The last few months have seen ECR Minerals (LSE:ECR) bounce back to 0.8p following a raft of strong newsflow from its licences in Victoria and some new shifts to its future direction. The business is pursuing opportunities at its Creswick and Bailieston licences in the Australian mining region, as interest from majors like Newmont Mining hots up. At the same time, ECR is continuing to look at ways to take advantage of the current gold price weakness to bolster its portfolio, while also exploring opportunities in the fast-growing energy metals sector. As interest in ECR from Chinese investors continues to grow, CEO Craig Brown explains why he believes the potential on offer at the firm could soon make its current £2.8m market cap look very attractive to investors.
Map of ECR Minerals’ five licences in Victoria, Australia
A Leading licence
Arguably, one of the most exciting opportunities in ECR’s portfolio of Victoria-based licences at present is Creswick, which the business acquired in April this year. Since taking over the tenement, ECR has been carrying out mapping and field work to better understand a large portion that sits on a 25m-wide, 15km long geological feature called the Dimocks Main Shale (DMS). The firm believes that, despite being overlooked historically thanks to a lack of reliable historic documentation, the areas contains potential for considerable in-situ gold mineralised tonnage. If it can prove that this material comprises economically extractable gold, then it could be included in bulk mining.
In September, ECR said its work had identified a large gold system in the DMS gold targets at Creswick. Excitingly, it believes this could be a potential contributor to the Eureka Lead in the upper parts of the Ballarat goldfield that has historically been responsible for 11 million oz of alluvial gold production. It added that it has also found evidence that it could be a contributing source to the nearby Creswick/Berry Lead systems, which are estimated to have produced a further 2.6 million ozs of gold.
As a result of these findings, ECR believes Creswick could potentially house a rare bulk tonnage gold operation. To follow up on this opportunity, the firm has established a prioritised exploration programme beginning with an extensive rock chip sampling programme to supplement exploration data and analysis. After processing these results, ECR will drill test the DMS to establish the gold endowment within the tonnage identified before carrying out more in-depth drilling.
Map showing the DMS
Brown tells us that Creswick is emerging as a potential ‘jewel in the crown’ for ECR, adding that he is excited by the potential on offer given the historical success of nearby drilling operations:
‘We think we have discovered a large gold system in Victoria that previous operators have overlooked in the past. To the south of Creswick, 15 million ozs of gold has been mined in the area of Ballarat while a further 6 million ozs has been take out of the ground to the North. We are sitting in the middle, and a lot of mining at surface has taken place historically, little has taken place at depth. That’s where we see the most significant potential. Following our rock chip sampling, we hope to start drilling at least 12 holes at Creswick. We believe it could contain a very significant deposit. What’s more, this drilling work should move very quickly as we are using a new laboratory that can turn results around very quickly. This is a very efficient way of drilling large deposits as you can decide proactively how and where to continue drilling base on a live feed of results data.’
Another of ECR’s key tenements in Victoria is Baillieston, located in the centre of the region, 30km east of Kirkland Lake Gold’s 1 million oz Fosterville Gold Mine. Fosterville is currently the largest producing gold mine in Victoria, with 300,000oz of gold predicted this year. Thanks to its impressive 94pc recovery rate, the operation has been – and continues to be - integral to an ongoing resurgence of gold mining in Victoria over recent years. Around the same distance away from Bailieston to the southwest is the Costerfield gold mine, another prolific producer in the region,
Baillieston’s location received yet another vote of confidence earlier this month when Newmont Mining, one of the world’s largest gold producers, applied for a large block of land right next door. Although Newmont is yet to acquire the licence, Brown says its interest in an area so close to Baillieston is exciting alone:
‘I was looking at this land a couple of months ago, and it wasn’t available, so it is obvious that neighbours have had to drop it off in that time. It is pretty incredible that Newmont has come and got in there quickly, so they must have been keeping an eye on it. We believe that Baillieston has a huge amount of prospective potential, so Newmont’s enthusiasm for such a nearby area is very encouraging.’
In July, ECR announced that a diamond core drilling programme had identified a significant gold system at Baillieston’s most advanced prospect, Blue Moon. Several drill holes confirmed the presence of moderate gold mineralisation at the site, but, most importantly, follow-up analysis found considerable leaching of gold-containing veinlets in its oxide zone near surface.
According to ECR, if these leached materials are gold bearing, then much higher grades of gold could be identified by drilling beneath the tenement’s oxide zone. This would potentially support ECR’s theory that Blue Moon may contain a similar type of mineralisation to the Fosterville mine. To follow up on its findings, ECR immediately launched an accelerated development programme on the prospect, supported by a £650,000 round of strategic financing.
