Download this EXCLUSIVE report from ValueTheMarkets to discover why Fosterville South (TSX-V:FSX) is among the world’s hottest, high-grade gold exploration plays.

A spectacular underground gold rush is underway in the Australian state of Victoria.

It began just five years ago with the discovery of vast seams of high-grade gold at the Fosterville Gold Mine.

Thanks to significant advances in drilling technology and subterranean surveying techniques, mining companies can now access previously untappedlarge-scale deposits of high-grade gold.

For gold exploration firms, this is an extremely exciting new frontier.

The official Geological Survey of Victoria has even gone on-the-record to say it believes that at least 75,000,000 ounces of the precious metal are now waiting to be discovered across the state.

To put this into context, 88,000,000 ounces of gold have been mined in Victoria in the last 170 years.

At current spot prices, those undiscovered ounces would be worth a staggering $127,500,000,000.

With such great potential, it is no wonder the region is attracting so much international investor interest.

After all, the results at Fosterville have been stunning.

By the end of 2019, the mine’s owner, Kirkland Lake Gold (TSX:KL) (NYSE:KL), reported high-grade gold reserves of 2 million ounces with an additional 1.7 million inferred ounces at the site.

Better yet, between 2017 and 2019, the company mined 1.2 million ounces at Fosterville for a cost of just $315 an ounce, and an incredible average grade of 30.6 grams a tonne!

The Fosterville Gold Mine comfortably leads the pack when it comes to the world’s highest-grade, lowest-cost mining operations.

With such phenomenal success, it is no surprise that Kirkland Lake’s share price shot up over 27 TIMES, from C$2.20 in July 2015 to more than C$60 by the end of last year.

This has transformed the miner into a C$15 billion firm.

Now, with so much more high-grade gold potential remaining in Victoria,  which company might be the next to experience such meteoric growth?

Fosterville South Exploration (TSX-V:FSX) certainly has strong potential.

Read this SPECIAL REPORT from ValueTheMarkets to learn the fascinating backstory to the incredible opportunity at Fosterville South (TSX-V:FSX)

The pitch for Fosterville South (TSX-V:FSX) is as straightforward as it comes.

Fosterville South (TSX-V:FSX) has managed to secure 1,386kmof what could prove to be some of the most promising prospecting land for large-scale, high-grade gold deposits anywhere on the planet.

With a fully-funded, high-impact drill campaign ready to go in 2020, Fosterville South’s (TSX-V:FSX) award-winning technical team is particularly bullish about the company’s Lauriston Project.

Lauriston directly borders the Fosterville Gold mine, and the indications are that it shares the same geological features.

Rex Motton, Fosterville South’s (TSX-V:FSXchief operating officer and the original inspiration behind this opportunity, is convinced about the potential for what modern drilling could uncover: 

“Victoria has hardly scratched the surface when it comes to exploring these newly identified, high-grade underground gold zones.

There has been a lot of exploration done at Ballarat and Bendigo as they are very big goldfields, but when you look in a regional sense, there are very few deep drill holes.

Even on our ground in Lauriston, which sits directly adjacent to the Fosterville Gold Mine, there are only about a dozen reverse circulation holes and half a dozen diamond holes

None of these have gone deeper than about 200m in terms of drilling. For an area that is 600km2 in size that is minuscule. With such high-grade, near-surface historic production here, that is extremely surprising, but it also opens up an incredible opportunity for Fosterville South.)

To learn exactly why Rex Motton is so confident about Fosterville South (TSX-V:FSX) and how he was able to secure such a large area of prime high-grade gold exploration land DOWNLOAD THIS EXCLUSIVE REPORT from ValueTheMarkets.

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Author: Daniel Flynn

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, does not a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, has been paid for the production of this piece by the company or companies mentioned above.

MiningMaven.com and MiningMaven Ltd are not responsible for the article's content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

Greatland Gold (LSE:GGP) was one of Wednesday's biggest winners after announcing another excellent set of drilling results at its Havieron project in Australia.

The company said work by major miner Newcrest (ASX:NCM), which is currently completing a farm-in to Havieron, has expanded further the continuity of high-grade gold mineralisation at the project. Mineralisation now extends over a 450-metre strike length to vertical depths of 600 metres while still remaining open at depth and to the northwest.

Highlight intersections from Newcrest's latest round of drilling include:

-142 m @ 1.9g/t Au, 0.38% Cu from 534m, including 15.7m @ 9.8g/t Au, 0.61% Cu from 572.3m

- 24m @ 3.9g/t Au, 0.21% Cu from 734m, including 17.3m @ 19g/t Au, 0.62% Cu from 790.7m

Work will now continue with the aim of establishing a maiden resource for Havieron by the second half of this year. Numerous environmental, geotechnical, and metallurgical studies are currently in place to support these efforts alongside future permitting requirements.

Meanwhile, Greatland expects Newcrest to complete the second stage of its farm-in to Havieron by the end of this month. The company is looking to begin an exploration decline at the project by the of this year or early 2021. It is also examining the likelihood of establishing commercial production within two to three years from this point.

