The goldfields in Victoria, South Australia are grabbing the world’s attention for the second time in history.
Upon the first discovery of the precious metal in the 1850s, we saw this desert area become a major international mining centre.
As you can probably imagine, technology has moved on from the hand-dug pits, wooden ladders and dynamite that marked these times.
Today, 3D-mapping, drone-based mineralogical studies, and vast national resources devoted to seismic, geochemical and geochronological surveys are unearthing a deeper, second layer to Victoria’s gold rush.
The Geological Survey of Victoria now estimates that 75 million ounces of high-grade gold is currently sitting under the earth in Australia’s most southern state.
Tax no dampener on gold rush
The scale of finds being made in Victoria are so enormous that the local government is even keen to cash in.
In January 2020, it announced that mines recovering more than 2,500 ounces of gold a year would be subject to a 2.75% tax.
But this has done little to dampen exploration interest.
Not least because the state government has been handing out multi-million-dollar grants to mining companies to get their projects underway.
What the tax development does mean, however, is that the cost of mining an ounce of gold has risen to the point where only the most well-capitalised projects with licenses to boot will succeed.
Enter ECR Minerals (LSE:ECR).
ECR has more than a few strings to its bow in Australia.
The firm’s main area of interest is the Victoria boom.
In Bailieston and Creswick, ECR boasts two enormously exciting and prospective Victoria gold projects.
Bailieston is found in the major orogenic Lachlan Fold Belt, while Creswick sits on the Dimocks Main Shale that extends to Ballarat then miles to the south.
Bailieston’s location within Victoria
Recreating Kirkland Lake’s success
Kirkland Lake Gold (TSX.KL) (NYSE:KL) has become the poster child for success in the current wave of Victoria gold interest.
In the last five years, the firm’s share price has exploded 2,263% thanks to its ownership of the Fosterville Gold Mine.
This has made the company and its investors rich by any standard.
Fosterville is the largest gold producer in Victoria, increasing annual gold production by 315% between 2014 and 2018 while also seeing a 540% jump in gold head grade from 4.6g/t to 24.8g/t, according to the national geological survey.
Operating cash costs of $130 to $150 per oz are laughably small for a world-class deposit, and the spot price of gold hitting new eight-year highs of $1,759 per oz has done nothing to dampen enthusiasm for the precious metal.
ECR’s key tenement of Bailleston sits just 18 miles east of Fosterville and on the same rich seam of gold that has made millionaires of Kirkland’s investors.
Trading volume has started to pick up in ECR since it won licences at the start of 2020.
But with wider equity markets consumed by Covid-19, attention has been diverted away from a potential goldmine.
With the ECR share price trading in a range at around 0.7p, there is huge upside potential to be had.
The Blue Moon prospect at Bailieston, Victoria
Firms flocking to Victoria
ABC Australia reported in May 2020 that more than 80 mineral exploration applications are now underway in Victoria.
And it is the UK and Canada-listed companies that have got there first.
Top names include Power Metal Resources (LSE:POW), Red Rock Resources (LSE:RRR) and Fosterville South (TSX.V:FSX).
The latter of these has this week spun off two of its gold projects at Avoca and Timor in Victoria — bought from none other than ECR — to create a new company, Leviathan Gold, with FSX shareholders receiving shares in Leviathan on a one-to-one basis.
Shares in FSX rose by nearly 30% to an all-time high of CAD$4.35 on the news.
ECR’s sale of Avoca and Timor to Fosterville South means that – as well as an upfront $500,000 to fund its Bailieston and Creswick exploration – ECR will receive $1 for every ounce of gold discovered, up to a maximum of $2,000,000.
Multinational miners are now converging on Victoria, but they have been beaten to the punch to by their nimbler rivals.
As a relatively small AIM-listed exploration, the results here could be a kingmaker for ECR.
Author: Daniel Flynn
The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.
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