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Reverse circulation drill rig over C1. Segue Resources Ltd (ASX:SEG) has transformed itself into one of the largest tenement holders in Australia’s newest and hottest massive nickel sulphide province in the Fraser Range of Western Australia.
Over the last 12 months Segue Resources has secured over 4,000 square kilometres of tenements at the Plumridge Nickel and Gold Project and the Deralinya Project.
Segue Resources controls 10% of the Fraser Range Gravity High that is highly prospective for magmatic nickel sulphides. The nearby Nova-Bollinger Nickel, Copper deposit owned by Sirius Resources(Resource of 10.2 million tonnes at 2.4% nickel) and is capitalised at $1.3 billion.
Segue Resources recently raised $4 million, and with the assistance of industry leading consultants Newexco and Omni GeoX, have already identified at least 7 major magnetic “conductor” targets. These targets are shallow and all exhibit larger signatures than the “eye” located over the original Nova-Bollinger nickel discovery.
Shallow scout drilling across some of the conductor targets indicates the presence of the same rock types that are present at Nova-Bollinger. Reverse circulation and diamond drilling is underway at E21 which has all of the indications of being a very large mafic/ultramafic body similar to the eye at Nova-Bollinger, but several times larger.
Brazilian mining giant Vale has entered the search for nickel sulphides with tenements located at the eastern end of the Fraser Range. Vale owns the Voisey Bay nickel mine which has similar geology (magmatic sulphides) to Nova-Bollinger, but is a much larger deposit of 141 million tonnes at 1.6% nickel.
Vale sees potential for the discovery of additional “Nova style” magmatic nickel sulphide deposits which are new to Australia and are larger than typical Australian nickel sulphide deposits.
Small cap fund manager Acorn Capital which is a specialist investor in microcap companies and has an 8.4% investment in Segue.
Proactive Investors believes that investor portfolios should have speculative exposure to Segue Resources highly prospective drilling program at Plumridge. The discovery of economic massive nickel sulphide values could value Segue Resources at $0.25-$0.50 per share. Speculative Buy. "
.... the discovery of economic massive nickel sulphide values could value Segue Resources at $0.25-$0.50 per share. ...
Major Shareholders
Directors: 9.2%
Top 20 shareholders: 50.0%
Directors:-
Managing Director: Steven Michael
Non-Executive Director: Nicholas Ong
Company Secretary: Matthew Foy
BACKGROUND – LARGE TENEMENT HOLDINGS IN THE ALBANY-FRASER RANGE, WESTERN AUSTRALIA ARE HIGHLY PROSPECTIVE FOR MASSIVE NICKEL SULPHIDES Segue Resources Ltd (ASX:SEG) is an ASX listed exploration and development company that is one of the largest tenement holders in the highly prospective Albany-Fraser Range Province of Western Australia. The Company controls 14 exploration licences that cover a total of 4,180 square kilometres that include the Plumridge Nickel and Gold Project in the northern portion of the Fraser Range, Deralinya Project in the southern Fraser Range, and the Pardoo Nickel and Copper Project located in the Pilbara region of Western Australia.
All of the tenements are 100% owned by Segue Resources, except for two tenements in the Plumridge Nickel and Gold Project that are subject to an 80% /20% farm-in Joint Venture with Fraser Metals Group Ltd.
The Plumridge Nickel and Gold Project is the immediate focus of an ongoing exploration and development effort because it is highly prospective for Nova-Bollinger style nickel and copper deposits.
PLUMRIDGE NICKEL AND GOLD PROJECT Segue Resources completed the purchase of the Plumridge Nickel and Gold Project in April of this year which included 2,881 square kilometres of contiguous exploration tenements that extend for approximately 120 kilometres from north to south and 70 kilometres from east to west. The purchase included 8 Exploration Licenses numbered E28/1475, E39/1084, E39/1117 and E39/1118 for a 100% interest, and E39/1731 and E28/2317 for an 80% interest (see Map One).
An additional 10 Exploration Licence Applications were also made that cover an area of 741 square kilometres that abut or are proximate to the main project area.
The Company is contractually bound to an exploration spend of $500,000 within 2 years on E39/1731 and E28/2317 and is part of the 80/20 Joint Venture with Fraser Metals Group Ltd.
