Emmerson Resources is an advanced explorer with an excellent technical pedigree that’s pursuing aggressive exploration and appraisal activity with respect to its Tennant Creek acreage – in conjunction with Evolution Mining.
| Corporate Details |  |
| Status: Advanced Explorer | |
| Size: Small Cap | |
| Commodity Exposure: Gold | |
| Share Price: $0.032 | |
| 12-month Range: $0.021 – $0.051 | |
| Shares: 377m, Options: 2.1m | |
| Top 20: 61% | |
| Net Cash: $2.9m | |
| Market Value: $12m |
| Key Parameters | Rating (✓out of 5) | Quarterly Statistics |
| Management Quality | ✓✓✓✓✓ | Q1 2015 Exploration Spend: $0.485m |
| Financial Security | ✓✓✓✓✓ | Q1 2015 Administration Spend: $0.234m |
| Project Quality | ✓✓✓✓✓ | Exploration Spend 67%, Admin. Spend 33% |
| Exploration / Resource Potential | ✓✓✓✓✓ | Q2 2015 Forecast Exploration Spend: Nil |
| Project Risk | ✓✓✓✓✓ | Q2 2015 Forecast Admin. Spend: $0.3m |
We introduced Emmerson Resources to our Portfolio during December 2010, based on our long-standing belief in the company’s high-grade, gold-copper Tennant Creek acreage package in the Northern Territory. We’ve maintained confidence in the company’s ability to ‘crack the code’ with respect to the geology of Tennant Creek, with the ultimate goal of production status. The 2014 joint venture tie-up with Evolution Mining (ASX: EVN) has reaffirmed our confidence in the overall story.
One of the company’s biggest attractions has been technological. Emmerson utilises a technique that is able to clearly identify fresh gold-copper targets that have a strong chance of being mineralised. Within the Tennant Creek context this means the identification of mineralisation-bearing host ironstones. The use of HeliTEM surveys has allowed for the identification of extensions to prospective mine corridors, thus expanding mineralized trends well outside of areas previously defined by magnetic surveying alone.
We believe there is a fundamental lack of broader market appreciation of the significance of the farm-out/joint venture deal with Evolution Mining (ASX: EVN). The deal has huge implications for a company of Emmerson’s modest size, with Evolution investing almost $29 million in both Tennant Creek exploration and Emmerson itself, over the next five years. Evolution’s commitment reinforces our long-held view on the vast resource potential of Emmerson’s Tennant Creek portfolio.
Recent Activity
2015 Field Season Commencement
In our prior coverage during April we foreshadowed the imminent commencement of Emmerson’s 2015 exploration program, fully-funded by its joint venture partner, Evolution Mining. Activity is focused predominantly on the Eastern Project Area (EPA) within the Tennant Creek Mineral Field (TCMF).
The work included a major 18,000-metre infill RAB drilling program at Emmerson’s Billy Boy prospect, which has just been completed. The aim of the drilling was to sample the regolith/bedrock beneath the sand cover, targeting the best gold, copper and bismuth anomalies ahead of later testing by either RC or diamond drilling.
Encouragingly, results from the RAB program have successfully identified new massive iron alteration that typically hosts high-grade gold mineralisation within the TCMF.
Furthermore, two of the four planned diamond drill-holes have also been completed and they have successfully verified the underlying geology, in particular the presence of the “hematite shale” horizon that is typically associated with high-grade gold mineralisation at most major deposits within the TCMF.
Samples from the RAB drilling program have been dispatched to the assay laboratory, whilst core logging and sampling is underway on the diamond drilling program. Based on the success of the RAB drilling, further holes are planned for Billy Boy as the diamond drilling continues.
Exploration Co-funding Initiatives
Emmerson has also successfully secured landmark co-funding from the Northern Territory Government for two initiatives:
- Deep diamond drilling to test for gold potential beneath the recently discovered copper mineralisation at Goanna and also beneath the historic Gecko mine. This drilling will be guided by the recent 2D seismic geophysics that suggests favourable geology and structures continue at depth and may host deeper gold mineralization.
- A 60km line of regional 2D seismic reflection to better refine the underlying geology and controls to the mineralisation within the TCMF.
The co-funded deep diamond drilling is awaiting the availability of a suitable rig and is tentatively scheduled to commence during July 2015. Based on Emmerson’s belief that the metal zonation at Gecko and Goanna indicates potential for a sizeable gold zone underlying the high-grade copper mineralization, this will be an exciting program.
The regional seismic survey is planned to commence mid-June and will provide the first deep seismic profile through the entire TCMF. This survey has the potential to rewrite the structural and geological framework of the field and provide important regional context to reinvigorating the discovery of a new generation of gold and copper deposits.
