Interest Builds Around AusQuest
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AusQuest Limited (ASX: AQD, Share Price: $0.02 Market Cap: $10m) has a strategy of focusing exclusively on ‘big-picture’ exploration projects, both domestically and abroad. The company has implemented a Strategic Alliance Agreement (SAA) with diversified miner South32 (ASX: S32) to develop a pipeline of high-potential exploration opportunities, with South32 funding all exploration activity.
There’s been a really important development, with diamond drilling now underway on the joint venture’s Blue Billy zinc project in Western Australia. Its significance lies in the fact that is the first drilling program commissioned under the AQD-S32 SAA – and there’s strong market anticipation surrounding the program.
AusQuest’s SAA with South32 corresponds with a sizeable recovery in its share price - from lows around $0.005 in late 2016 to a recent high of $0.022. There’s strong market interest surrounding the Blue Billy drilling program, as it will target zinc targets (at a time of strong metal prices) that lie down-dip from existing zinc anomalies. Geologically, there are potential analogies with sediment-hosted zinc deposits in NW Queensland. AusQuest’s strategy of exclusively targeting Tier 1 exploration discoveries differentiates it from the vast majority of its junior peers, combined with the fact that it is fully-funded in this activity.
Announcement Detail – Blue Billy Drilling Underway
Diamond drilling is now underway on Blue Billy zinc joint venture project, 100km southwest of Paraburdoo in Western Australia’s Edmund Basin. South32 can earn a 70% stake by spending US$4 million on exploration, with the potential to boost its stake to 80% if it completes a Pre-Feasibility Study (PFS). AusQuest is the initial operator of the joint venture and is managing the initial drilling work.
Figure 1: Graphic showing Blue Billy JV geology, zinc anomalies and drill-hole locations for the current program
As the graphic shows, four diamond drill-holes will be broadly spaced ~4km to ~10km apart - and drilled to an average depth of 775 metres, taking around six weeks to complete. The holes are to be drilled at specific locations where the targeted stratigraphy (pyritic black shales of the Blue Billy Formation) lie within close proximity of the Talga Fault.
The aim is to test down-dip from previously identified shallow zinc anomalies (up to 0.5% Zn). The regional-scale Talga Fault lies ~10km down-dip from the known zinc occurrences. AusQuest believes that this stratigraphy provides a compelling analogy with similar sediment-hosted zinc deposits like Century, in Queensland’s Mt Isa region.
The Blue Billy Formation is relatively thick in the area to be targeted by drilling (~600 metres), suggesting the presence of nearby growth faults that could have been active during the time of sedimentation and acted as possible conduits for mineralising zinc-rich fluids.
Overview - Sedex Zinc Deposits
More than half of the world’s zinc and lead has been extracted from sedex deposits like Mt Isa. The region is in fact host to the biggest accumulations of zinc, lead and silver in the world. The area hosts five supergiant sedex deposits – McArthur River, Century, Mt Isa, Hilton, and George Fisher.
Sedex deposits form deep under the ocean where vents in the sea floor allow hydrothermal fluids to mix with seawater. These hot, saline fluids have percolated through several kilometres of sediments and crystalline rocks, picking up precious metals along the way. As the metal-rich hydrothermal fluids hit the cool sea water, they precipitate material onto the sea floor at and near the vents. Metal-rich minerals are deposited between layers of fine-grained mud, sand and silt.
So the Mt Isa region was once an ancient sea floor!
Sedex deposits form at or just below the seafloor in thick sediments laid down in rifts – long troughs that form where crust is pulled apart and thinned – or passive margin settings – where continents drift apart. Faults that form in these settings become the conduit for hydrothermal fluids.
AusQuest and South32 have targeted their drill-holes in specific locations at the Blue Billy projects, as they believe that the Talga Fault could represent one of these conduits for potentially mineralised fluids.
Known sedex deposits occur within Paleozoic-age and Proterozoic-age basins, which means they occur exclusively in rocks between 2.5 billion years and 250 million years old. For exploration geologists, the first item on their check list should be finding a region of the right age and right geological setting.
We initiated coverage of AusQuest around $0.017 during September 2015 – representing a current gain of 17%.
As we’ve discussed, the SAA with South32 represents an exciting opportunity to work alongside one of the world’s most successful diversified miners, leveraging AusQuest’s skills as an explorer targeting provincial-scale discovery opportunities. The arrangement gives AusQuest the financial capability to identify and evaluate opportunities, as well as providing rewards for success along the way.
Market interest is now closely focused on AusQuest as the first drilling program is now underway as part of the SAA at Blue Billy. It’s an important milestone for the company. Zinc has been one of the best-performing commodities of recent years, as the graphic below clearly shows.
After a decade as a broking resources analyst with Intersuisse, Gavin helped establish the Fat Prophets Mining Report during 2005, writing and producing the report until he established MineLife during late 2010. He writes about mining and energy companies via his MineLife reports.
Disclaimer: Gavin Wendt, who is a director of Mine Life Pty Ltd ACN 140 028 799, compiled this document. It does not constitute investment advice. In preparing this report, no account was taken of the investment objectives, financial situation and particular needs of any particular person. Before making an investment decision on the basis of this report, investors and prospective investors need to consider, with or without the assistance of a securities adviser, whether the information is appropriate in light of the particular investment needs, objectives and financial circumstances of the investor or the prospective investor. Although the information contained in this publication has been obtained from sources considered and believed to be both reliable and accurate, no responsibility is accepted for any opinion expressed or for any error or omission in that information.