Results to date support both high-grade selective and bulk mining methods at the project, and both options are currently being evaluated.

Greatland's chief executive Gervaise Heddle said: "We are delighted by this sixth consecutive set of excellent results from Newcrest's drilling campaign, which continue to demonstrate the continuity of high-grade mineralisation and expand the mineralised footprint. These latest results represent one of the best sets of drilling results at Havieron since Newcrest began its exploration campaign and reinforce the potential to accelerate the timetable for commercial production.

"As we enter the Australian exploration season, Newcrest continues to drill Havieron at pace and will shortly complete Stage 2 of the Farm-in. Meanwhile, we are planning to be very active with our own systematic exploration campaign across the Paterson, which will focus on drill testing many of the high-priority targets we identified last year."

As at writing, the company was trading 11.45 higher with a share price of 4.7p and a market capitalisation of £170.9 million.

The latest round of work adds further fuel to our recent argument that Havieron could be truly transformational for Greatland. To read our analysis, please click here.

Author: Daniel Flynn

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, does not a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, has not been paid for the production of this piece by the company or companies mentioned above.

MiningMaven.com and MiningMaven Ltd are not responsible for the article’s content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

The problems inherent in a battery metals supply chain supremely concentrated on China have been spotlighted by coronavirus, but the problems have been in play for years. 

The bottleneck was there for all to see long before the spread of Covid-19 shuttered factories across China. 

According to a Wednesday report by the Associated Press “the problem is supply chains. China’s are famously nimble and resourceful, but they lack raw materials and workers after the most intensive anti-disease measures ever imposed closed factories [and] cut off most access to cities with more than 60 million people.”

While companies have begun to re-open, there are ongoing higher costs and significant delays. A mid-February survey by The American Chamber of Commerce in Shanghai found that 78% of businesses in Shanghai, Suzhou, Nanjing and the wider Yangtze River Delta did not have enough staff to run full production lines. 

Nearly half said their global operations had already been affected by the shutdown and 58% said their output would be lower than normal until at least the second half of 2020.

Away from China

Manufacturers are looking for new suppliers but few can compete on price and almost none can match China’s levels of service.

These problems have been evident since President Donald Trump ignited the ongoing US-China trade war by imposing tariffs on imports from the trading giant. 

And shifting production away from the Chinese state and into perceived cheaper South East Asian alternatives comes with its own set of problems. 

A Wall Street Journal report written in the wake of the early stages of the trade dispute noted: “This should be Vietnam’s chance to shine. Instead it is becoming increasingly clear that it will be years, if ever, before this nation and other aspiring manufacturing destinations are ready to replace China as the world’s factory floor.

The problem is even more acute for producers and users of battery metals. 

Mitchell Smith, chief executive and president of cobalt development company Global Energy Metals (TSX-V:GEMC) told MiningMaven: “Coronavirus is having a large disruptive effect on the overall commodity marketplace as we are already witnessing large builds in stockpiles of minerals given the inability to transport and handle material at Chinese ports. The same can be said about exports of refined product.”

Gigafactory

Battery metals are key to the growth of the renewables industry: lithium-ion batteries form the basis for powering electric vehicles, for example.

And while the explosion in the number of electric vehicles is set to drive the renewables revolution, the fact is that supply chains are simply not ready to produce the number of batteries that this wholesale change will require. 

Elon Musk’s Tesla is ahead of the curve. Its $4.5 billion Gigafactory 1 in Nevada opened in 2016. Musk said at least 100 of these gigantic electric vehicle assembly lines would be needed to power the future growth of the industry.

And yet Tesla has started building its latest Gigafactory not in the United States, but in China. Tesla has struggled to recruit enough engineers in America to run operations, an issue it believes — or believed, until coronavirus broke out — could be solved by China’s army of specialists. 

Europe’s first Tesla-inspired battery megafactory belongs to Sweden’s Northvolt. That company received a €350 million loan from the European Investment Bank in May 2019 to get the project started. But this is one of only a handful being built outside China. 

In 2017, there were 17 lithium-ion battery mega-factories under construction globally. Today, 46 of the 70 in construction are in China.

Another problem

There is vast and increasing demand for refined cobalt in the manufacturing of lithium-ion batteries. But few have tracked the scarcity of these in-demand resources. According to a MassifCapital report on risks in the supply chain: “If every battery manufacturing facility under construction today is built and operates at 100% capacity, then the next ten years will see an 8x increase in demand for lithium, a 7x increase in graphite anodes, a 19x increase in nickel and a 4x increase in cobalt.

China’s domestic and foreign influence on the global cobalt supply chain also remains substantial. This dependence has already caused significant problems and industry experts expect the trend to continue. 

Mitchell Smith put it like this: “Prolonged economic disruption due to the coronavirus epidemic should make end-users in the automotive and electronics industries reflect on the over-reliance upon one country.” 

As a whole the industry desperately needs to consider diversification of supply and refinement of the materials critical for the new renewable world we will all be living in, Smith added.

