Egan Street Resources – (ASX: EGA, Share Price: $0.275, Market Cap: $36m, coverage initiated @ $0.27 in August 2017 – current gain of 2%)
Work has commenced on an impending Mineral Resource update for Rothsay Gold Project in WA.
We first initiated coverage of EGA and introduced it to our Watch-List during August 2017, at price levels very similar to current ones, based on the potential for production and a re-rating based on the company’s 100%-owned and high-grade Rothsay Gold Project in WA’s Midwest region. EGA’s share price has performed solidly since then, as the company undertakes important appraisal work.
Rothsay hosts high-grade Mineral Resources of 307koz at an average grade of 10.9g/t Au (Indicated 460kt @ 11.5g/t Au and Inferred 420kt @ 10.2g/t Au) and a production target based on a 2017 PFS of 936kt @ 7.0 g/t for 200koz of gold produced. EGA is currently focused on increasing the geological confidence of the Mineral Resource, expanding the known mineralisation and carrying out the necessary evaluation, modelling and feasibility studies to progress a potential near-term, low capital intensity opportunity to commence mine development and gold production operations.
Latest Activity
Rothsay Drilling Update
EGA has recently commenced work on a near-term Mineral Resource update for its Rothsay Project, following the receipt of additional outstanding high-grade drilling results. All results from the exploration work undertaken during Q1 2018 have been received and are being included in the Resource modelling that’s currently underway.
The latest assay results come from four diamond holes that were drilled as part of the infill and extensional program at the Woodley’s and Woodley’s East Shears at Rothsay, as well as an additional intersection from the previously reported hole RYDD064 from the Woodley Ultramafic.
The infill drilling specifically targeted areas outside of the current Woodley’s East Resource at depth and the results are particularly encouraging and include 0.9m at 30.9g/t Au from 310m, 1.0m at 22.3g/t Au from 309m and 0.75m at 10.0 g/t Au from 232.6m.
The previously reported hole RYDD064 also returned a strong intersection of 1.85m at 13.5g/t Au from 409.5m, which is only 5.7m further up-hole from the previously reported intercept of 1.2m at 11.2g/t Au from 417m.
Figure 1: Woodley’s Shear showing significant and recent intersections
Technical Significance
The latest drilling has confirmed the presence of several narrow high-grade veins within the Woodley’s East hanging wall that have now been intersected several times with the recent and previous extensional and infill drilling for Woodley’s East.
These results include 0.3m at 10.3g/t Au from 259.8m, 0.3m at 5.5g/t Au from 272.3m, 0.3m at 7.0g/t Au from 195.9m, 2.4m at 8.2g/t Au from 198.8m and 0.4m at 15.0g/t Au from 212.8m – all from the most recent round of results received. These results have not previously been included in the Rothsay Mineral Resource Estimate.
The updated Mineral Resource, which will be completed during April, will underpin the Definitive Feasibility Study (DFS) on the project that’s due for completion during Q2 2018.
Other Recent Activity
Regional Exploration Drilling Update
EGA has also commenced a 59-hole RC drilling program has also commenced at Rothsay targeting the known 14km of strike along the highly prospective shears on the Woodley’s, Clyde and Miners ultramafic contacts. This regional program includes:
- 20 holes planned for the area to the north of the existing Woodley’s Resource, to follow up a historical intersection of 0.6m at 29.2 g/t Au. The program in this area is also designed to test higher up in the sequence and, if successful, will enable a tighter targeting exercise to be undertaken at depth.
- A further 25-hole program that has been designed in two phases. The first phase is designed to test previous RC drilling that returned quartz mineralisation on the Clyde ultramafic, along strike and to the south of historical drilling that returned 3m at 17.4 g/t Au. The second phase is contingent on the success of Phase 1 and will test depth extensions and potential further along strike.
- A 14-hole program that has been designed to follow up the encouraging recent intersection of 0.95m at 7.6 g/t Au in the Miners Ultramafic. To date, EGA has not conducted any exploration on this ultramafic unit (apart from the single diamond drill hole reported previously). This program will follow up the recent intersection and test down-dip of historical RC results that included 2m at 13.6 g/t Au.
Project Overview
The Rothsay Project covers an area of approximately 62 sq km and has historically been exploited by shallow open-pits and underground mining techniques up until the early 1990’s. Gold was first discovered in the Rothsay Gold Project region during 1894 and since then historic gold production has totalled approximately 54,000oz. The Project was last mined by Metana Minerals NL, which ceased production in May 1991 after the gold price fell below US$360/oz.
EGA acquired the Rothsay Gold Project during 2011 and since that time has compiled extensive historical data into a useable form, as well as completed several exploration drilling program that have resulted in the delineation of a 2012 edition JORC compliant Mineral Resource of 880kt at an average grade of 10.9g/t Au for 307koz (Indicated 460kt @ 11.5g/t Au for 170koz and Inferred 420kt @ 10.2g/t Au for 137koz) and a production target of 936kt @ 7.0g/t for 200koz of gold produced.
The Company is focused on increasing the geological confidence of the Mineral Resource, expanding the known mineralisation and carrying out the necessary evaluation, modelling and feasibility studies to progress a potential near-term, low capital intensity opportunity to commence gold production. Extensive underground development infrastructure from historical workings remains in place at the Rothsay site.
Summary
The latest encouraging drilling results will flow through into an updated Mineral Resource, which will be completed during April, will underpin the Definitive Feasibility Study (DFS) on the project that’s due for completion during Q2 2018.
A PFS in 2017 was completed over an open-pit and a 200ktpa conventional CIL operation that would ramp up to 50koz pa Au in year 3 of a 5.5 years LOM. Up front capex is estimated to be $34M and the AISC $1020/oz, with first gold production targeted for late-2018/early 2019.
Importantly, EGA is funded to progress the Rothsay Gold Project to a decision to mine (technical and commercial studies completed, funding secured and key construction, mining and processing contracts in place). The company’s longer-term growth aspirations are based on a strategy of utilising the cash-flow generated by an initial Rothsay mining operation to target extensions of the main deposit and explore the surrounding tenements, which include a 14km strike length of highly prospective and virtually unexplored stratigraphy.