Project Overview
Emmerson’s 100%-owned EPA encompasses around 500 sq km and is predominantly covered by sand and is largely unexplored. Systematic work by Emmerson over a number of years has dramatically changed the exploration model, leading directly to the discoveries at Goanna and Monitor during 2011/12. The copper and gold within these prospects is associated with hematite ironstones and/or quartz vein arrays, constituting a new style of mineralisation and the first new discoveries within the TCMF for over a decade.
The EPA fits within this new style, as it is weakly magnetic and prospective for the gold-hematite ironstone association. Further supporting evidence is evident within the general area where one of Tennant Creek’s highest grade deposits – the historical Nobles Nob mine – produced around 2Mt at an average recovered grade of 17.3g/t gold (with some zones in excess of 124g/t gold), with the highest grades associated with hematite ironstone.
The area outside of the current drilling program encompasses around 400 sq km, so given the immediate success at Billy Boy the balance of the project area will be explored in a similar manner. The strategy involves using recent geological interpretations based on high-resolution magnetic surveying to define broad areas of interest – with subsequent RAB drilling to pinpoint mineralisation, then follow-up RC/diamond drilling to test the depth potential of the mineralisation.
During H2 2014, 4,200 line km of high-resolution magnetics and radiometrics was completed within the EPA (refer to graphic above), providing an excellent framework for assessing the undercover geology and structure, along with the successful identification of new, weakly-magnetic ironstone.
In parallel, a large regional RAB drilling program was conducted over the Billy Boy Mining Leases on 1.7km-spaced lines, aimed at geochemically sampling the bedrock and tracing back to source some gold-jasper nuggets returned by local prospectors. The anomalous geochemistry from this program occurs along major structures, in association with the hematite shale formation (an important element in the joint venture’s new exploration model) and in some cases, across contiguous lines.
Four trial lines of seismic reflection were completed over known mines. Whilst the results of this survey are still confidential, the initial interpretations are providing new insights into the controls on the TCMF mineralisation. Specifically, the survey detected both the presence and orientation of the structures and conduits that are responsible for channeling the mineralising fluids. It is anticipated this survey will assist in better targeting the gold zones beneath some of the copper at such deposits as Gecko.
Similarly, Emmerson has been working with respected specialists on targeting methodology in an effort to identify statistically robust parameters of the known deposits in the TCMF. To date some 237 predictive maps have been produced, which constitute the various elements of the exploration model plus empirical data derived from surface geochemistry and drill holes.
Preliminary testing of this model gave a Weights of Evidence success rate of 95.92% in predicting known deposits and 99.83% for the Logistic Regression model – and further fine tuning is currently underway. It is anticipated that this will assist in identifying new areas with similar geological characteristics to the known major deposits and prospects that have all the elements but have not been effectively explored.
Evolution Minerals Farm-in
Under the terms of the deal announced back in mid-2014, Evolution will sole-fund exploration expenditure worth $15 million over a three-year period in order to earn a 65% stake in Emmerson’s 2,500 sq km Tennant Creek project area. Evolution can then spend a further $10 million minimum over a further two-year period to earn an additional 10% stake in the Tennant Creek project area, taking its total stake to 75%.
Evolution also subscribed to a placement of 49.144 million Emmerson shares at a price of $0.0381 each that raised $1.872 million, whilst Emmerson also received approximately 2.5 million Evolution shares at an issue price of $0.7986 per share (currently trading at $1.10). This has boosted Emmerson’s cash reserves and investments to around $5.5 million.
The major consequence of the tie-up with Evolution is that a major ramp-up in field activity is underway, hopefully accelerating the company’s transition from advanced exploration status to that of a producer. The aim is to achieve this through aggressive near-mine drilling programs aimed at growing the existing JORC-compliant resource base, combined with regional exploration work. Exploration activity is drawing upon Evolution’s vast development and exploration expertise, but is managed and operated by Emmerson.
Summary
The Tennant Creek mineral field has produced more than 5.5 M ounces of gold and 470,000 tonnes of copper, making it one of the highest-grade goldfields in Australia. Emmerson has consolidated 95% of the mineral field, where amazingly just 8% of the historical drilling has penetrated below 150 metres depth. Some of the most prospective rocks in the field lie hidden beneath recent cover.
The 2015 exploration program will test interesting targets such as Billy Boy, which represent outstanding, large scale, multi-element geochemical anomalies. In addition, early-stage results from the application of new technology such as the recent seismic survey appear promising in terms of enhancing the company’s capacity to explore at depth. These will likely lead Emmerson to test for high-grade gold mineralization beneath the some of the copper zones at the Gecko and Goanna deposits.
The tie-up with Evolution Mining provides shareholders with financial security, technical expertise, a high level of exploration activity, a potentially accelerated timeline to production and also minimal dilution. Exploration activity will draw upon Evolution’s vast development and exploration expertise, but will be managed and operated by Emmerson. We therefore retain our Speculative Buy recommendation on Emmerson Resources around current price levels for those investors without existing exposure to the stock.
