What the Analysts Say
WHAT THE ANALYSTS SAY: This week our team of experts run the ruler over St George Mining and Southern Gold.
Website: www.breakawayresearch.com
St George Mining (ASX: SGQ)
In the East Laverton project, St. George has a quality tenement package, considered highly prospective for komatiite-hosted nickel sulphide mineralisation, over an underexplored greenstone belt.
This prospectivity is backed up by work to date, which has demonstrated that the geology is similar to that in the Agnew-Wiluna belt, and has also intersected nickel sulphides.
East Laverton and the adjoining Lake Minigwal gold project are also considered prospective for orogenic gold mineralisation, similar to that in the Laverton district some 230km to the northwest.
The newly acquired Hawaii and Mt. Alexander North projects SW of Leinster also exhibit good potential – they are interpreted as being in a similar geological and structural setting to the high-grade Cosmos complex some 150km to the north, and limited historical exploration by BHP Billiton Nickel West has returned promising results.
Exploration is operated and managed by staff and consultants with extensive experience in Western Australian nickel and a track record of discovery.
St. George Mining is an Australia-based junior explorer focussing activities on nickel sulphide and gold in the Yilgarn Craton of Western Australia.
The key project is East Laverton, located over greenstones in the North-eastern goldfields, 230km southeast of Laverton, and hitherto relatively under-explored for komatiite hosted nickel sulphide mineralisation.
Website: www.breakawayresearch.com
Southern Gold (ASX: SAU)
Southern Gold is an ASX-listed junior gold exploration company whose main focus is the Bulong gold project 30 kilometres east of Kalgoorlie in Wester Australia, where small scale open pit mining has recently commenced at its flagship Cannon gold mine.
Southern Gold listed on the ASX in April 2005. The initial focus was on gold exploration around the Challenger mine in South Australia, nickel at Bulong South, uranium/base metals in the Gawler Craton and gold and gold/copper in the Lachlan Fold Belt.
The company later added exploration tenements in Cambodia to its asset base.
The bulk of these assets have now been disposed of, allowing the company to concentrate on the Bulong gold assets.
A PFS conducted in 2013 demonstrated the economic viability of an open pit and underground operation, toll‐treating ore at a nearby mill.
The estimated cash generation, based on a gold price of $1,500 per ounce, was approximately $14 million.
At an estimated total cost of $1,150 per ounce (including the capital on the small pit), the buffer is considerable.
An update to the PFS in 2014 further enhanced the project economics, boosting anticipated cash generation to around $18 million.
The announcement that Metals X (ASX: MLX) would finance and operate (mine, haul and process) the early stage development of the Cannon Gold Resource was a major breakthrough for Southern Gold.
Operational activities are to be charged on an open book, at‐cost basis, providing a high level of transparency.
Surplus cash will be shared on a 50/50 basis. Metals X, an Australian top ten gold producer and Australia’s largest tin producer, is well funded and has extensive expertise and experience in operational management.
This means that the normal risks associated with start‐up of small operations are significantly reduced.
Putting a value on a small resource such as Cannon can sometimes be difficult, but a recent transaction on a nearby property gives a good indication of the potential worth of the project.
In July 2015, Metals X announced the acquisition of the Georges Reward deposit on exploration tenement E25/268 for $4.5 million.
Georges Reward has a publically announced JORC Inferred Resource of 375,000 tonnes at 1.89g/t gold containing 22,800 ounces of gold.
While direct comparisons cannot effectively capture exploration upside, the Cannon project has a resource of 846,260 tonnes at 3.57g/t gold containing 97,045 ounces of gold, more than four times the amount of gold at almost twice the grade.
Disclaimer: The above is intended as a guide only. The Roadhouse accepts no responsibility for investments made from this advice, successful or otherwise.
The views, opinions or recommendations of this article do not in any way reflect the views, opinions, recommendations, of The Resources Roadhouse.
The Roadhouse makes no representation or warranty with respect to the accuracy, completeness or currency of the content. The content is for educational purposes only and does not constitute financial advice. Independent advice should be obtained from an Australian financial services licensee before making investment decisions.