MAJOR RESOURCES IN CLOSE PROXIMITY TO THE PLUMRIDGE PROJECT AREA
The Nova-Bollinger nickel and copper deposit is located 125 kilometres to the southwest and along the same Fraser Range gravity high that encompasses the Plumridge Project area. Nova is a magmatic nickel sulphide deposit that has never been seen in Australia before, and is similar to Canadian deposits such as Thompson (Vale), Raglan (Xstrata), and Voisey Bay (Vale) that are much larger than typical Australian nickel sulphide deposits.
Common features of these magmatic nickel deposits include the age of the rocks, degree of metamorphism and deformation, association with a (once) mafic intrusive rock, presence of copper, cobalt and nickel and the ratios of these metals.
Nova currently hosts a JORC compliant resource of 10.2 million tonnes at 2.4% nickel. 1.0% copper and 0.08% cobalt for 242,000 tonnes of nickel, 100,000 tonnes of copper and 7,700 tonnes of cobalt, at a 0.6% nickel cut-off. Bollinger is an additional orebody that is connected to Nova via an interpreted feeder zone.
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MAP ONE: PLUMRIDGE NICKEL AND GOLD PROJECT
The Nova and Bollinger nickel and copper deposits were discovered by Sirius Resources (ASX: SIR) which surged from $0.05 in July of 2012 to $5.00 per share in March of 2013, and now carries a market capitalisation of $1.3 billion.
The Tropicana Gold Deposit is located 50 kilometres to the north of Plumridge and hosts 7.72 million ounces of gold. The Plumridge Gold Project encompasses the Corvette, Mustang, Stingray and Camaro gold prospects which have potential to host a major system of easterly trending high grade gold in albite veins. The geology of these prospects mirror Beadell Resources (ASX: BDR) Tropicana East Gold Project that is located 60 kilometres east of the Tropicana Gold Deposit.
Other highly prospective targets within the general area (not owned by Segue Resources) include Beachcomber, Socrates, Heraclitus and Brookman.
ELECTRO-MAGNETIC SURVEY OF PLUMRIDGE PROJECT AREA IDENTIFIED 16 EYE TARGETS AND 5 CONDUCTORS
In November of 2013 the Company retained Newexco and Omni GeoX, specialists in Fraser Range nickel exploration to identify 16 eye targets using high resolution aeromagnetic data (from an original suite of 30 eye targets) at Plumridge that carry a similar magnetic signature to the Nova- Bollinger deposit. The average size of each eye target was more than five times larger than the Nova deposit, with the largest eye carrying a length of over 20 kilometres.
The consultants relied on aeromagnetic data to identify targets that are covered in transported cover that masks the surface expression of potential nickel sources.
Regional historic drilling data from earlier explorers produced an accurate depth to bedrock map and assisted with the identification of the 16 eye targets located in shallow areas to a depth of 500 metres. This minimised potential for identification of false positive conductors and eliminated deep overburden exploration and development costs.
In January of 2014 Newexco commenced the second stage of this program by undertaking 123 line kilometres of Moving Loop Electro-Magnetic survey work. This effort focused exclusively on the identified eye targets and constituted one of the largest and most comprehensive surveys undertaken in the Fraser Range.
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MAP TWO: ELECTRO-MAGNETIC WORK IDENTIFIED 5 CONDUCTORS FROM 16 EYE TARGETS PLUS RECENT E21 AND E28 TARGETS
E21 IDENTIFIED AS NEW HIGH PRIORITY PROSPECT AND E28 IDENTIFIED AS AN ADDITIONAL PROSPECT
In June of 2014 the Company identified an additional and high priority target on the recently acquired E39/1731. The feature known as E21 covers approximately 25 square kilometres and lies at the southern end of the Exploration Licence. E21 is transected by the axis of the Fraser Range gravity high and major parallel regional structures that are in close proximity to the Nova structure.
E21 has all the indications of being a very large mafic/ultramafic body, similar to the eye which hosts Nova-Bollinger but several times larger.
Segue now has its maiden reverse circulation deep drilling program underway at the E21 target.
Omni GeoX and Strike Drilling are currently on site with the RC pre-collar to approximately 300 metres at C1 the first hole to be drilled. The program is designed to test four bedrock EM conductors located around the northern edge of an interpreted intrusive complex (E21 Target) which lies within tenement E39/1731.
After the RC pre-collar is completed at C1, a diamond tail through the conductor plate, which has been modelled at 650 metres to the centre of the plate will be completed. The hole is expected to be completed by the end of October 2014.
