Hugely credentialed exploration company with a focus on the Bryah Basin of Western Australia. A major farm-out with Sandfire Resources could see at least $15 million spent on exploration over a 5½-year period.
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Corporate Details |
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| Key Parameters | Rating (✓out of 5) | Quarterly Statistics |
| Management Quality | ✓✓✓✓✓ | Q1 2014 Exploration Spend: $0.417m |
| Financial Security | ✓✓✓✓✓ | Q1 2014 Admin Spend: $0.396m |
| Project Quality | ✓✓✓✓✓ | Exploration Spend 51%, Admin Spend 49% |
| Exploration / Resource Potential | ✓✓✓✓✓ | Q2 2014 Forecast Exploration Spend: $0.4m |
| Project Risk | ✓✓✓✓✓ | Q2 2014 Forecast Admin. Spend: $0.215m |
We introduced Talisman Mining to our MineLife Portfolio during January 2014 after several years on our Watch-list, based on our long-standing belief in the company’s board and management team, along with its high-quality project portfolio and robust cash position. Our confidence in the quality of the company’s assets has been reinforced by growing market awareness over recent months, which has seen Talisman’s share price surge from a low of $0.08 to a high of $0.195 – all within the month of June.
Talisman first and foremost boasts proven in-house exploration expertise, comprising a large chunk of the management team that was hugely successful at former ASX-listed nickel explorer/producer Jubilee Mines. The team discovered multiple high-grade sulphide nickel deposits and transformed Jubilee into an established producer prior to its eventual takeover by Xstrata. The Jubilee board accepted Xstrata’s $23-a-share cash offer during 2007 (a far cry from its minnow status at $0.20) that valued it at $3.1 billion.
The company’s second major attraction is its dominant ground position within the Doolgunna region of Western Australia. In fact, outside of major regional player and producer Sandfire Resources (ASX: SFR), Talisman ranks as the best-qualified operator in this highly prospective region. It was no surprise therefore that Talisman recently entered into a major joint venture farm-out deal, under which Sandfire can earn up to a 70% stake in three of Talisman’s projects by spending at least $15 million over a 5½-year period.
Recent Activity
Sandfire Commences Exploration Work
Talisman announced this week that Sandfire Resources is about to commence a deep diamond drill-hole to test a late-time EM conductor that’s been identified at a depth of 400 metres below surface.
The conductor was identified from a recent high-powered surface fixed-loop electromagnetic (FLEM) survey at Talisman’s Homer prospect, situated within its 303 sq km Springfield Copper-Gold Project in Western Australia’s Bryah Basin in the Murchison Goldfields (refer to our Daily Resources Bulletin on 15th June).
Once the necessary approvals are obtained, Sandfire plans to undertake a single diamond drill-hole of approximately 900 metres with the aim of intersecting the modelled conductor at a target depth of 400 metres. A drill-rig is available on-site at DeGrussa to commence drilling as soon as approvals are received.
As well as testing the modelled conductor, the drill-hole will also be used by Sandfire to establish a platform for further down-hole EM to test for additional conductors both at depth and away from this principal EM target.
Technical Significance
This is the first time Sandfire’s high-energy geophysical techniques have been deployed along the extension of the DeGrussa Mine Corridor at Springfield. To date Sandfire has only completed Stage 1 of a planned four-stage FLEM survey.
Importantly, Talisman’s Homer prospect lies immediately along strike and to the east of Sandfire’s operating DeGrussa copper-gold mine and is interpreted to contain extensions of the same volcanic rock package that hosts the DeGrussa VMS deposits.
Sandfire had already identified a combined 65km strike length of prospective VMS horizon across the combined Talisman and Sandfire tenements.
Sandfire’s recent analysis has resulted in the detection of a late-time conductor that is interpreted to sit within the extension of the prospective DeGrussa stratigraphic horizon. The conductor sits just 5km east of the DeGrussa mine.
Project Background
Sandfire has the right to earn a 70% ownership interest in Talisman’s interests within the Doolgunna region by spending $15 million on exploration across the projects within a 5½-year period. As part of the deal, Sandfire has a minimum expenditure commitment of $5 million within the first two-year period.
Sandfire can then elect to either withdraw from the agreement with no further commitment and no project equity interest, or spend an additional $5 million within a further two-year period in order to earn a 51% interest in the projects.
Following this period a joint venture will be formed, with Sandfire holding a 51% interest and Talisman a 49% interest, in the projects. At this point, Sandfire has the option to sole-fund a further $5 million worth of exploration expenditure within a further 18-month period, which will see it acquire a further 19% stake in the projects, taking its total interest to 70%.
The deal is hugely significant in our view, as it provides the potential to unlock a new generation of copper-gold discoveries by combining Sandfire’s emerging geological knowledge (gained from the discovery and development of the high-profile DeGrussa discovery) with Talisman’s extensive Doolgunna datasets and geological knowledge.
At least six RC drill-holes previously drilled by Talisman at the Homer prospect were identified by Sandfire for the application of high-energy DHEM to test for the presence of conductors that could in turn represent accumulations. In addition, Sandfire undertook a high-powered Fixed-loop Electro Magnetic survey (FLEM) at the Homer prospect that encompassed approximately 1.6km of the prospective DeGrussa host horizon, in order to better test for conductors beyond the extent of previous ground electromagnetic surveys.
The results so far are hugely encouraging and they mark the beginning of an important new period of exploration activity across Talisman’s Doolgunna portfolio.
In terms of history, Talisman has been actively exploring the Springfield Project since the granting of the first two project tenements during November 2009. Exploration activities have since been focused on the generation of quality data sets, as well as programs of diamond, RC and RAB drilling to test priority targets. These drilling programs have also been undertaken to provide critical stratigraphic and structural information necessary for exploring for this type of deposit.
This important work was invaluable in terms of providing the strong technical foundation to attract a quality partner of the pedigree of Sandfire Resources.
Summary
Talisman has put enormous effort over the past five years into its overall exploration approach, its review of exploration models and prioritisation of exploration targets. Talisman has invested more than $20 million in exploring its Doolgunna regional projects over the past four years. At the end of the day however, intensive large-scale regional exploration is best suited to a company like Sandfire that possesses both deep pockets and the very strong incentive of adding to its DeGrussa regional resource base and extending its overall production life.
Talisman retains exposure to a potential minimum of $15 million worth of exploration and appraisal expenditure at no cost, whilst maintaining $16.6 million in current cash reserves – all with a market value of just $20 million. Accordingly, we retain our Spec Buy recommendation on Talisman Mining for those without existing exposure (noting that the stock has risen sharply from our Spec Buy recommendation around $0.096 a fortnight ago).
