Successful Integra team tap appetite for leveraged exploration...

Successful Integra team tap appetite for leveraged exploration IPOs withreturn to WA goldfields

And Iluka’s bullishassessment of mineral sands prices is good news for Strandline as it ramps upconstruction of its Coburn project in WA.

26th August 2021

Barry FitzGerald

It is hard to movethe dial when market caps are $8-$20 billion like they are for the leading goldproducers.

They rely on thegold price to create share price momentum, and when the gold price is goingthrough a consolidation phase at lower levels like it is now, that momentum isto the downside.

It is against thatbackdrop that gold IPOs are attracting greater investor interest than the performanceof the leading gold stocks – and gold’s retreat to below $US1800/oz – mighthave you believe.

The reason for thatis simple enough. It is all about the inherent leverage to the upside a newbiehas to a discovery being made.

The newbie’s issuedcapital is nice and tight because it has just floated, or is about to. So it iseasier to move the dial with a discovery in share price terms than it is forthe leading gold stocks.

A tight capital basealso differentiates the newbie from the established explorers which over theyears have blown their capital bases due to the time-honoured practice ofraising more funds to continue exploring. It means that leverage to a decentdiscovery is diffused across billions of bits of paper.

But for the newbieswith market caps on listing generally in sub-$20 million territory, theleverage to a discovery can be extreme. The 20c share in the IPO can become a10-bagger in a hurry, with a bit of luck.

The trick of courseis to sort through the gold IPO options to pick the potential winners. Asalways, the best derisking exercise is to focus on the track record of thepeople behind the IPO, first, second and third.

E79 Gold Mines:

Today’s interestamong the crop of gold IPOs out there is a thing called E79 Gold Mines, whichhas a proposed ASX code of err... E79.

The IPO marks areturn to the WA goldfields by Chris Cairns, as non-executive chairman, andPeter Ironside, as a non-executive director.

Before the successthe pair have had at Stavely Minerals (SVY) – it’s working on a maiden resourceestimate at its Thursday’s Gossan copper/gold discovery in western Victoria –they were best known for their Integra Mining success.

Integra Mining wasthe Eastern goldfields explorer which made three greenfield discoveries andbecame a gold producer with a resource base of more than 2m ounces. It wasacquired by Silver Lake in 2013 for $426m, a good enough reason you would thinkto have another crack with E79.

The boots on theground guy at E79 in the CEO role is Ned Summerhayes, formerly explorationmanager at the $78m market cap Black Cat Syndicate (BC8), while Cairns isnon-executive chairman and Ironside a non-exec.

E79 is out to raiseup to $7m at 20c a share (35m shares, with Euroz Hartleys the lead manager) fora market cap of $13m (65m shares) at the issue price, against which it startsout with $9m cash for an enterprise value of $4m.

The flagship is aproject on the sparsely explored southern end of the 30Moz Laverton tectonicbelt, not far from where the $110m market cap Apollo Consolidated has hadsuccess outlining a 1.1Moz resource in recent times.

Cairns said he wasintroduced to the Laverton South project area by a former Integraexploration manager, a guy he says has a nose for gold.

“He walked into myoffice and said he had figured out some of the second order controls for thegold camps within the broader Laverton tectonic zone,” Cairns said.

“And that he thinksthat there is one of these subordinate controls crossing the tectonic zone downto the south on ground that is now the Laverton South project.”

Despite 30Moz ofgold found in the northern reaches of the Laverton belt, the southern endhas largely been ignored.

Cairns said that isbecause of a long-standing assessment by the Geological Survey of WA that thesouthern extension of the belt was underlain by granite rather than theprospective greenstones found to the north.

“More recentgeophysical data like magnetics has demonstrated that there may well be a veryshallow granite sill, but there is greenstone underneath it,” he said.