A down-hole EM survey will be undertaken to provide a diagnostic test of the bedrock conductor. Conductors C2, C3 and C4 will be drilled with RC holes to target depths of 250-300 metres. The RC hole planned at C2 will test two interpreted conductor plate orientations.
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DIAGRAM ONE: E21 PROSPECT CONTAINS FOUR CURRENTLY IDENTIFIED TARGETS WITHIN E39/1731
At E28, three significant bedrock EM conductors have been identified along with a new conductor at the E28 Target, which will be drilled as part of the current RC drilling program.
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DIAGRAM TWO: NEWLY IDENTIFIED E28 TARGET WITHIN E28/2266
SCOUT AIRCORE DRILLING PROGRAM COMPLETED OVER SEVEN TARGETS AT PLUMRIDGE
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DIAGRAM THREE: LOCATION OF AIRCORE HOLES COMPLETED OVER SEVEN TARGETS Segue Resources has also completed a 48 hole aircore drilling program for a total of 2,162 metres over 7 Electromagnetic targets at Plumridge.
The objective of the drilling was to collect geological and lithogeochemical data to provide an initial test of the target zones that had been identified in airborne magnetic and Ground Moving Loop EM data. Over 700 samples were sent to ALS Minerals in Perth for multi-element geochemical assaying.
The assay results included a maximum assay of 3,130ppm nickel (0.31% nickel), with associated elevated chromium, in PAC006 within a broader intersection of 16 metres at 0.16% nickel from 20 metres (including 6 metres at 0.28% nickel from 22 metres).
The lithogeochemistry in PAC006 is indicative of a mafic-ultramafic rock and demonstrates the success of the program in identifying the target mafic-ultramafic rocks that will now require follow up assessment.
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DIAGRAM FOUR: CROSS SECTION OF PROPOSED DRILLING PROGRAM AT E28 TARGET
PLUMRIDGE GOLD PROSPECTS
The Plumridge project area had previously been explored for gold that included the Corvette gold prospect that is a gold anomaly that has been defined by aircore, reverse circulation and diamond drilling. Significant and multiple intercepts in localised areas have been defined over a strike length that exceeds 5 kilometres.
The Company is re-analysing over 16,000 drill chip samples for gold associated alteration mineral chemistry. The integration of this work with alteration and structural studies may result in the definition of a number of new gold targets that are close to areas of known mineralisation.
DERALINYA PROJECT
The Deralinya Project is 100% owned, covers 1,298 square kilometres, and is located in the southern portion of the Fraser Range Province. The four tenements overlay the Central Biranup Zone of the Albany Fraser Orogen and are prospective for “Ida Fault extension type gold, shear zone hosted gold, palaeochannel and shoreline mineral sands, and palaeochannel and salt lake hosted Mulga Rocks style uranium mineralisation.
The Company is reviewing exploration data to define the most appropriate exploration model to develop Deralinya. A number of radiometric uranium and thorium anomalies have already been identified that are on the margins of salt lakes that have easy access and will be easy to test.
PARDOO PROJECT
The Pardoo Project is 100% owned, is prospective for nickel, copper and iron ore, and is located on the Great Northern Highway, approximately 120 kilometres east-northeast of Port Hedland in the Pilbara region of Western Australia. The project is surrounded by significant infrastructure that includes roads, rail, deep sea port and a Canning Basin water supply.
Pardoo includes the Highway nickel and copper resource that is contained within two contiguous exploration licences E45/1866 and E45/3383 and one exploration licence application E45/4279 that cover a total of 343 square kilometres.
The tenements contain magmatic and shear hosted nickel, copper and platinum group elements, and are highly prospective for nickel sulphide mineralisation. In 2010 Snowden Mining Industry Consultants prepared an updated Inferred JORC compliant resource for the Highway deposit of 50 million tonnes grading 0.30% nickel, 0.13% copper, and 0.03% cobalt at a cut-off grade of 0.1% nickel.
CATALYSTS FOR NEAR TERM SHARE PRICE GROWTH
- E21 Target: Drilling program has commenced to test four high priority EM conductors at the E21 Target
- E28 Target: Three significant bedrock EM conductors have been identified, with a new conductor planned to be drilled as part of the current RC drilling program.
