crook said.

“They recently completed their research and targeting for the project and were looking at a mechanism to get it into the public arena, and were happy for us to do that for them.

“The project has a low entry cost; we have a lot of work to do, however if the project does blossom they will make some money and our company will become a different beast altogether.”

It’s no secret there has been much excitement in recent times in the Fraser Range region, due in no small way to the recent discovery of the Nova nickel-copper deposit by Sirius Resources.

Of particular interest are a couple of targets Pioneer has identified adjacent to major structural zones, which it considers may be capable of acting as conduits for a mineralising event.

Soil sampling carried out on the project by Pan Australian Resources in 1998 identified two nickel anomalies, each with a strike length over four kilometres, as well as a six kilometre long gold anomaly.

“The Fairwater promoters drew geological analogies to both the Tropicana gold project and Sirius’ Nova nickel discovery,” Crook said.

“That is a big statement to make I know, but the project does have a four kilometre long gold anomaly, in rocks believed to be of an equivalent age and structural regime as Tropicana.

“And as far as nickel prospectivity goes, earlier explorers had the area looked over in some detail, which provided an interpretive geology map showing a mafic complex, bounded by a major crustal suture and, most importantly, a series of soil geochemistry anomalies with elevated coincident nickel, copper and chrome values.

“These geological and geochemical elements are the first things a mineral explorer looks for when hunting for a nickel deposit.

“So we consider we may have the first indications of a nickel deposit there.

“The first thing we are doing is to bring the soil sample data base up to date, and we have samplers on the ground now.

“If we get some encouraging nickel and copper numbers from that, which we expect we should, we will be able to move straight in with an EM survey to see if there is an elephant sitting there waiting for us.”

The Fairwater acquisition is a shrewd strategic move by Pioneer as it provides the company early entry into the emerging Albany-Fraser province.

This is a significant move for a junior exploration play as the region is rapidly becoming an important Western Australian mineral belt.

As significant as the move may be, Crook also hinted at the possibility of further news to come in regard to additional acquisitions closer to the company’s spiritual base of Kalgoorlie.

“Fairwater may have taken us out of our general 75 kilometre radius from Kalgoorlie,” he said.

“However, there are a few projects within that realm attracting our interest and we hope to have some more news on that front in the not-too-distant future.”

Pioneer Resources Limited (ASX: PIO)
…The Short Story

HEAD OFFICE
21 Ord Street
West Perth WA 6005

Ph: +61 8 9322 6974
Fax: +61 8 9486 9393

Email: pioneer@pioresources.com.au  
Web: www.pioresources.com.au

DIRECTORS
Craig McGown, David Crook, Allan Trench, Wayne Spilsbury

MAJOR SHAREHOLDERS
Xstrata Nickel Australasia 4.19%
Janet W Turner        2.29%
Colbern Fiduciary Nominees Pty Ltd  1.78%

SHARES ON ISSUE
510.5 million

MARKET CAPITALISATION
16.34 million (18/10/12)

Interesting news and views from across the Resource Analyst universe.

Excelsior Gold Ltd
(ASX:EXG)

EXG is a gold exploration and development company with tenements along the Bardoc Tectonic Zone to the north-west of the four million ounce Paddington gold mine.

Exploration and reinterpretation of historical data resulted in global resource growth of plus 105 per cent to 952.6koz at 1.7 grams per tonne gold over the past two years.

At the Zoroastrian deposit resources have expanded plus-120 per cent to 286.3koz at 2.8g/t gold in eight months.

Drilling re-commencing at Zoroastrian in early October, targeting strike and depth extensions, as well as these parallel loads ignored by previous operators.

Potential for Excelsior Gold to triple the Zoroastrian resource over the next 6 to 12 months.

Extensional drilling at Zoroastrian has increased potential to develop a standalone plant on the site of the old Bardoc mill.

Delivery of an expanded Zoroastrian resource will, in our view, enable Excelsior Gold to develop a 1 to 1.5 million tonnes per annum capacity plant, producing in excess of 85koz gold per annum.

Excelsior Gold is due to complete a PFS in JQ13.

The cash position of the company, as at September 2012 was $5.8m (expected expenditure for DQ12 is $2.9m).

The company is funded to progress exploration and development studies for the next 6 months; however acceleration of Zoroastrian exploration, which we would view as positive, may require further capital.