Author: Mark Sheridan

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, does not a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, has been paid for the production of this piece by the company or companies mentioned above.

MiningMaven.com and MiningMaven Ltd are not responsible for the article’s content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance.

 

AIM-listed gold and nickel player Katoro Gold (LSE:KAT) says the climbing price of gold has had a positive impact on its well-received plans to exploit a South African gold resource.

The spot price of gold hit a seven-year peak of $1686.74/oz on 24 February, reaching record levels against the Euro and Canadian and Australian dollars.  

Global fears about the spread of coronavirus and its effect on global supply chains caused a growing flight to safety on Monday as Italian authorities enforced a quarantine around a worsening outbreak of Covid-19. The Dow saw a 1,000 point drop that day, while the FTSE 100 cratered nearly 4%.

Nicky Shiels, commodities analysts at Scotiabank, noted that Covid-19 represented a “black swan” or unforeseen event that could roil global markets for months to come, with gold prices “doing what they should given renewed global growth risks”. Prices have already “taken out our average forecast for 2020 ($1,600) and it’s likely the floors are shifting up,” Shiels added. 

The gold price has since edged backwards a little from its multi-year high to settle around the $1,650 mark. But with fears about the spread of coronavirus in Europe, we would suggest that jittery markets will support this price point in the near term. 

All of this means good news for gold producers, especially those who can point to near-term revenue. 

Katoro intend to reprocess an existing gold tailings resource rated at approximately 1.34Moz at a South African mine owned by Blyvoor. It and entered into a joint venture with the company on 30 January 2020.

Reprocessing of gold from tailings is a relatively new technological approach which examines and exploits mining materials previously thought of as waste. This process gained popularity in South Africa in the 1970s, using a technique known as flotation to recover pyrite uranium and gold. Given the vast amount of tailings (in the region of hundreds of millions of tonnes) produced from gold mining, more efficient scientific methods developed in recent years have been able to extract and recover metals that were not discovered in the original mining process. 

Katoro agreed to provide a loan worth £790,000 to the JV. £263,000 of this amount has already been advanced with the remaining £527,000 expected to be released in the near future. 

To fund the loan Katoro issued a convertible loan note to SI Capital for £397,000 and secured £400,000 from Sanderson Capital Partners. 

Katoro said in a 25 February market update that it had issued notice to Sanderson that it intended to draw down the additional £400,000 in full to fund ongoing work. 

Executive chairman Louis Coetzee noted that his team was “very pleased” with progress so far, saying that feasibility studies and plant design were progressing ahead of expectations. 

“The Board notes the strengthening gold price which further bolsters what we consider to be very robust project economics,” Katoro said.

Shares in the London-headquartered explorer have gained 325% in the last 12 months. On this latest news, the KAT share price has gained 3% to 2.7p. 

Author: Tom Rodgers

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, does not a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, has been paid for the production of this piece by the company or companies mentioned above.

MiningMaven.com and MiningMaven Ltd are not responsible for the article’s content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance.

Rockfire Resources (LSE: ROCK) chief executive David Price has hailed a set of “extremely positive” results from its drilling in north Queensland, Australia, where all its holes hit gold. The firm's shares opened 20% higher at 1.445p in Tuesday trading.

Rockfire reported that it found “extensive intercepts of continuous gold mineralisation” at its Plateau deposit, 30 miles southeast of Charters Towers on the country’s east coast. Drilling revealed a 2.0 grams per tonne (“g/t”) gold zone at 145 metres, closer to the surface than the 2.0 g/t zone discovered at the nearby Mt Wright Gold Mine. 

The exploration means the gold explorer is now confident that the Plateau deposit extends to an area thought to be more than 200 metres long, 70 metres wide and 200 metres deep. 

Price told in the market in an RNS: “These long intervals of gold in the upper levels of Plateau are extremely positive and demonstrate the size of the mineralising system.”

He added that his technical team believed Plateau presents “similarities” to Mt Wright, an existing underground mine that is thought to host 1.5 million ounces of gold, with the main ore between 400 metres and 850 metres below surface level. 

"We appear to be at the top of a similarly large gold deposit,” said Price.

The drill results at Plateau include three holes of 0.4 g/t, 0.4 g/t and 0.2 g/t, extending mineralisation more than 100 metres east of previously reported results. 

Shares in the AIM-listed explorer have been active of late. Positive results from late November 2019 drilling which announced a major gold system at Plateau saw the price surge from 0.41p to a three-year high of 2.2p. The company then told the market last month that its x-ray analysis of October 2019 drill samples had unveiled significant silver deposits of 2 ounces per tonne at Plateau.

Rockfire said its next steps would be to conduct a geophysical survey called controlled source audio frequency magnetotellurics, which was expected to provide target generation below the levels drilled thus far at Plateau. The same survey method identified deep drill targets at Mt Wright, Price said. 

Author: Tom Rodgers

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, does not a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, has been paid for the production of this piece by the company or companies mentioned above.