- Diamond drilling of C1
- Reverse circulation drilling of C2, C3, and C4 conductors at E21 Target
- Further evaluation of conductors 1 to 6 generated from 16 eye targets
- Development of conductors at E28 target
- Ongoing work related to Aeromagnetic and Moving Loop Aeromagnetic studies and follow up technical studies to develop targets and drilling programs
- Evaluation of gold targets within Plumridge project area after nickel drilling program is completed
- Evaluation of Deralinya Project area
GLOBAL NICKEL MARKET
In January of this year Indonesia’s ban on the export of raw nickel ore took effect, creating a 50% surge in London Metal Exchange pricing that reached over £21,000 per tonne of processed nickel by mid-May. Priced in US$ this equates to a rally from US$6.00 per pound to US$9.50 per pound, with current pricing of US$7.52 per pound.
In 2013 annualised global production of nickel was at 2,490,000 metric tonnes, with Indonesia contributing 228,000 metric tonnes in 2012 and 440,000 metric tonnes in 2013, or 17.7% of the global total of nickel production (excluding recycled metal). Expanded Indonesian refining capacity will take several years to establish and will deny Chinese refiners the ability to profit from these valuable resources.
The growth in Indonesian production of nickel ore severely depressed nickel pricing, and news of the export ban created massive re-stocking by Chinese refiners and dumping of nickel into LME stores. Over the course of 2014 LME stockpiles have increased from 260,000 metric tonnes to 345,000 metric tonnes.
Chinese refiners are currently blending richer and stockpiled Indonesian nickel ore with lower grade nickel ores from the Philippines which has a nickel output that is roughly equivalent to the banned Indonesian production numbers. The lower grade Philippine ore will drive up the price of Chinese pig nickel production, and eventually the stockpiles will run out.
The consensus amongst nickel forecasters is that nickel prices will increase over the next 6-12 months to between US$10 – US$11.36 per pound. Glencore which is a significant nickel producer is forecasting nickel prices to increase by 35% by 2018, and outpace price increases for aluminium 28%, zinc 25%, thermal coal 15%, copper 5%, oil 3% and a reduction of 10% for iron ore.
ANALYSIS & VALUATION Segue Resources Ltd is currently capitalised at $22.0 million, of which $0.7 million is cash and places an Enterprise Value “EV” of $21.3 million on its tenement holdings. Most of this EV is derived from the nickel prospectivity of the Plumridge project area in the Fraser Range.
Sirius Resources (ASX: SIR) is the obvious Fraser Range peer group leader with its discovery and development of the Nova and Bollinger nickel and copper discovery, and is capitalised at $1.3 billion.
Leaders within the group of Fraser Range explorers that have advanced to the stage where they have identified magnetic “eyes”, completed early stage drilling with positive nickel indications and have drill ready targets include Matsa Resources (ASX: MAT) which is capitalised at $30.3 million and carries an EV of $18.3 million.
Windward Resources (ASX: WIN) holds a 70% interest in over 8,000 square kilometres of Fraser Range tenements. Windward has developed a number of nickel drilling targets, has completed some early drilling, and is capitalised at $18.5 million and carries an EV of $12.6 million.
Segue Resources has already defined seven solid nickel targets that are drill ready and could be classified as the leader within this peer group of Fraser Range nickel explorers, and carries a valuation that is in line with this group. The Company is supported by Acorn Capital which is a specialist investor in microcap companies and maintains an 8.4% equity interest.
Brazilian mining giant Vale, which is capitalised at US$55 billion, is the first major to enter the Fraser Range nickel search, and has secured tenements that are located on the eastern edge of the Range. Vale owns Voisey Bay and is very conversant with the style of nickel mineralisation that is being sought along the Fraser Range.
The presence of this major nickel miner upgrades the entire Range, and underwrites the potential for the various peer group explorers to be drawn into joint ventures or become take-over candidates.
At this stage it is not possible to develop a 6 to 12 month price target for Segue Resources. Proactive Investors believes that investors should have a position in the stock due to the massive upside potential that is inherent in the potential discovery of an economic nickel resource. The entry of Vale into the Fraser Range highlights the stakes and scale of potential for nickel discoveries. Segue Resourcesis perhaps the best leveraged of any Fraser Range explorer and deserves a position in a portfolio.
Segue Resources has already identified 7 magnetic conductors that are highly prospective for nickel values and are subject to current or upcoming drill programs.
A significant and economic nickel resource could easily carry a value of $0.5 - $1.0 billion that is based on the valuation that came into play at the nearby Nova-Bollinger discovery. This would equate to $0.25 - $0.50 per Segue Resources share. "
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