FAR EAST CAPITAL REPORT.
Native Minerals: ticking all the right boxes on gold The impetus for the continued rise in the gold price to >
US$2,920/oz early last week seemed to be the story that
China is allowing its top 10 insurance companies to invest
up to 1% of their assets in bullion. If accurate, this makes
another US$24Bn available to create demand for gold. The
bull market is gathering momentum.
Continuing the thematic of looking for good value in smaller
prospective gold producers, we cover Native Minerals
Resources Holdings (NMR) this week with the benefit of a
site visit to see how the refurbishment of the Blackjack
treatment plant is progressing. Located inland from
Townsville and nearby Charters Towers, NMR seems to tick
all the boxes I have been specifying in recent Weeklies;
granted mining licence, processing facilities with minimal
capex to recommission, mineable resources and
experienced management with early cashflow and rapid
capex payback on the agenda. Now that NMR has raised
the $20m to get the operation going again it is all systems
go with a schedule of first gold in June/July 2025.
There was a useful improvement in the sentiment over the
week such that equilibrium has been achieved. The
improvement can be attributed to investors switching
money into the junior gold sector. Expect more of it.
The Charters Towers Gold Project (100%)
NMR refers to this as a gold project and not a gold mine as
it has the potential to achieve gold production from more
than one location. Interestingly, there has no publicly
released feasibility study and no guidance offered by the
Company. This may be a deliberate policy or it may be
another example of a project that falls short of meeting all
the hurdles of ASX Listing Rules Chapter 5 that impede
companies saying what they would like to say. The ASX is
becoming more strict every month as it seeks to restrict
information flows to data that is auditable in the belief that
this is the best way to keep people honest. How naive! I
shouldn’t complain though. Perhaps this is an opening for
those of us who are smart enough to figure out the
potential profitability for ourselves rather than wait to be
spoon fed with compliant numbers.
Rapid timeline from acquisition to commissioning
It was only as recently as November 2024, that NMR
signed the deal to buy the project, receiving shareholder
approval later in that month. However, due diligence was
being conducted by Ausenco and other leading contractors
in the months prior to the signing. NMR has relied on a
scoping study completed by the previous owners in 2019,
for the Far Fanning Deposit (Inferred Mineral Resource
Estimate (MRE) of 2.3 Mt @ 1.84g/t Au for 138,000 oz of
gold (JORC 2012)), overprinting its own internal studies.
Note that there is no formal guidance on production or
costs. The Company is more focussed on actually doing it.
Background and History
Apart from The Broncos, Charters Towers has been famous
for the stranglehold that the Lynch family had on the
historical goldfield going back to the 1970s. If ever there
was an example of overpromising and underdelivering it
was the Jim Lynch-run company Charters Towers Gold
Mines, that became Citigold. Promotion ran high but gold
production was always low. I once commented that the
most valuable asset the company had was the inclusion of
“Citi…” in the name being similar to Citibank, as this proved
useful in raising money from US investors at the time. As
history shows, Citigold itself proved to be just another
disappointing company, but that left the door open to other
entrants into the goldfield.
Regionally, the hills in a 100 km radius around Charters
Towers have hosted a number of significant gold mines.
Most notable regional ones were Mt Leyshon, owned by
Pan Australian, Pajingo, by Battle Mountain Gold and
Ravenswood, found by MIM Holdings.
The Blackjack toll treatment facility that is now being
refurbished by NMR was purchased in WA by Citigold in
1996, and relocated to 15 km from Charters Towers
subsequently. It was sold to Maroon Gold in 2017, but that
company went into administration in 2020. Not much
happened until NMR came along in late 2024, with a wellthought out plan to restart the operation.
Acquisition Terms and Financing
On 8 November, NMR announced the deal whereby it was
paying a non-dilutive $18.9m structured amount over 33
months with a 2% perpetual royalty on gold production.
Colllins Street Capital was the vendor having achieved its
position through the Administration of the previous owner.
NMR quickly placed $3.46m at 4¢ a share and undertook a
1 for 1 non-renounceable issue 4¢, intended to raise
another $15.9m. The CEO, Blake Cannavo, took up his full
$3m entitlement. Notably, the raisings were pitched at a
14% premium to the 5-day VWAP.
Unsurprisingly there was a 74% shortfall in the entitlement
issue, but Wes Maas of Maas Group Holdings stepped into
the breech, agreeing to take up to 19.9% of the issued
capital via the shortfall, with his investment anticipated to
be around $6.5m.
Chapter One - restarting the operation
The $20m refurbishment program at the Blackjack site is
well underway with a target of achieving the first gold
production by early July, 2025. The objective is to produce
20,000 oz in year one at a cash cost of A$2,000/oz
according to a research note prepared by ABL Capital
Partners, but there seems to be room to lift the rate to
30,000 oz p.a. at some point. With the gold price at
A$4,400/oz, that suggest a gross cash surplus of A$48m
p.a. at the lower production level. (Remember to take off
This commentary is provided at no charge and in good faith from sources believed to be reliable and accurate. Far East Capital Ltd directors and employees do not
accept liability for the results of any action taken on the basis of information provided or for any errors or omissions contained therein. Readers should seek investment
advice from their professional advisors before acting on information contained therein. Please see Disclosure of Conflicts of Interest at the end of this commentary.
FAR EAST CAPITAL LIMITED
Suite 24, Level 6, 259 Clarence Street
SYDNEY NSW AUSTRALIA 2000
Mobile Telephone: +61 417 863187
AFS Licence No. 253003 ACN 068 838 193
Weekly
Commentary
The Mining Investment Experts
15 February 2025 Chart comments updated on Friday’s close Analyst : Warwick Grigo
(20min delay)