The success also prompted ECR to advance its work across several other areas in Baillieston. For example, it has re-launched an exploration programme across several targets in the area. Thus far, it has released two sets of results from this work, offering numerous rock chips samples hosting high-grade gold mineralisation. It took many of these from a prospect called HR3 Byron that houses the historic Byron Mine where records indicate that 4,416oz of gold have been produced from 8,698t of ore. ECR is now working on a next-stage exploration programme to examine the extent of mineralisation across successfully sampled areas.
The success also led ECR to complete mapping and sampling in unexplored areas to the north of Blue Moon, where it has identified two new prospective gold targets called Red Moon and Yellow Moon. These are being subjected to further geochemical analysis to determine whether a follow-up work programme is appropriate. Finally, ECR also plans to carry out trenching and soil sampling at a final Baillieston prospect called Black Cat. Here, the firm is preparing work to better understand the hard rock prospects before potentially selecting targets for drilling.
Alongside Creswick and Baillieston, ECR owns three further tenements in the Victoria area. The most advanced of these is Avoca, a historically mined licence that contains prospects called Bung Bong, Monte Christo, Surprise, and Henry’s Hill. A drilling programme earlier this year at Bung Bong and Monte Christo identified gold mineralisation.
Meanwhile, ECR also owns a licence called Timor, which contains numerous hard rock and alluvial gold deposits evidenced by significant historical working. Its final Victoria licence is Moormbool, a mostly unexplored tenement covering around 59km2.
Despite its busy work schedule in Victoria, ECR revealed that it is also reviewing several additional gold project acquisition opportunities in a strategic review announced earlier this month. With poorer commodity market conditions allowing it to pick up gold opportunities on a cost-efficient process, Brown told us he sees an advantage in building a diverse, low-cost and strategically significant portfolio of gold projects while he still can:
‘The junior resources sector is challenging at the moment. The Canadian and Australian markets are struggling, and so is the UK to a degree. You would generally expect a bit of an uplift from the beginning of September until the end of the year, but we haven’t seen that in 2018 so far. While this has its problems, it also creates an opportunity for a junior business like us to increase our position on the ground with strong opportunities at a low cost. This will put us in a fantastic place when the markets once again change.’
Elsewhere in this month’s strategic update, ECR said it was aware of the growing global interest in energy metals and minerals for battery technologies. It added that it has found several projects in the sector that could be attractive and had held discussions with third parties who would be interested in supporting the developing of these through an injection of capital. Brown elaborated on ECR’s progress in this area to us:
‘In the past, our focus has primarily been on gold, but because the energy metals sector has heated up so much, we are now reviewing quite a few other projects. For example, we are reviewing a uranium project at the moment as well as several additional projects in that space. We haven’t taken on anything yet, but we wouldn't have even looked at this energy metals and mineral for battery technologies several years ago, so that alone shows how much the area has heated up. There seems to be a lot of projects around, and we would be looking at these projects in Australia and some in Africa.’
Thanks to July’s strategic financing initiative to support the development of Blue Moon, which was carried out at 0.7p a share, Brown says ECR remains fully funded for its anticipated workflow until Q3 next year. This includes $100,000 ringfenced for activities such as initial due diligence and licence application costs to fast-track new and existing projects. Further boosting the business’s cash runway is the potential for an additional £1.16m from outstanding warrants.
Brown adds that ECR is also seeing an increasing amount of interest from investors in the Chinese market, supported by non-executive chairman David Tang’s connections to the country. Indeed, Tang has worked as president of China Nonferrous Metals International Mining Company and managing director of China Nonferrous Gold. With Chinese institutional investor Shenyang Xinliaoan Machinery already holding a 16pc position in ECR, Brown is optimistic around the potential that increasing interest from Asia can bring:
‘Several investors in China are looking at injecting capital into ECR or joint venturing with us to support our assets. If they could work with us to speed up the drilling and development of our portfolio then that would be fantastic for everyone involved, and it would allow to reach the potential, we believe we are sitting on at an even quicker rate.’
Finally, he adds that the business will receive another financial boost from Australia’s Junior Minerals Exploration Incentive. This enables junior resources players to create and issue tax credits by giving up a portion of their tax losses from greenfield mineral exploration expenditure.
Irons in the fire
Creswick and Bailieston provide two attractive opportunities for ECR that are likely to yield results over coming months as the company runs off existing cash. The nearby interest from Newmont only adds weight to the potential ECR believes to be on offer. With these licences in tow, the company’s ongoing efforts to pick up new gold projects while prices remain low, or even enter the growing battery metals space, become all-the-more exciting. With a number of irons in the fire – ECR has interests in several other projects we will cover in a later piece – the firm offers many potential sources of strong newsflow that could help it see considerable share price strength.
Author: Daniel Flynn
Disclosure: The author does not own shares in the companies mentioned above