MiningMaven.com and MiningMaven Ltd are not responsible for the article’s content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance.

 


Armadale Capital (LSE:ACP) has reiterated its intention to deliver a definitive feasibility study (“DFS”) for its Mahenge Liandu graphite project in the current quarter.

Based in south-east Tanzania, Mahenge Liandu contains one of the country’s most substantial high-grade graphite resources, with high-grade coarse flakes and near-surface mineralisation contained within one ore body. Armadale is currently completing a DFS based on the results of a scoping study centred around a 400,000tpa throughput ratio. This put Mahenge Liandu’s net present value at $349 million and its pre-tax internal rate of at 122% against development capital expenditure of just $35 million, implying an after-tax payback period of 1.2 years.

In Friday’s update, Armadale said the DFS ramps up to 1 million tonnes per annum throughput after four years and will initially target high-grade, near-surface graphite mineralisation for production to maximise value. Meanwhile, it said metallurgical test-work is being completed on high-grade composites with average grades of 14.9% and 15.6% total graphitic carbon to confirm the project flowsheet is suited to high-grade ore. Likewise, site locations for all elements of the project have been finalised, an access road has been marked out, and logistics have been costed out with a local well-established Tanzanian contractor.

Beyond the DFS, Armadale said that its director Steve Mahede is confident that developing mining projects through to production is a major priority for Tanzania’s government following a recent meeting with officials. Finally, the organisation said it was beginning to advance post-DFS work programmes focused on road access, production bores, and – critically – commercialisation and project funding discussions with potential partners.

The company’s chairman, Nick Johansen, said: “With one of the largest high-grade resources in Tanzania this dovetails perfectly with our ongoing commitment to push the envelope to transform into an emerging producer by H1 2021.

“In support of this, refinements to our resource modelling and mine plan from the scoping study have increased our confidence that the project is going to be a low cost, long life operation.

“We look forward to sharing these key value metrics within the next month as we finalise the DFS, results for which we know are eagerly anticipated. I would like to thank shareholders for their patience in this regard and give my assurance that finalising this study is our primary objective. We will then look to accelerate commercialisation and funding initiatives with our partners to ensure we remain on track with our fast-paced growth plans.”

As we have previously written, the scoping study at Mahenge Liandu was based around a conservative $1,272 per tonne graphite price and an average concentrate purity of 95%.  Graphite prices are currently sitting much higher than this, and Mahenge Liandu is proven to be able to produce the material consistently at a grade considerably higher than 95%. Last year, we looked at whether investors were missing a significant opportunity at Armadale given this conservative approach.

As we highlighted, Australian miner Black Rock recently agreed to supply “premium” graphite with a nominal grade of between 97.5-98.5% for $1,490 a tonne and “ultra” graphite grading more than 99% for $2,161/t.   Both of these prices come in at a significant premium to the $1,272/t used by Armadale in the scoping study for Mahenge Liandu, which neighbours and shares many similarities with Black Rock’s Mahenge asset.  f Armadale can secure binding sales agreements at a much higher price than $1,272, then Mahenge Liandu’s fundamentals would be enhanced even further.

Author: Daniel Flynn

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, does not a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, has been paid for the production of this piece by the company or companies mentioned above.

MiningMaven.com and MiningMaven Ltd are not responsible for the article’s content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance.

 

Tuesday saw gold prices cross the key psychological level of $1,600 an ounce for the first time since 2013 as concerns over the COVID-19 epidemic in China continued to drive investors towards safe-haven assets.

Spot gold hit highs of $1,605.10 an ounce during the day’s trading due to increased risk aversion at the hands of the so-called “coronavirus”.

This followed a warning from the World Health Organisation that confirmed cases of the virus now total 73,332 since first being identified late last year in Wuhan, China. Meanwhile, there has been at least 1,873 deaths from the virus, which is now thought to have spread across as many as 25 countries- including several in Europe.

The rush towards safe-haven assets – which include government bonds and the US dollars as well as gold – stems from concerns over the long-term economic fallout that could arise from the spread of coronavirus. Analysts have suggested that supply chain disruption caused by the virus across numerous industries in China and around the world could hit GDP rates in many leading nations and curtail global consumption.

In response, the likelihood of central banks taking an increasingly dovish stance on monetary policy – cutting interest rates, for example – to stimulate their economy is expected to rise.

While this dynamic can result in falling stock markets and declining bond yields, lower interest rates favour gold as they reduce the opportunity cost of holding non-yielding bullion. As such, concerns around the long-term coronavirus fallout have even enabled the gold price to withstand the impact of a drop in new virus cases over the last two days. Indeed, the precious metal has remained above $1,600 an ounce despite a cautious move forward by equity markets around the world.

Should the current dynamic in the gold market continue, then a very direct beneficiary will be the UK’s junior gold businesses. When the price these firms can command for the precious metal they produce rises, so too does their margins per ounce. The end result is obvious – revenues and profits can soar without any correlation to production rates.

A fantastic example of this dynamic in action can be found in Hochschild Mining’s (LSE:HOC) preliminary 2019 results, which were released on Wednesday.