Recommendation: BUY and place a 12 month price target of 24 cents per share on a $ per resource ounce basis.

Price target contingent on delivery of a Zoroastrian resource of 700koz gold at a grade of 2.5 to 3g/t.

A preliminary DCF valuation based on completion of a BFS targeting a 1.5Mtpa operation producing plus-85koz per annum to provide a valuation guide of 40 cents per share.

Greenland Minerals and Energy Ltd
(ASX:GGG)

Rare earth and uranium giant moves towards mining

Following recent metallurgical breakthroughs and a gradual pro-uranium political shift in Greenland, Greenland Minerals and Energy’s Kvanefjeld Rare Earth Elements (REE) – uranium project (in-ground resources approx. $450 billion) is likely to be operating within the next five years.

Key points:

Kvanefjeld: the world’s second-largest deposit of rare earths (RE-oxide 10.33 million tonnes) and fifth of uranium (575 million pounds), with significant zinc (2.25 million tonnes) and calcite.

Metallurgical breakthroughs mean simple, low cost processing by flotation and  atmospheric leach.

PFS updated Aug 2012: processing 7.2 million tonnes per annum for 36 years, producing 51.9 thousand tonnes per annum rare earth oxide (REO) as carbonate and 2.6 million pounds per annum uranium, OPEX $3.07 per kilogram REO with uranium credits at $70 per pound.

CAPEX is US$1.3 billion with likely further reductions due to metallurgical improvements. Project is scalable, so potential to start smaller and expand.

Greenland Minerals and Energy moving to 100 per cent ownership from 61 per cent, Joint Venture legal problems resolved.

Moratorium on mining uranium in Greenland; however, Greenland Minerals and Energy has approval to investigate uranium potential up to DFS. Mining Licence possible in 1H14.

Kvanefjeld is one of the few Tier 1 mineral projects held by a small cap that has a real chance of being built in the next five years.

With post-tax NPV (15 per cent) of $2.4 billion, its economic potential is indisputable.

The main challenges for Greenland Minerals and Energy will be obtaining a mining licence, funding, and generating confidence among investors in the REE and uranium markets.

Price target over 12 months is a speculative $2.32/sh, contingent on a near-term shift in Greenland’s anti-uranium stance.

If the uranium moratorium stands, Kvanefjeld will be hard to develop.

A binary outcome if ever we’ve seen one.

Recommendation: Buy (Speculative) 12 month target $2.32/sh

 

Dourado Resources Limited
(ASX:DUO)

Exploration recommences at Yerrida Basin-Goodin Dome

After a quiet 2012 over which the market experienced an aggressive sell down of risk assets, we are more confident of renewed market interest in ASX-listed junior explorers such as Dourado Resources as it recommences exploration at its Mooloogool-Diamond Well tenements covering around 2,400 square kilometres in the Yerrida Basin Goodin Dome region of Western Australia.

The tenements are situated south of Sandfire Resources’ (ASX:SFR) DeGrussa project (14.6 million tonnes at 4.6 per cent copper, 1.6 grams per tonne gold) and cover prospective lithologies and cross cutting regional structures that are potential hosts for copper / gold mineralisation.

14 copper / gold geochemical anomalies identified to date appearing to overlap on to neighbouring tenements held by Enterprise Metals (ASX:ENT), Great Western Exploration (ASX:GTE) and Thundelarra Resources (ASX:THX).

A soil geochemical program is planned over 10 tenements together with 11 Aircore holes in the south-east of the Mooloogool-Diamond Well tenements.

A HELITEM survey is also planned for the southern tenements.

Impressive results from neighbouring properties including Ventnor Resources (ASX:VRX) with high-grade copper results from Thaduna-Green Dragon and Enterprise Metals who recently reported high-grade gold intercepts from the Vulcan gold prospect including 4 metres at 3.9g/t gold from 84m
downhole.

2012 RC program extended gold mineralisation further north, east and south at Sabbath gold project (145,000t at 2.21g/t gold).

Results from second phase of RC drilling are awaited.

Recent soil geochemical sampling at Garden Gully (Mistletoe tenement) identified gold mineralisation in the south of the tenement (close to Doray Minerals (ASX:DRM) Andy Well project, 717,000t at 11.4g/t gold for 262,000 ounces)– a follow up RAB program is planned.

A further 10 targets have been identified in the southern tenements.

