Sandfire Resources Offers Investors Some Very Rich Rock At Doolgunna, And Some Seriously Weird Geology Too.
By Our Man in Oz.
Discovery is fun, especially when it comes in triplicate. That’s why Minesite’s Man in Oz got a little excited earlier this week when he began to investigate why a small, previously unheard of mining company called Sandfire Resources had set the Australian Securities Exchange alight. From a standing start of A5 cents per share in trade booked as recently as March, the company’s shares have rocketed, and were trading as high as A$1.43 by Thursday 9th July. Driving investor interest is an interesting copper-gold discovery near Meekatharra in central Western Australia. But, driving the company itself are two familiar names from booms past. Sandfire is the déjà vu vehicle for Miles Kennedy and Karl Simich, once of Kimberley Diamond Company fame, but now with copper coursing through their blood. Having identified that it is the Doolgunna copper-gold discovery which is behind the 28-fold hike in Sandfire’s share price over just four months, and having re-discovered Miles and Karl in the same Walker Street office in West Perth, it was time for the third discovery, a geologist’s explanation of Doolgunna which, if it lives up to its early promise, could be a very significant strike, in light of its location adjacent to a highway and natural gas pipeline, and in light of the nearby delights of Meekatharra, a town once famously described by the wife of a former Australian Prime Minister as “the end of the earth”.
Visiting Miles and Karl was one of those “blast from past” experiences, and a pointer to the fact that old explorers don’t die, they just find something else to do. That observation was driven home by a quick introduction to a young man leaving the Walker Street office as Minesite’s Man in Oz arrived. Until recently the man in question had been a senior employee at Kimberley Diamond. Today, he’s back in the Miles/Karl fold. As well as recruiting staff from the once-promising Ellendale diamond mine of Kimberley Diamonds there has been a bit of hurried re-employing of the Sandfire staff that were retrenched late last year. That retrenchment included the company draughtsman, with his absence offering a good explanation as to why no-one seemed to be able to follow the first reports of the Doolgunna discovery – the maps looked they were drawn on a kitchen table using a set of Lakeland coloured pencils on loan from a primary school.
Better explanations will follow because of the re-employed draughtsman, but also because over the next few weeks Sandfire will receive more drilling results which will provide a better understanding of what’s happening at depth. Essentially, it appears that Sandfire has discovered a rich, but complex series of structures related to an ancient volcanic event. Early explanations are that the mineralisation is of the volcanogenic massive sulphide type (VMS), the source-rock of some of the world’s great base metal mines. But, understanding what’s going on underground has been confused by there being at least two zones (or sheets) of mineralisation lying parallel to each other. The closest to the surface, and dipping at about 64 degrees, is called DeGrussa, and the second (behind and deeper) is called Conductor 1.
John Evans, Sandfire’s technical director, told Minesite that the geology encountered fell into the “weird” category with analysis revealing rocks containing “half the periodic table”. John said the original work at Doolgunna had been gold-focussed because the area is host to a number of major gold mines. “We were looking for traditional sheer structures”, he said. “But we found something completely different.” In keeping with that great geological tradition of baffling outsiders with an overdose of scientific jargon, John then meandered through a series of maps and charts outlining his current theory about Doolgunna.
Investors with an interest in technical stuff will find the unfolding Doolgunna story a fascinating trip through “geology-land”. Normal people will simply look at some of the assays (of which there are not yet many) and see hits such as 39 metres of rock grading 5.2% copper, plus 1.6 grams of gold per tonne, plus 10.5 grams a silver from a depth of 135 metres. Other hits have been as high as 6.9% copper, and early analysis also reported a high palladium content with one 26 metre slice of the DeGrussa “sheet” containing 2.4 grams of palladium per tonne.
There is no doubt that Doolgunna is an intriguing discovery. There is also no doubt that Sandfire is an equally intriguing company, run by two men who have forgotten more about running an Australian mining company than most people will ever learn. Two observations from Miles emphasised that point. Firstly, that the cocktail of minerals discovered so far boils down to a potential orebody grading the equivalent of 5% copper. Secondly, that the value of each tonne of that material is around US$250. To put that dollar “guestimate” into perspective, the Ellendale diamond mine which was sold to London-based Gem Diamonds in 2007, which, as we’ll all recall was a great time to be the seller of anything, was yielding dirt valued at about US$14 a tonne.
The challenge now is for Sandfire to bang down as many holes, as quickly as it can. One of the plans that was shown to Minesite is of a future drilling campaign that will start with one rig working a double shift, and with a second rig then likely to join in the hunt for the outer limits of the DeGrussa and Conductor 1 structures, and anything else that might lie at depth. For Miles and Karl, and the re-assembling crew from the days of Kimberley Diamond, it’s game on (again).
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