Precious metal prices recovered significantly throughout the second half of the results period, helping average gold prices for the year as a whole hit $1,414 an ounce- 12% higher than 2018’s $1,268 an ounce average. Average silver prices for the year, meanwhile, reached $16.5 an ounce, compared to $15.3 an ounce in 2018.

Thanks to the higher price it could demand for its gold and silver, the FTSE 250-listed miner noted that it was able to deleverage and: “… generate strong free cash flow allowing us to strengthen our balance sheet, further invest in our exploration initiatives and add value accretive projects to our portfolio.”

Meanwhile, it delivered a 28% year-on-year increase in adjusted EBITDA ($343.3 million), a 100% jump in post-exceptional profit before income tax ($76.8 million), and a 100% leap in post-exceptional basic earnings per share ($0.06). Elsewhere, its cash balance as at 31 December 2019 sat at $166.4 million, compared to $79.7 million.

Critically, however, all of this came despite the firm revealing that year-on-year silver production had fallen by 15% to 16,808,000 ounces, while gold production rose by just 4% to 270,000 ounces.

What Hochschild’s results demonstrate is the real power that metal prices carry over the fates of producing firms in the sector. Despite unremarkable production progress, favourable macro conditions alone enabled the company to deliver transformational year-on-year financial improvements. As at writing, the £902.5 million business is sitting 10% higher at 176.29p – its highest level since the beginning of January.

If global concerns continue to buoy gold prices – be it coronavirus, the US/China trade war, or shifting monetary policy – then we could well see more success stories like Hochschild throughout results season.

Author: Daniel Flynn

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, does not a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, has not been paid for the production of this piece by the company or companies mentioned above.

MiningMaven.com and MiningMaven Ltd are not responsible for the article’s content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

 

Shares in gold and nickel exploration and development player Katoro Gold (LSE:KAT) are currently experiencing a lot of interest in the market – they are currently sitting at 3.16p after rising 241% so far this year.

Katoro’s strong momentum began recently with news of a new, near-term gold production opportunity in South Africa. With the deal immediately putting a near-term revenue stream on the horizon, it is not hard to see why Katoro has captured the attention of investors. That being said, even after recent price movements, Katoro is currently only valued at around £6 million. This demonstrates how far many junior exploration and development firms have really fallen in recent years.

Given the true scale of the JV’s revenue potential amid bullish gold market conditions and the likelihood of positive near-term news flow, we believe Katoro’s current bull-run could well continue for some time.

Immediate impact

To recap, on 30 January 2020, Katoro announced its binding, conditional entry into a 50/50 unincorporated joint venture (“JV”) with a company called Blyvoor. The partners plan to reprocess and exploit an existing 1.34 million ounce, JORC-compliant gold resource spanning six tailing dams 75 kilometres south-west of Johannesburg in South Africa.

As part of the deal, Katoro will provide up to a £790,000 repayable loan to the JV to fund ongoing development work on the project. To support this, Katoro has already raised £397,000 in the form of a convertible loan note with investors through SI Capital and has also agreed further facilities with external finance partners for the balance if this is called down. This means finance for Kataro’s entry into this transaction is already resolved, an important element for investor confidence.

The first critical point to note about the South Africa JV is that it represents a considerable, near-term revenue-generating production opportunity for Katoro.

Much of the groundwork has already been covered at the South African tailings project. For example, the mining licence and environmental impact assessment required for the reprocessing of the tailings is already in place. This means that production can begin immediately once a processing plant has been constructed and commissioned.

Plant progress may not be too far off, either – Katoro has already held discussions with potential funding parties for the project. It believes this will be secured at the project level in the form of debt funding – meaning shareholders would not be diluted at the PLC level.

The second key point to note is the potential economic impact that the 50/50 JV project could have for Katoro once gold recovery begins.

The partners are targeting an initial production rate of up to 250,000 tonnes of material a month at an average grade of 0.3 grams per tonne gold from the tailings. This is expected to mark the first stage of a production ramp-up to 500,000 tonnes of material a month within two years. At 500,000 tonnes of material per month, the project is targeted to produce around 35,000 ounces of gold a year and to have a 35-year life of mine.

So, what does this mean financially?

Katoro’s board believes that the project enters economic territory at a $1,300 an ounce (“/oz”) gold price. As such, this figure has used this to calculate economic fundamentals.

Including an all-in-sustaining cost of just $664/oz for the first five years planned production and project capital costs of $30-35 million, the firm puts the project’s net present value (10) at $49 million and its internal rate of return at 31%.

To put this another way, at an annual production rate of 35,000 ounces of gold, the project would generate around $22.3 million per annum for the JV ( (35,000 X 1,300) – (35,000 X 664) ). Katoro’s 50% share of this comes in at $11.15 million (c.£8.6 million per annum), a figure that compares very favourable to its current, c.£6 million market cap.

