Gascoyne Resources (ASX: GCY, Share Price: $0.44, Market Cap: $166m) remains one of our favourite emerging gold production plays, led by a vastly experienced board and management team with a strong blend of exploration, discovery and mining backgrounds. The company boasts a sizeable WA gold resource inventory of 2.23 million ounces – comprising two advanced projects on granted Mining Leases.
Gascoyne has announced a Maiden Mineral Resource for the Sly Fox deposit comprising 1.5 Mt @ 1.6 g/t gold for 77,000 ounces of contained gold, with air-core drilling intersecting several significant zones of near-surface gold mineralisation NW and SE along the Sly Fox Shear zone.
Market Significance
Gascoyne’s share price has performed strongly over the past two years, firming from below $0.10 in 2015 to an all-time high of $0.81 in August 2016 – driven by growing market awareness of its high-quality WA gold resource base. Aggressive exploration and appraisal activity has helped drive growing corporate interest in what will be the sector’s next significant domestic gold miner. With the maiden Sly Fox resource announced, the total Dalgaranga Resource base now stands at 1.31 million ounces, representing a more than 17% increase in Resources since the positive Definitive Feasibility Study was delivered in late 2016.
Announcement Detail – Sly Fox Project Update
In recent coverage we’d highlighted the encouraging drilling results received from the company’s Sly Fox drilling program, situated within its 100%-owned Dalgaranga Gold Project. Importantly, these results have now filtered through into a maiden JORC resource estimate for Sly Fox.
The maiden Sly Fox Mineral Resource comprises 1.5Mt @ 1.6 g/t Au for 77,000 ounces of gold. The addition of this new Resource boosts the global Dalgaranga Gold Project Resource to 31.1Mt @ 1.3 g/t Au for 1,310,000 ounces of contained gold – including Proved and Probable Ore Reserve of 552,000 ounces of gold.
Table 1: Sly Fox June 2017 Mineral Resource Estimate (0.5 g/t Au Cut-off)
Technical Significance
The Maiden Resource estimate of the Sly Fox deposit comes just three months after the company’s maiden Resource estimate for the Gilbeys South deposit – which between the two of them have added significant new Resources to the Dalgaranga Gold Project since the DFS was completed in late 2016. The upgrades demonstrate the potential to further extend the mine life of the project.
While the initial Sly Fox Resource is modest in size, it covers just the first 270 metres of strike defined by RC drilling to date. The maiden Resource for the Sly Fox deposit will form the basis for an initial Ore Reserve for the deposit, which is expected to be completed in the next few months once the geotechnical drilling data is compiled. The Ore Reserve will be integrated into the development plan for the Dalgaranga Gold Project. Given the higher grade of the Resource relative the bulk of the Dalgaranga Resources, it is expected that any pit at Sly Fox will be scheduled early in the mine plan.
Table 2: Dalgaranga Project June 2017 Mineral Resource Estimate (0.5 g/t Au Cut-off)
Figure 1: Dalgaranga Gold Project Deposit and Prospect Layout
Other Recent Activity
Sly Fox Diamond Drilling
Diamond drilling for geotechnical and metallurgical test-work, along with extensional drilling, has been completed. This work will allow for initial pit design and optimisations to be completed now that the Mineral Resource has been estimated. Initial metallurgical recoveries are excellent, averaging well above 90% and as high as 98% in the oxide zone, with high gravity gold recovery and low reagent consumption.
Assay results for two diamond drill-holes (one resource hole and one geotechnical diamond drill hole) are expected to be received in around three weeks.
Sly Fox Air-Core Drilling
The results from most of the recently completed air-core drilling to the NW and SE of the Sly Fox deposit have been received. The drilling was focussed on testing the Sly Fox NW trending shear zone and the structurally complex area where it is interpreted to intersect the NE-trending Gilbeys shear zone.
Numerous gold mineralised intervals have been intersected associated with altered schist/shale zones along the Sly Fox shear, and parallel trends to the NW and SE of the Sly Fox gold deposit. Of note are the intersections 12m @ 3.0 g/t gold from 20m in DGAC1965, 12m @ 1.1 g/t gold from 28m in DGAC1987, 8m @ 1.1 g/t gold from 48m and 3m @ 3.0 g/t gold from 80m to EOH in DGAC1980.
Results from a further 31 air-core holes completed in this area are still to be received. Once the results are to hand, follow-up RC drilling will be planned. Simultaneously, regional air-core exploration drilling is ongoing at Dalgaranga.
Figure 2: Dalgaranga Gold Project, Sly Fox Area – Location of Recent Air-core Drilling Intersections
Summary
We initiated coverage of Gascoyne Resources at a price around $0.17 during February 2016 – representing a current gain of 160%.
The Dalgaranga Gold Project can be progressed at a relatively low capital cost, whilst ongoing exploration drilling continues to enhance the resource picture. The deposits have a number of unique characteristics that have resulted in lower-than-normal capital and operating costs – including the very soft nature of the ore, excellent metallurgical recoveries, rapid leaching and very low reagent consumptions.
From a bigger picture perspective, Dalgaranga offers a relatively low-capex starter project that will allow it to leverage into its +1Moz Glenburgh project in WA’s Gascoyne region, which requires further drilling to extend beyond the current ~4-year mine life. Importantly for example, the recent Sly Fox discovery lies less than 2km from the proposed Dalgaranga mill.
Both the Dalgaranga and Glenburgh projects in combination would see Gascoyne with a potential production profile of +150,000 oz p.a.
There is the potential for additional share price appreciation based on aggressive drilling activity and significant news-flow, particularly within the context of the emerging Sly Fox discovery.
