A hugely-credentialed exploration company with a $15m farm-out JV with Sandfire Resources over its Bryah Basin acreage. Drilling has revealed the first regional mineralised sulphides outside of DeGrussa.
| Corporate Details |  |
| Status: Emerging Producer | |
| Size: Small Cap | |
| Commodity Exposure: Copper | |
| Share Price: $0.75 | |
| 12-month Range: $0.10 – $0.785 | |
| Shares: 149m, Options: 7m | |
| Top 20: 38% | |
| Net Cash: $13m | |
| Market Value: $112m |
| Key Parameters | Rating (✓out of 5) | Quarterly Statistics |
| Management Quality | ✓✓✓✓✓ | Q1 2015 Exploration Spend: $0.63m |
| Financial Security | ✓✓✓✓✓ | Q1 2015 Administration Spend: $0.367m |
| Project Quality | ✓✓✓✓✓ | Exploration Spend 67%, Admin. Spend 37% |
| Exploration / Resource Potential | ✓✓✓✓✓ | Q2 2015 Forecast Exploration Spend: $0.75m |
| Project Risk | ✓✓✓✓✓ | Q2 2015 Forecast Admin. Spend: $0.75m |
We first introduced Talisman Mining during February around $0.155 based on our long-standing belief in the company’s proven board and management team, combined with its high-quality Bryah Basin project portfolio and robust cash position. The company has since undertaken two significant corporate deals – the first involving a $15 million farm-out of its Bryah Basin acreage to Sandfire Resources (ASX: SFR) – and the second involving the acquisition of the Sinclair nickel project.
Talisman boasts proven in-house exploration and appraisal expertise, comprising a large chunk of the former management team that was involved with hugely successful ASX-listed nickel explorer/producer, Jubilee Mines. The team was involved in the discovery of multiple high-grade, sulphide nickel deposits that 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.
Talisman maintains a dominant and enormously prospective ground position within the Doolgunna region of Western Australia and has formulated a farm-out JV with Sandfire Resources, whereby 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. Talisman has also secured the advanced Sinclair nickel project from Glencore for $10 million, a project that Talisman’s board knows intimately, having been involved in its initial discovery.
Recent Activity
Doolgunna Project – outstanding mineralized massive sulphide hits continue
Talisman’s share price has surged by more than 400% over the past month as the market digests the enormous significance of the massive sulphide hits generated from current drilling at its Monty prospect.
These encouraging drill-hits represent the first significant high-grade massive sulphide copper-gold mineralisation so far identified outside of the existing mineralized lenses at the DeGrussa deposit.
In our recent coverage we’ve highlighted the outstanding high-grade mineralisation obtained from Talisman’s diamond drill-hole TLDD0004A, which returned an exceptional massive sulphide intercept comprising 16.5 metres grading 18.9% Cu and 2.1g/t Au from between 409.5 metres and 426 metres down-hole depth.
Well Talisman’s done it again – with the company announcing this week that RC pre-collar TLRC0004 had intersected 18 metres of massive sulphides from a depth of between 108.0 metres and 126.0 metres down-hole – at a location 200 metres along strike from TLDD0004A.
Not only that – Talisman has also this week received outstanding assay results from diamond drill-hole TLDD0005, which intercepted 9.2 metres grading 11.8% Cu and 2.9 g/t Au from between 417.0 metres and 426.2 metres down-hole depth – at a location 80 metres southwest along strike from TLDD0004A.
Hole TLDD0005 intercepted an overall mineralised zone comprising 13.1 metres grading 8.4% Cu and 2.1 g/t Au from between 416.7 metres and 429.8 metres down-hole depth.
Technical Significance
The identification of massive sulphides in the immediate step-out hole TLDD0005 and pre-collar hole TLRC0004 is enormously encouraging. Adding to confidence is the fact that the massive sulphides intersected within both TLDD0005 and TLRC0004 contain visible chalcopyrite similar to those observed within TLDD0004A. Furthermore the intersection within TLRC0004 occurred much closer to surface than anticipated (from just 108 metres down-hole) compared with other holes.
There are strong similarities to the geological setting at DeGrussa – excellent grades, accessible depth and potentially more than 200 metres of strike length. To put things into perspective, the strike length of the C5 orebody at the DeGrussa mine comprises 280 metres, with a vertical extent of 370 metres and Resource comprising 1.5Mt.
Joint venture partner, Sandfire Resources, has advised that RC hole TLRC0004 has now been completed to a final depth of 306 metres down-hole and will provide a platform for down-hole EM (DHEM) surveys.
Sandfire have also advised that drilling of step-out diamond hole TLDD0006 is continuing at allocation approximately 80 metres along strike to the southwest from TLDD0005; while a new step-out RC hole TLRC0005 has been collared approximately 160 metres further along strike to the south-west from TLRC0004 – making a total step-out of 360 metres from TLDD0004A.
Sandfire is considering allocating additional diamond drilling capacity to the Monty discovery over the coming weeks and has commenced approvals to enable it to commence 24/7 drilling operations.
Project Overview
As we have discussed since our initial coverage 18 months ago, a lot of hard work and money (more than $20 million worth) have been invested by Talisman into its Doolgunna project acreage over the past five years. Whilst some might describe Monty as somewhat of an ‘overnight success’, the reality is that it’s the results of a high level of meticulous exploration and appraisal planning and activity.
Recent exploration momentum was generated by diamond drill-hole TLDD0002A, which tested a subtle, discrete off-hole electromagnetic (EM) conductor previously identified by both a high-powered surface FLEM survey and a high-powered DHEM survey on a historical Talisman drill-hole, SPD021.
A subsequent high-powered DHEM survey of TLDD0002A identified a highly-conductive, late-time anomaly situated around 15 metres off-hole – potentially indicative of an accumulation of mineralised massive sulphides. Follow-up diamond hole TLDD004A confirmed high-grade copper and gold mineralization comprising 16.5 metres grading 18.9% Cu and 2.1g/t Au. Subsequent step-out holes TLDD0005 and TLRC0004 have all intersected massive sulphides.
Sandfire Joint Venture
The joint venture deal with Sandfire Resources is enormously important 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 data-sets and geological knowledge.
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 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% stake and Talisman a 49% stake – in the projects. Sandfire then 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 stake to 70%.
Summary
The results being generated by the current diamond drilling program at Monty are clearly outstanding and so far point to a potential mineralized strike length of more than 200 metres at robust grades. Whilst we await further important drill results, we maintain our Speculative Buy recommendation around current price levels for those investors without existing exposure.