This type of comparison begins to look even more favourable when you consider the fact that, in reality, gold prices currently sit much higher than $1,300/oz. If we use the $1,565/oz quoted by Katoro as the current gold price in its 30 January release, then Katoro’s annual take from the project at a 35,000-ounce per annum production rate comes in at $15.8 million, or c.£12.2 million per annum ( ( (35,000 X 1,565) – (35,000 X 664) ) /2 ).

With many expecting gold prices to continue rising after climbing 20% in the third quarter of 2019, there is room for these figures to become even more attractive.

Moreover, the project currently has a projected life of 33 years, demonstrating the long-term production and revenue generating potential.

Finally, there are several important indications that the JV will be able to quickly and easily build on the strong economic foundations in place at the South African tailings project.

First, the funds provided by Katoro as part of the JV agreement will be used to, in the company’s own words, “optimise mining strategy”. The firms will complete final detailed mine planning and scheduling to perfect mining strategy and better define the expected plant feed grades and identify possible low-grade zones. They will also look at ways to keep operating costs down as much as possible and maximise processing efficiency. Currently, gold recoveries of 56-60% are thought to be achievable – could this figure rise?

Meanwhile, the JV has already shown its commitment to forming as strong a management team as possible to drive forward. On 10 February 2020, less than two weeks after the deal was announced, the firms had formed a JV management committee and appointed new JV manager  Graham Briggs – former chief executive of Harmony Gold Mining. The group have already started “moving forward multiple workstreams”, according to Katoro.

The JV’s new management, rapid pace, and work to optimise its project alongside financing discussions show commitment to advancing as quickly and in as economical a way as possible. Not only that, but these points are likely to provide a great deal of short-term news that – if positive – could provide further fuel for Katoro’s share price.

The sky is the limit

The bottom line is that Katoro’s entry into the South Africa JV has changed its outlook significantly, putting near-term revenue generation on the horizon. Although the meteoric rise in Katoro’s share price reflects this, the project’s potential in a strong gold market and the pro-active approach to its optimisation may mean the firm has not yet peaked. Now that Katoro has got the ball rolling, the next few months will be about maintaining the pace with frequent project updates and progress towards gold production.

Author: Daniel Flynn

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, does not a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, has been paid for the production of this piece by the company or companies mentioned above.

MiningMaven.com and MiningMaven Ltd are not responsible for the article’s content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

Greatland Gold (LSE:GGP) powered forward to a record high of 3.78p at the end of last week after posting an “outstanding” set of drilling results for the Havieron asset it is advancing with Newcrest Mining (ASX:NCM). With a market cap of £104.1 million, the Australia-focused gold explorer and developer sat nearly 110% higher than it did at the beginning of 2020 after riding a massive wave of increased trading volume in its shares. The market is now eager to see the extent to which Greatland can build on this success and how big Havieron could ultimately prove to be, with an extra $25 million expected to be spent on the property this year.

Aside from Havieron’s ongoing potential, there were several key reasons why investors were particularly excited about the latest drilling campaign here. The long-term implications factors could prove to be truly transformational. Here, we take a detailed look at what is causing all this excitement.

Firstly, and perhaps most obviously, investors were highly encouraged by the quality of the news itself.

To recap, Havieron is a gold deposit centred on a magnetic anomaly in the Paterson region of Western Australia. Newcrest operates it under a farm-in agreement with Greatland. Exploration drilling by Greatland in 2018 led to the discovery of significant gold and copper mineralisation under 400 metres of cover.

After following this with its own set of strong drilling results in mid-2019, Newcrest completed nearly 19,000 metres of additional drilling in the final quarter of last year to enhance its understanding of Havieron’s true scale. With its latest work extending continuity of mineralisation at the asset over 450 metres of strike, including widths of up to 150 metres and depths over 600 metres, Newcrest has undoubtedly met its primary objective. What’s more, these extents could extend further yet, with mineralisation remaining open both to the north-west and at depth.

Meanwhile, highlight intersections included 136 metres at 2.9 grams per tonne (“g/t”) gold and 0.6% copper from 504 metres and 73 metres at 3.2 g/t gold and 0.67% copper from 513 metres.

In its update, Greatland put the importance of the results into context, stating:

“The latest drill results and the initial observed dimensions of the deposit suggest that Havieron represents a significant gold-copper discovery.”

Newcrest exceeds expectations

A second, highly encouraging sign for investors was Newcrest’s enthusiastic reaction to its latest results at Havieron.

The Havieron deposit is based just 45 kilometres east of Telfer, one of Newcrest’s flagship project that produces up to 460,000 ounces of gold and 13,000 kilotonnes of copper a year. Newcrest’s ultimate goal, alongside Greatland, is to truck high-grade ore from Havieron to Telfer for processing - extending its mine’s life and reducing production costs per ounce. To do this, the major miner entered a deal with Greatland last year that granted it the right to earn up to a 70% interest in Havieron target by spending up to $65 million on its development across four stages, as seen below.

Newcrest is currently in the second stage of the farm-in. However, the firm’s outpouring of support for Havieron in the wake of its latest results suggests that Greatland will continue to benefit from the major’s massive firepower moving forward.

