Gold’s stellar run this year (its 16 per cent rise has seen it outperform virtually every other asset class in the first two months of 2016) has resulted in a re-rating for most producers. But investor interest is also starting to trickle down to the ranks of developers and, dare we say it, explorers.
Little-known junior Capricorn Metals (ASX: CMM) couldn’t have found a better time to pop its head up and tell the world about its plans to build “a significant new Australian gold company”.
And judging by the pedigree of the players behind the newly-minted junior – which emerged from the recent merger of ASX-listed Malagasy Minerals (ASX: MGY) with unlisted Greenmount Resources Pty Ltd – and the credentials of its key asset, the Karlawinda Gold Project in WA, this could be more than just PR spin.
Karlawinda – which was acquired by Greenmount from the leading mid-tier gold and nickel miner Independence Group (ASX: IGO) – has all the hallmarks of one of those “forgotten” WA gold assets which are increasingly coming back to life courtesy of a hot gold market.
Gold was originally discovered at Karlawinda by WMC in the 2005, but it was Independence Group, under the stewardship of its former Managing Director Chris Bonwick that discovered and drilled out the Bibra deposit, establishing a 650,000oz resource and spending upwards of $12 million on resource development and high quality scoping studies.
Independence sold the project to Greenmount in 2015 amid competing capital priorities with the Tropicana gold development and Sirius acquisition, in the process relinquishing a tasty “mid-tier” sized asset that provides the perfect foundation for an emerging junior seeking to make its fortune.
While Bibra’s grade is modest (1.1gpt), the deposit can be extracted via a straightforward single 3-stage open pit to a depth of just 230m with a very low stripping ratio. There’s no shortage of examples of highly successful and profitable open pit operations working at this sort of grade (think Regis; think Millennium Minerals).
What’s more, there’s a significant amount of unclassified mineralisation sitting within the A$1600 pit shell optimised by Independence Group which can be converted to JORC resources with limited in-fill drilling.
Earlier this week, Capricorn announced the start of its maiden 8000m drilling program at Bibra, which is designed to test this potential and lay the foundations for a resource upgrade and Scoping Study by mid-year.
Analysts reckon the potential to establish a 1 million ounce reserve at Bibra is excellent, which means it could easily underpin a relatively straightforward +100,000oz-a-year operation with a decent mine life, capable of generating healthy margins at the current gold price.
Perhaps not surprisingly, Capricorn has already attracted a bevy of impressive “names” to its share register and management team.
The Malagasy merger was accompanied by a $1.5 million capital raising which saw respected mid-tier gold producer Regis Resources (ASX: RRL) emerge with a cornerstone 9.9 per cent stake.
It also saw a strategic investment group associated with highly regarded mining executive Heath Hellewell (co-founder of gold producer Doray Minerals and previously one of the key players Independence Group) emerge with a 19.9 per cent stake.
Add to the mix a few other prominent names such as ex-Jubilee Mines Executive Chair Kerry Harmanis as a major shareholder, other key members of the Jubilee management team (Peter Thompson as Managing Director and Peter Langworthy as Executive Director), and you can start to see why Capricorn is beginning to garner a significant amount of investor interest and attention.
The Company’s shares are off to a strong start as well, already close to doubling this year from 5c to 10c at the time of writing, giving the well-backed company a relatively modest market capitalisation of around $39 million – leaving plenty of room to grow.
And with drilling now underway at Bibra, there’s likely to be plenty of news on the horizon.
Investors will have the opportunity to hear the Capricorn Metals story first-hand at the first Resources Rising Stars investor luncheon series of the year, which kicks off in Melbourne, Sydney and Brisbane on March 15-17. Visit http://resourcesrisingstars.com.au/infopage/6868 to secure a free registration.
