Exploration upside trumps boardroom power struggle

THE INSIDE STORY: South Australian uranium and South American copper form the basis of Alliance Resources’ current focus.

The flagship project of Alliance Resources (ASX: AGS) is its 25 per cent interest in the Four Mile uranium project located 550 kilometres north of Adelaide in South Australia. Quasar Resources has a 75 per cent interest in the project.

 

Under the terms of the JV, Alliance is free carried through exploration.

Quasar is an affiliate of Heathgate Resources, owner and operator of the adjacent Beverley uranium mine – Australia’s third uranium mine and the only in situ leach mine.

The Four Mile project boasts an impressive set of numbers, including a 2012 JORC Code-compatible Indicated and Inferred Mineral Resource estimate of 9.8 million tonnes at 0.33 per cent uranium oxide (U3O8) containing 32,000 tonnes (71 million pounds) of contained U3O8.

With these figures it’s understandable the Four Mile uranium deposit is considered by most pundits to be one of the larger uranium deposits going around, not only in Australia but on the global stage.

However, not all is as happy as it could be between the JV partners at present as they disagree over how to develop the project.

“During the year, Alliance announced that a decision to recommence development of the Four Mile uranium project was made with Quasar Resources Pty Ltd (Quasar) voting its 75 per cent interest in favour and Alliance’s wholly owned subsidiary, Alliance Craton Explorer Pty Ltd (ACE) voting its interest against Quasar’s Start-Up Plan and Proposed Program and Budget,” Alliance stated in its Annual Report last year.

“Quasar has advised that an updated schedule of activities and cash flow projections will be provided once all government approvals have been received, taking into account later commencement and completion dates from those set out in its Start-Up Plan and Proposed Program and Budget.

“Notwithstanding this decision to recommence development, ACE still considers the construction of an appropriately sized stand-alone plant at Four Mile would produce a better outcome for ACE and Alliance in general.”

The potential of the Four Mile deposit was highlighted recently with the announcement of drilling results, which encountered further uranium intercepts at the discovery area Alliance announced in December 2013, located 1.2 kilometres to the northeast of the Four Mile East uranium deposit.

Results included:

FMD0017: 3.7 metres at 0.39 per cent uranium; and

FMD0018: 3.2m at 0.45 per cent uranium, 1.7m at 0.3 per cent uranium, 2.6m at 0.39 per cent uranium.

Alliance also recently reported the intersection of high-grade uranium mineralisation over a strike length of approximately 1100m and a maximum width of 800m, which is an increase of 300m of what had previously been reported.

While all this has been happening Alliance has added a further project to its fleet, this time casting an exploratory eye over the South American country of Chile.

Alliance’s Chilean properties are located in the Cabeza de Vaca district of Atacama Region III, placing them in northern Chile’s iron-oxide copper-gold belt, close to the mining centre of Copiapo and 27km southeast of the 479 million tonnes at 0.95 per cent copper, 0.22 grams per tonne gold, 3.1g/t silver La Candelaria mine owned by Freeport-McMoran Copper & Gold Inc.

The company’s Chilean subsidiary company, Alliance Chile has secured several options to acquire copper-gold properties and has submitted applications to acquire three exploration licences covering the greater part of the Cabeza de Vaca district.

 

“It’s in the northern regions that the bulk of the country’s major copper deposits exist,” Alliance Resources managing director Steve Johnston told The Resources Roadhouse.

“We believe there is much potential for large porphyry deposits in the region, however we are trying to target and focus on high-grade, near-surface deposits, which are related to the porphyry style deposits at depth.

“Our exploration manager and are contract geologist are on the ground in Chile at the moment and reviewing and sampling specific third party opportunities.

“We’ll get those samples back, analyse them and then make the decision as to which of these prospects we may follow up.”

Johnston said the company was excited to be exploring in Chile saying it is a great place to be as a junior exploration play with many deposits outcropping at surface as well as some of the world’s biggest copper mines already operating there.

“We are looking for a porphyry-style deposit but we haven’t ruled out the smaller high-grade deposits,” he said.

“We feel that if we can find an area that hosts enough of these smaller deposits we then have a chance of locating a feeder zone of a buried porphyry that hasn’t been unroofed.

“That’s really our focus at the moment, identifying second tier targets first with the hope of finding a first tier target.

“Financially, developing a tier one target is tough for a company the size of Alliance, so if it did intersect one, then we would be seeking Joint Venture interest from a major to come in and help to develop it.

“Alternatively, should we hit a smaller deposit of high-grade copper at one to two per cent, then we are more than capable of doing that by ourselves.”

In recent times Chile has developed a reputation as a country with low sovereign risk that encourages exploration, even though it does have a slightly complex tenement structure to navigate.

Basically a lot of Chilean people own one or more mining tenements or concessions.

These get handed down through the family who typically option these tenements out to companies to earn a modest fee each year with a much larger fee if the option is exercised.

The system allows exploration concessions over the top of the mining concessions, allowing exploration over the tenements, enabling companies to conduct drilling, airborne geophysics and geochemistry, however companies ultimately require the permission of the underlying mining concession holder when it comes to exploitation.

“It has taken us just on two years, but we now have established a pretty firm footing in Chile,” Johnston explained.

“It’s been a new region and new regime for us and the learning curve has been quite steep, but we know how things operate over there now.

“From an exploration point of view it is actually a good system, even if you might find yourself dealing with ten different concession holders.

“One major difference from the way we do things in Australia is that here you may start with a tenement holding of 1,000 square kilometres and gradually narrow that down to around 100 square kilometres pinpointing particular targets or point of interest.

“In Chile you may lay out a large Exploration Licence area but the actual mining concessions are reasonably small and as many targets outcrop, this means the footprint of your target area is quite small allowing you to focus in and do the appropriate deals.”

In its September 2013 Quarterly the company reported it was well placed financially with around $24 million in the bank.

Having not dipped into the account in any great way since then it is well-funded to conduct drilling at Cabeza de Vaca, which it anticipates kicking off in the first half of this year.

Alliance Resources Limited (ASX: AGS)
…The Short Story

HEAD OFFICE
Suite 3, 51 – 55 City Road
Southbank, VIC, 3006

Ph: +61 3 9697 9090
Fax: +61 3 9697 9091

Email: info@allianceresources.com.au
Web: www.allianceresources.com.au
 
DIRECTORS
John Dunlop, Ian Gandel, Anthony Lethlean, Steve Johnston

MAJOR SHAREHOLDERS
Abbotsleigh Pty Ltd            25.76%
NEFCO Nominees Pty Ltd            2.27%
John S Dunlop Nominees Pty Ltd    1.78%
J P Morgan Nominees            1.75%

SHARES ON OFFER
341 million

MARKET CAPITALISATION

$56.3 million (at 24/1/14)