For example, in its exploration report, Newcrest described the grades it has seen at the deposit as “unique” for the region, adding that it now plans to “progress and accelerate our evaluation of this opportunity”. Likewise, in a tweet, the company said Havieron “signals a new era in our asset portfolio”, adding: “Grades like this are rare & we’re excited with our progress”.

Newcrest also appears to be putting its money where its mouth is when it comes to this enthusiasm. As Greatland highlighted in its update:

-Drilling has recently recommenced drilling at Havieron following a short Christmas break;

-An additional 20,000-30,000 metres of drilling are planned in the next two quarters to support the potential delivery of a maiden resource by the end of the calendar year 2020;

-A number of environmental, geotechnical, and metallurgical studies have commenced to support the potential delivery of a resource and future permitting requirements.

Meanwhile, Newcrest itself said it expects its exploration expenditure to be $25 million higher than anticipated at Havieron in light of the positive results.

Things could not have got off to a better start at Havieron for Newcrest, and this paints a very bright picture for Greatland’s future at the asset.

Mapping out Havieron

With Havieron’s dimensions now established, the third (and perhaps most important) point that is likely to be on the minds of excited Greatland investors is that it is now possible to make an estimate of the project’s contained gold. Although by no means definitive at this stage, the early signs are very encouraging.

Let’s take a look.

With a 450-metre strike length, a 150-metre width, and a depth of 600 metres, it is reasonable at this stage to assume that mineralisation at Havieron covers roughly 40,500,000 cubic metres (450 X 150 X 600). Next, if we apply a specific gravity of three (which is broadly expected in the regional geology), we get to approximately 120,000,000 tonnes of ore (40,500,000 X 3 = 121,500,000).

Now it becomes a question of what grade we apply to the ore. To provide a range of potential outcomes, let’s apply three scenarios (note that we divide by 31.1 because this is the number of grams in one troy ounce):

-LOW: 1 g/t ore, which results in roughly 3,900,000 ounces of gold ( (120,000,000 X 1) / 31.1 );

-MID: 1.5 g/t ore, which results in roughly 5,800,000 ounces of gold ( (120,000,000 X 1.5) /  31.1 ); and

-HIGH: 2 g/t ore, which results in roughly 7,700,000 ounces of gold ( (120,000,000 X 2 ) / 31.1 )

Now, we have to assign a valuation to each ounce contained within the Havieron. The table below, taken from our recent report on Greatland, demonstrates the value of a few of Australia’s largest gold miners, in US dollar per resource terms.

If we take a relatively conservative view and assume that each Havieron ounce is valued at $200, then the total value of Greatland’s 30% project interest (on the assumption that Newcrest takes a 70% stake) is as follows:

-LOW: $234 million (£178.7 million) ( (3,900,000 X 200) X 0.3 )

-MID: $348 million (£265.8 million) ( (5,800,000 X 200) X 0.3 )

-HIGH: $462 million (£352.8 million) ( (7,700,000 X 200) X 0.3 )

No matter what scenario you apply, this initial estimate compares very attractively to Greatland’s current all-time high market cap of £104.1 million. This is especially encouraging when we take into account that gold prices are on one of their strongest runs in years and Havieron’s resource remains open – the project’s ultimate dimensions could be significantly larger than the numbers we have used here.

A bright future at Havieron

Three clear takeaways emerge from our analysis:

-Joint venture work has got off to as good a start as possible at Havieron, with the deposit showing more and more signs of boasting the prospectivity that Greatland has long suspected;

- With Newcrest indicating an additional $25 million spend here, this is a most encouraging indicator of its commitment to Havieron over the long term; and

-Rough early resource estimates suggest Havieron, even when using conservative assumptions, could be a vast economic force for Greatland- especially in combination with the remainder of its portfolio.

All of these points have the potential to have a very positive impact of Greatland’s share price and market cap, potentially pushing it to further hights. Heddle was keen to express his enthusiasm for the Havieron’s game-changing potential when we spoke to him, saying:

“It is a really exciting time for Greatland and Newcrest. We are just starting to see the true potential scale of the Havieron project, and we will see a lot more over the next six months. Our eyes are now on delivering a maiden resource by the end of the year, and this will be a really huge milestone for us.”

If Newcrest and Greatland can remain on track at Havieron as they have so far been able to, the future could indeed be very bright for shareholders.

Author: Daniel Flynn

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, does not a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, has been paid for the production of this piece by the company or companies mentioned above.

MiningMaven.com and MiningMaven Ltd are not responsible for the article’s content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

The global shift away from internal combustion engine-powered cars and towards electric vehicles (“EVs”) continues to accelerate at a record pace. With growing demand for the metals involved in the production of EV batteries being complemented in many cases by supply-side disruption, a major investment opportunity has arisen.

According to the International Energy Agency (“IEA”), electric car usage has been soaring over the last decade, with global stock passing five million in 2018 – a 63% increase on the previous year. However, this annual growth rate looks set to accelerate further moving forward. The same organisation expects the number of EVs on the road to hit 125 million by 2030, while JP Morgan believes that EVs and hybrid electric vehicles will account for 30% of all vehicle sales by 2025.

