New presentations are firing global interest in WA goldminers
WA’s Pilbara region is best known for iron ore.
Tim Treadgold
The Australian
6:57PM October 9, 2017
A picture might be worth a thousand words, but on the stockmarkets of Australia and Canada it can be argued that a video is worth a billion dollars. That value, roughly, is what’s been created by a gold rush in the Pilbara region of Western Australia, a place better known for its iron ore than its gold.
Over the past few months a stampede of gold explorers has descended on a vast region inland from the gas-export centre of Karratha. They are hunting for gold nuggets discovered in a type of rock previously ignored by prospectors.
Just a few days ago a remarkable event occurred: the Canadian company leading the rush organised a live internet streaming report for a US audience of a field crew collecting gold nuggets in the Pilbara.
There is so much information in that previous paragraph that it needs explaining, because no one in the mining industry has ever seen anything like it before. And it’s a fair chance that it was a novelty for corporate regulators, such as those at the ASX and ASIC.
That’s not to say that any laws were broken. It’s that the document covering mineral reporting, the co-called JORC code (the rule book of the Joint Ore Reserves Committee) was written long before a film crew could transmit live coverage of an active exploration project to an audience at an international investment conference.
What delegates to the Denver Gold Forum saw can still be seen by visiting the homepage of Novo Resources in the box under the headline: “A new paradigm in gold exploration and investing”. Shot live in the middle of the night Australian time (for the daytime Denver conference), the streaming video shows a prospector with a metal detector identifying gold nuggets in a patch of near-surface conglomerate.
The video has been a major factor in supercharging the Pilbara gold rush.
Along with Novo, which is a major player, a flood of small gold explorers have claimed that they too have a foothold in a part of the Pilbara that might contain nugget-rich conglomerate.
De Grey Mining was the big winner of late, rushing from 6c a share to 22.5c after reporting an increase in its Pilbara gold resource and a $5 million investment in its shares by Canada’s Kirkland Lake Resources. Kirkland is the company behind Victoria’s reborn Fosterville mine and a major shareholder in Novo.
Other Pilbara gold explorers on the move include DGO Resources (up from 64c a month ago to $1.97), and Kairos Mining (up from 2c to 8.8c).
Do we take it seriously?
That really is an impossible question to answer immediately, because exploration reported so far has been what’s known in the mining industry as “surface sampling”. That’s a useful way to start a project, but it’s a process that tells an investor nothing about what lies at depth. Drilling is the only way to uncover the truth about the Pilbara’s nugget gold, but even then there is an issue with nugget gold. It’s difficult to quantify how much gold is present in a particular area, and even more difficult to plan a long-term mining project.That’s why nugget gold is a favourite of lone prospectors with their metal detectors. But it’s not for mining companies, which have to invest millions of dollars in mining and processing equipment to justify chasing the often-elusive nuggets that can be thick in one part of a prospect and thin a few metres further on.
Novo’s plan of attack demonstrates the nature of the challenge that lies ahead, with the first phase of drilling not involving the use of a conventional mineral rig that extracts cores a few centimetres wide. Instead, it’s adapting a technique used in diamond exploration — wide bore, or large diameter, drilling, with holes measuring 17.5 inches (44.45cm). This technique is only good for drilling a short distance, because of the power needed to drive such a wide drill bit. The process is a form of bulk sampling essential to discover how many nuggets are in an area of conglomerate, in exactly the same way diamond explorers have to count the gems to know whether it’s worth developing a mine.
The next six to 12 months are critical for the Pilbara gold hunt. It is a search attracting speculators from around the world. That’s thanks largely to Novo’s video, which is certainly not guaranteed to lead to a major mine development. Here’s what we know so far:
• There is nothing new about gold nuggets being collected by prospectors in the Pilbara. It’s been happening there for more than 100 years.
• The genesis of the nuggets being “harvested” by Novo has not been established, and proving how they came to be in the conglomerate is crucial to knowing whether they will be found in other parts of the Pilbara.
• Canadian explorers have a reputation for extreme optimism that sometimes proves correct (such as the redevelopment of Fosterville), but can also prove misplaced.
For speculators, the Pilbara nugget game is fabulous fun. For investors with a low tolerance for risk, it might be best to enjoy the exploration from a safe distance. Tim Treadgold is resources correspondent at www.eurekareport.com.au, which is owned by InvestSmart.
ARV Price at posting:
30.0¢ Sentiment: Hold Disclosure: Held
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