Price Catalyst

Exploration success at the Yerrida Basin-Goodin Dome tenements still represents the best opportunity for Dourado to stimulate market interest.

The recent discovery of elevated gold mineralisation by Enterprise Metals has further underlined the regions’ prospectivity.

The imminent publication of a maiden JORC copper resource at Ventnor’s Thaduna/Green Dragon in the order of 150 million tonnes at greater than 2 per cent copper should also boost market sentiment.

Recommendation: accumulate under 6 cents.

There are some positive signs emerging in the junior resource sector and as long as we are not poleaxed by the Dow Jones we could see decent conditions leading into Christmas and beyond.

A few observations and comments:
 
Major increase in trading halts for capital raisings.

When we came out of the GFC there were a number of low priced placements and rights issues that had to be digested and following the brutality of June/July 2012 I see no major difference here.
 
Stale bulls the other resistance

Especially as long suffering shareholders will look to sell into the first sign of strength.  
 
The stellar performance of Sirius Resources (ASX:SIR)

Created much interest in near-ologists Buxton Resources (ASX:BUX) and Matsa Resources (ASX:MAT) and resulted in strong rallies from Peel Mining (ASX:PEX), Sabre Resources (ASX:SBR) and Marmota Energy (ASX:MEU).

These rallies are now spreading to other juniors across a number of sectors.

This is resulting in short-lived rallies lacking follow through but serves to highlight just how powerful the fear of missing out is.

Speculators have now seen Sirius run from 5.7c to $2.99 and they don’t want to miss out.

 

Source: ASX

When you think back to July it is amazing how the mindset of the speculator has changed.

Unfortunately mind power cannot alter geology and I think there are some major disappointments ahead and a vast number of traders are going to get caught out.

As Kim Slater mentioned to me recently on YMYC, lobster pots are easy to get into but difficult to get out of.
 
Anxiety levels must be increasing.

With more stocks now running on rock chips, soil samples, and geological similarities the temptation to liquidate the slower moving stocks in favour of spreading out into the “hot” stocks must be overwhelming.

This strategy might result in some early success but you end up owning far too many juniors and may lead to some nasty habits that many find impossible to eradicate.
 
The Dow Jones I believe is the biggest threat to what we are seeing now.

Even though there was a 110 point drop last night the volatility has been far too low for my liking and we could well see some 200-plus down sessions in the short-term.

This is perfectly normal considering how well the Dow has rallied and whilst it mightn’t signal a nasty bear market it could be enough to cause some panic across the exploration sector.
 
The IPO market remains lacklustre at best

However Boadicea Resources (ASX:BOA) listed yesterday.

Boadicea is immediately adjacent and along trend to Sirius’ Nova Discovery – the edge of Boadicea’s tenement is approximately 4.2 kilometres from Nova.

 

The company raised $1,120,500 under the initial Public Offer by the issue of 5.6 million fully paid ordinary shares at an issue price of 20 cents. Source: ASX

The fascination with selling a stock at a neat number continues.

At the time of writing on the sell side of Sirius there were only 3623 shares for sale at $2.97 but 157,550 at $2.99 and 232,675 at $3.00.

At $3.02 there were only 10,000 shares for sale.

Sirius’ all-time high thus far is $2.99 and I wonder how many sellers are now feeling stranded because they refused to a take a cent or two less?

Sure Sirius may power its way through $3.00 on the next major run but sometimes the calls of stocks going to 5c, 10c, 20c, 50c, $1.00 and so on need to be treated as a guide only.

Throughout my career as an advisor one of the hardest things to do for many people was to break 100,000 shares.

These days with fuel dockets you have your hand on the bowser until it clicks and you don’t worry about running it to $90.03.

I have suggested to some that buying odd parcels such as 123,579 of something could be worthwhile in taking the first steps to learning how to let go.
 
Positive feedback increasing.

We are starting to hear stories on forums and events where people are now boasting about how much money they are making.

Egos on the rise along with the spread of FIGJAM.

You should have seen it during the blow off phase in the Dotcom bubble but all I can say is that people should not ‘mistake a bull market for brains’.

If you know what you are doing and have a decent BS detector this is the type of market you want with the key being able to sell all the way up without the fear that some stocks might go higher.

‘This time it’s different’ are the four most expensive words in history and if this mini exploration bubble intensifies then they will become extremely relevant.