The reasons for this accelerating uptake are varied, encompassing improving technology, increasing environmental consciousness, and – critically – growing government support. Leaders around the world are setting ambitious targets and granting generous incentives to encourage the complete phase-out of traditional vehicles in favour of plug-in EVs in their respective nations. For example, the UK government’s current policy is to insist that, by 2040, all new cars and vans sold in the UK should be zero-emissions capable. Meanwhile, China aims to have five million EVs on the road by the end of 2020, increasing to over 80 million by 2030.

However, when it comes to meeting these ambitious targets, getting the public on board is just one half of the battle. The other half is ensuring that the capacity exists to meet the demand for EVs and their related charging infrastructure – a burden shared by governments and automobile manufacturers alike.

The wheels are already in motion here. Earlier this month, Canada and the US announced that they had finalised the Canada-US Joint Action Plan on Critical Minerals Collaboration. This aims to reduce both nations’ dependency on outside sources when it comes to sourcing “critical minerals” – many of which are required to build EV batteries – by securing supply chains. As well as the EV sector, this covers areas like manufacturing, communications, aerospace, and defence. Likewise, the US and China recently inked an initial trade deal that will boost America’s production of rare earth metals – critical to EV production because of their powerful magnetic properties.

Waking up to change

Key EV nations have woken up to the need to secure domestic energy metal supply, and these growing efforts throw yet more weight behind forecasts of a real explosion in uptake. The metals used in the production of these vehicles – particularly their batteries - are a clear beneficiary of this milestone. One of the most interesting is cobalt, a critical raw material for electric transport used in most common types of lithium-ion batteries.

Alongside an anticipated surge in demand like many of its battery metal peers, cobalt is experiencing severe supply-side disruption. This comes almost entirely down to the fact that nearly two-thirds of the metal comes from the Democratic Republic of the Congo (“DRC").

The cobalt industry in the DRC is well known for its vast artisanal mining contingent. Artisanal mining may be a vital source of income for many, but it also throws up many issues such as safety, child labour, and human rights abuses. These problems faced unprecedented levels of exposure last July when dozens of illegal miners were killed at Glencore’s Mutanda copper/cobalt mine after a wall collapsed. The firm subsequently shut the mine, effectively removing 20% of the world’s cobalt supply from the market. In the wake of this, several companies – including BMW and Apple – announced that they would stop buying cobalt from the DRC or at the very least insist on tighter regulations over working conditions.

Meanwhile, some areas of the EV market are even looking at ways to cut the amount of cobalt used in the batteries powering their vehicles. Tesla boss Elon Musk has pledged to remove the mineral from the next generation of his company’s cars and has already reduced the amount used in Tesla batteries from 11 kilograms per vehicle to 4.5 kilograms. Likewise, global tech companies like South Korea’s SK Innovation and LG Chem and the UK’s Johnson Matthew are researching ways of making cobalt-free batteries.

However, the reality is that removing cobalt from lithium-ion batteries is more easily said than done. Benchmark Minerals’ forecasts suggest that global demand for cobalt in 2029 will be 300,000 tonnes compared with an estimated 70,000 tonnes in 2019. Meanwhile, Tesla is thought to be inking a long-term contract with Glencore to ship cobalt to its new EV factor in Shanghai – suggesting the metal will remain key to the company’s expansion over the next few years at least.

So, while the movement away from cobalt may one day occur, for the time being, it appears to remain merely an idea than a reality. This poses an interesting dynamic for the metal in which its usage has to grow alongside accelerating EV adoption at the same time as industry participants are eschewing its key supplying nation. A clear beneficiary, therefore, appears to be companies with cobalt projects in the remaining 40% of supplying countries that are presumably giving rise to fewer ethical and jurisdictional issues than the DRC.

One such example is Global Energy Metals (TSX-V:GEMC), a pure-play cobalt business building a portfolio of projects in stable jurisdictions such as Queensland in Australia, Nevada in the US, and Ontario in Canada. Chief executive Mitchell Smith explains that the company has positioned itself ahead of the curve when it comes to the global trend of moving away from areas such as the DRC to source increasing amounts of cobalt.

As the global energy landscape evolves it is becoming much more mineral and metal intensive. Increasing the global production of batteries to electrify vehicles and power electronic devices will demand enormous quantities of critical minerals like cobalt. But the development of new mines, especially those in jurisdictionally safe mining districts in close proximity to refining capacity and end-use markets is not keeping pace,” he says.

“This paves the way for Global Energy Metals to continue to grow its strategies on a number of verticals and be integrated into the battery economy through collaboration with fellow industry peers with the direction of building a stable supply chain and mineral independence.”

Author: Daniel Flynn

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, does not a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, has been paid for the production of this piece by the company or companies mentioned above.

MiningMaven.com and MiningMaven Ltd are not responsible for the article’s content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

 

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