February 14, 2011Ausgold Looks Good, But Management Needs Time...

February 14, 2011

Ausgold Looks Good, But Management Needs Time At A Charm School.

By Our Man in Oz / www.minesite.com

The bubbly should have been flowing freely in the offices of Ausgold at the close on 14th February, and perhaps it was, as the Perth-based explorer's market capitalisation slid past the magic A$100 million mark. Investor interest in Ausgold's grandly-named Boddington South project in the south-west corner of Australia was what drove the market cap through that milestone, just 15 months after the company was capitalised at A$10 million. But, whether anyone cracked the champers on the day Ausgold officially became a 10-bagger will remain a mystery because a visit to the company's office by Minesite's Man in Oz was in vain.

Still, it wasn't really a surprise that Ausgold's chief executive, Benjamin Bell, was too busy to walk the 10 metres from his office to the front desk, as he had also been too busy on Friday to return a phone call.
Perhaps Benjamin's fellow Ausgold director, London-based veteran, Richard Lockwood, will find time to explain to his junior that opportunities to market a company should not be treated in such a cavalier fashion.

All that Minesite wanted to do was have someone explain why, after a century or so of prospectors and farmers kicking the rocks in the area, the game has changed. Because, a few decades ago, Minesite's Man standing in Benjamin's doorway, chatted with the late Bill Synnott, owner and editor of the Great Southern Herald newspaper, about gold in the Katanning region which includes Boddington South. Bill had a few stories to tell, but not about great discoveries, just minor gold shows. But that was before the Great Depression of the 1930s induced farmers and their families to make the long march to the richer goldfields around Kalgoorlie.

What is known about Boddington South is that it is a "discovery" that was generated by a geological theory, and that it's perhaps the ultimate example of "near-ology", that old game of claiming proximity to an established project and enjoying the rub-off. In Ausgold's case the application of "near-ology" is quite clear from the name, which seems to infer a southern proximity to the 26 million ounce giant of Newmont Mining, near the town of Boddington. The only issue with the name association in this case is the gap of some 220 kilometres between the real Boddington and Ausgold's Boddington South. It's a bit like calling Paris "South Brussels", because the distance is roughly the same.

Ausgold, if it could produce a spokesman, would undoubtedly explain that the Boddington South reference is all about geological structures, and is based around the theory that what it is exploring some 40 kilometres east of Katanning is a potential repetition of Newmont's monster mine, which ranks as Australia's biggest current source of gold. The theory being pursued by Ausgold is that the gold mineralisation noted by the old timers was caused when mineralised fluids were pumped to the surface adjacent to a large granite intrusive. Previous work along the line of strike has delineated a series of small orebodies, such as Jinkas, Dingo, White Dam, and Lone Tree, all for a JORC-code compliant resource of 241,800 ounces - modest, but a start, and with all deposits close to the surface.

Ausgold's plan is to drill deeper, and stretch out along the line of strike in the belief that the ancient volcanic activity has pushed the granite up, and then splayed it out. Drill results appear to be bearing out some of that theory, and the work from the December quarter has produced some sparkling assays. Best was a 20 metre hit grading 15.64 grams of gold a tonne, starting at 97 metres. Other notable intersections included 28 metres at 4.08 grams per tonne, also from 97 metres, and 23 metres at 4.29 grams per tonne from 81 metres. Additional drilling is underway, as is a fresh resource calculation which is expected to be released in the June quarter. At that time there might also be a fresh look at the copper that's also contained in the structures, given that copper is a feature of Newmont's genuine Boddington mine.

Presentations and public comments from Ausgold are rare at this stage of the company's history, but eventually Richard Lockwood and a well-known Aussie director of the company, Bob Pett, will explain to the rest of the board that investors should not have to explore for news in the same way management explores for gold. What has been said in the past is that Ausgold reckons there is 100 kilometres of previously unmapped greenstone in the area, which is significant because greenstone is a common gold-bearing rock unit in that part of Australia. The focus of exploration is for high-grade primary ore assaying in the eight-to-10 gram range, rather than the shallow oxide ore dug by earlier explorers. In effect, Ausgold is the latest incarnation of a proven exploration approach, which involves drilling deeper and following the major underground structures in the hope of finding gold at the edges of elongated structures.

On the market, Ausgold has been a star performer since the middle of last year, when it was trading just above penny dreadful status at around A12 cents. By the end of November the shares were up to A60 cents, and in trading on 14th February it ran to an all-time high of A$1.68, up A12 cents, or 7.7 per cent, on the day. A performance like that deserves a more detailed explanation if/when Ausgold management finds the time to speak publicly, and decides not to ignore publicity free kicks that do not come knocking every day. Apart from that there is a small question of it being sound practice to reply to phone calls and speak to visitors. It's called manners.