Constant Investor - Barry Dawes Interview

Excerpt of an interview by The Constant Investor with Barry Dawes, Executive Chairman of Martin Place Securities and a keen gold investoe.

The Pilbara is discussed, which is below:

And at the same time the centre of gravity of the Australian gold industry, I think, is moving north from Kalgoorlie towards the Pilbara, is it not?

Yeah, Australia produces let’s say 320 tonnes and about 65% of that is in WA and of that probably more than two thirds is in the Yulgan.  What we’re finding is there’s some hard rock gold opportunities in the Pilbara and it’s quite impressive, the rate of increase in gold resources but not really in gold production there but the resources are growing.  Then we’ve got the potential of the Pilbara conglomerates.  I think that the promise shown in these companies late last year is going to be realised.  I’ve spent a lot of time looking at the mechanism of gold formation and the work that I’ve done to date is very strongly supportive of there being a very large gold resource in the Pilbara which we hope will be mineable, I’m fairly sure it will be.  It’s going to be difficult in terms of developing resources because of the nature of the conglomerates but I have no doubt there’s a lot of gold there.

What do you mean you’ve been looking at the formation of gold, tell us what you’ve been learning?

It’s very well known within geological circles that about 80% of all the gold that’s ever been in place has occurred during a period of 2,600 to 3,000 million years ago.  The earth was a very different place in those days.  The other 20% is coming from more recent things like porphyry coppers in South America, Western Europe and USA and in eastern parts of Australia.  For the most part most of the gold has really come at that period so some geological event took place there.  In the scheme of things there are two very old cratonic areas which are relatively unformed and one of those things is what we call the Kaapvaal in South Africa and the other one is the Pilbara in Australia.  It’s all relative but these are the two remaining areas that are under-formed so they’ve got a lot of study.  In addition to that there is a thing called the Witwatersrand Basin which sits within the Kaapvaal Craton and that is the source of the world’s largest gold deposit.  So far 54,000 tonnes have been pulled out of the Witwatersrand and there’s a bit of debate but there’s been another 40,000 tonnes of resources and reserves that have been identified.  Whether they will be mined or what is another thing because you need a lot of capital to develop those.

In addition to that overall there were 26 horizons of mineralisation in the Witwatersrand and not all those have been mined and not all of those will be mined.  We can probably say that we’ve got another 40,000 to 50,000 tonnes of – and that’s my estimate it may not be right – of mineralisation that will never be an ore.  Adding it all up there’s about 150,000 tonnes that’s been associated with the Witwatersrand Basin.  Coming to the Pilbara you’ve got the same granites and greenstones as they have in the Kaapvaal and then on top of that we’ve got the Fortescue Basin and the Hamersley Basin.  Because both the Witwatersrand and the Fortescue Hammersley Basins have got sediment piles which also are relatively under formed these are the only areas of that age that are under formed and consequently have been the study by a lot of academic geologists over the years.  Consequently, we know reasonably well the ages of these things are much the same.  We can look at what happened in the Witwatersrand.

The view there is that the gold has really been precipitated from shallow continental seas, there’s a mechanism which will take a little longer to explain but that’s there and the evidence is quite strong.  The evidence is equally strong that the same thing has taken place in the Pilbara, in the Fortescue Basin.  They’re not twins they’re probably cousins but they are the same age and part of all of this academic study is they show that the geomagnetism, the paleomagnetism, suggests that these things were quite close together at some stage of about 720 to 800 million years ago.  The formations are similar, they tie in with this major gold event and when we look at the results that have come through from Novo Resources, which is a Canadian listed company that have done an extraordinary amount of work here and the results are very encouraging to my way of thinking.  Then we’ve got companies like Artemis and Kairos and Marindi.

What are the Australian stocks that have got the Pilbara gold, the ASX?

Artemis, De Grey, Kairos and Marindi, [Payoma] and these things are pretty interesting.  The Fortescue Basin gives us gold mineralisation over 400 kilometres, that’s a large length.  You’ve got stuff in the west and you’ve got it in the east and you’ve got remnants of the Fortescue formation sitting on top of the underlying greenstones and granites in the Pilbara to the north.  Very interestingly the Fortescue comes up in the south on the Bellary Dome a company called Marindi has found the same sort of gold buckets in the same area, 250 kilometres to the south.  Given that this is a basin without north, without an east/west, without a south, the probability of it going right across is high.  There’s probably local reasons for being here or not here, or concentrated here or not concentrated there.  It’s also very important that CRA in 1984 drilled a number of holes and one of those encountered the same conglomerates at 750 metres depth at 65 kilometres south of the discoveries in the Pilbara that Novo and Artemis have found.  It’s essentially continuous over 65 kilometres.  This gives a very large area and there’s a lot of work to be done before we get resources but essentially if we go back to the 150,000 tonnes at the Witwatersrand.

If we look at any of these orogenic gold deposits around the world like in the Yulgan and the Birimian in West Africa the most I can come up with is about 18,000 tonnes each and Kalgoorlie even greater Kalgoorlie with 100 million ounces of production, that only works out to be 3,000 tonnes.  So these things are tiny compared to the Witwatersrand and if we think about the amount of gold that might exist in the Pilbara it could be very large indeed.

Gary Morgan has been boring me for years about [Payoma] and nothing has ever happened there.  Do you think something will?  Obviously, you do.

It will, look at the gold that’s been produced.  The evidence is the gold.  The methodology that he has used may not have been acceptable to some parties but we’re really learning a lot and the JORC code needs to think about these types of deposits and be able to accommodate them because in my mind it’s very significant.  Novo Resources did two bulk samples and gave the results in July last year.  I think they got one of 84 grams per tonne and another one of 47 and they averaged it out at 67 grams per tonne.  That’s a pretty high number.  Other areas are giving numbers of sort of two to three grams but two to three grams in this sort of material is very exciting and very valuable because it works out to be about $150 a tonne in ground value and operating costs in these types of things aren’t going to be more than $30 or $40 per tonne so they’re going to be very low cost operations.