Martin Place Securities has produced a commissioned research report on Torian Resources, a small company operating in and around Kalgoorlie with particular focus on tenements along the Zuleika Corridor about 40km west of Kalgoorlie. What began as an interesting region for a small cap exploration play for MPS clients, the Zuleika Shear west of Kalgoorlie (now considered in some circles to be the Zuleika Corridor) has turned out to be something far more significant for the Australian gold industry and for the major companies in this area:- Northern Star, Evolution, Tribune and Rand Resources.
This Zuleika Corridor is now Australia's fifth largest goldfield, producing over 400,000ozpa, and is expected to rise as new mines from NST and EVN in particular are brought on stream.
The K2 and Strzleckie Structures carry narrow very high grade veins that support high grade and low cost mines that are currently very profitable and are amongst Australia's highest grade producers.
This production growth in a single goldfield mining camp is unprecedented in Australia my experience.
The growth in resources is also very substantial and the technical evidence from NST in particular is that the strong growth will continue.
Whilst most DawesPoints readers will be aware of the spectacular +750% performance of the ASX Gold Index from 2000 into 2011 like this:
They may not be aware that WA and the Kalgoorlie region in particular did not participate and in fact gold production fell 50% into 2008.
The gold production renaissance now underway and the exciting performance of the Zuleika Corridor makes for outstanding investment opportunities in the areas around Kalgoorlie.
Torian Resources is very well placed here and the Company's management which includes MD Matthew Sullivan, who also discovered important deposits in Kundana itself and also Kanowna Belle, has assembled a tenement package that covers about 25% of the line of strike of the highly productive K2 structure along the Zuleika Shear.
Torian's tenements along the Zuleika Shear are well chosen and even the tenements in the NE beyond Mt Pleasant may prove up to be a pleasant surprise.
The company is small but the opportunity has large potential and is deserving of a thorough assessment.
The data indicates that the region is still substantially underexplored with <5% of drill holes to date exceeding 100m below surface.
Barry DawesBSc FAusIMM MSAA
I own TNR, NST, EVN, TBR and Cascade.
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The gold price is beginning to show encouraging signs of beginning the next stage of the long term bull market that will take it to new highs over US$2000/oz.
The demand for gold from India and China already exceeds global mine production and is adding to high investment interest from Europe and North America. Central banks are also now significant net buyers so the overall gold market is tightening up. We also have to ask `who will be the sellers?’ to meet this demand at today’s prices.
Gold has already been rising in most currencies and the recent weakness in the A$ has pushed up the gold price up above A$1500/oz.
The ASX Gold Index has responded to the better gold market and is up 60% from its low in November but it is still 69% below the 2011 high when gold was only about A$1400/oz compared to A$1550 today. There is much to catch up.
Some Paradigm gold stock recommendations from the2014 December Dawes Points are up over 100% (NST +117, EVN115%) with others up over 50% (SAR +95%, MLX +83% and DRM +78%). The recent strong earnings reports from many of these companies and some with increased dividends can only get better in 2015 with a gold price A$150/oz higher.
Blackham Resources is one company that has outstanding prospects from its Wiluna gold mining project that Paradigm considers will provide outstanding short and long term returns as the entire Wiluna Goldfield is revived. With 4.7moz resources and a 1.3mtpa processing plant the project should have a long term future at gold production rates of over 100,000ozpa generating revenues of over A$150mpa.
Most Paradigm account clients hold BLK and should do very well as long term investors.
Risked milestones are provided to indicate an 18 month share price base target of A$0.90/share with potential of $1.57.
If you don’t have BLK and don’t have account with Paradigm you might be missing out!
Engineering studies on mines and mill well advanced
Target of >80kozpa by mid 2016 then >100kozpa
Mill refurbishment capital costs set at <A$16m
Mine development costs estimated at <A$10m
Total funding requirement is estimated at <A$26m
Cash flow positive five months after major funding drawdown
Initial resources base in excess of 4.7moz and growing
Additional potential of up to 3moz in near mine exploration
Blackham Resources’ 1.3mtpa Matilda Gold Project to produce 100-110,000ozpa is coming closer to fruition with progress made on the mill rehabilitation process and the finalising of ore sources from the current 4.7moz resource. Exploration appraisals are also providing potentially significant new resources.
Higher A$ gold prices and the fall in the cost of mining contractor equipment and fuel costs should give this project even more attractive margins.
Paradigm has determined a Base Case Project NPV8at A$1,500/oz of A$173m (A$0.90 /share fully diluted) and a Standard Case Project NP V8 at A$1,500/oz ofA$303m (A$1.57 /share fully diluted). Risked milestones are provided to indicate an 18 month share price base target of A$0.90/share with potential of $1.57.