Given the completion of the cap raise, and a solid basis for funding through 2022, it’s time to look forward to what’s on the horizon. GBM have undertaken two company changing acquisitions in the last 12 months and I thought it would be good to assess how they went compared to an industry rule of thumb, and also what is left on the acquisition front for the Drummond. These are my notes for my own understanding, but I figure others may find them useful.
Current Drummond holdings, and location of Wirralie:
Industry “Yardstick” pricing for gold resource acquisitions – provided by SRK Consulting and sourced from FFR/GCY Scheme Booklet.
YandanYandan was acquired from Aeris Resources (AIS) for A$3.0 million in GBZ shares @ 13.5c each in October 2020. At the time of acquisition, the resource was 401 koz inferred at JORC 2004 standard. Based on the yardstick above, fair price would be in the region of A$4.8m to A$9.6m, and this does not include the infrastructure that came with the Yandan tenements. Also to note, the Yandan resources were updated in December 2020 to 521 koz inferred JORC 2012 (without further drilling), further increasing the yardstick pricing to A$6.3m to A$12.5m! The Yandan acquisition was completed 3 months later in January 2021.
GBM management achieved a price for Yandan well below the yardstick lower threshold of A$4.8-$6.3 m in acquiring Yandan.
Twin Hills
A non-binding agreement to acquire Twin Hills from Minjar (subsidiary of Jinan listed on the SSE) was entered in February 2021, followed by a binding Tenement Sale Agreement in July 2021 for A$3.7 m in cash (basis - $5.33 AUD/oz for 633 koz Au) – my understanding is this is a combination of the A$2 m cash consideration payable to NQM/Minjar and the A$ 1.48m environmental bond for the tenements.
At the time of acquisition, the gold resource was 44 koz measured, 210 koz indicated and 379 koz inferred (JORC 2012, thanks to GBM circa 2017!). Based on the yardstick pricing, fair price would be in the region of A$11.7 m to A$24.4 m. The Twin Hills TSA is being finalised, with completion expected within the next month.
GBM management achieved a price for Twin Hills at a third of the yardstick lower threshold of A$11.7 m in acquiring Twin Hills (pending completion).
Next Target - Wirralie
Firstly, GBM have hinted at another Drummond acquisition on the cards in the Investor Update released 16/6 – after the non-binding agreement with Twin Hills had been entered. “Further acquisitions being evaluated”.
A very good summary of Wirralie from EVN announcement 13/06/2014:
A bit of background on Wirralie:
- Ross Mining NL successfully mined the oxide resource from between 1992-1997 (along with Koala & Glen Eva).
- Currently privately held, but was owned by EVN from mid-2014, until 2016 when it was sold to Minjar along with the Twin Hills tenements (https://evolutionmining.com.au/wp-content/uploads/2016/09/1590088.pdf). The paper trail then comes to an end, with Minjar not being listed on the ASX, but it appears to be owned by Solomon’s Gold, another private entity (https://solomonsgold.com.au/our-assets/).
- Mining has been restarted, either under Minjar or Solomon’s Gold - https://www.australianmining.com.au/news/mine-worker-severely-injured-after-qld-truck-rollover/. A check of mining leases shows that Solomon’s Gold holds a mining lease on the Wirralie site – ML 1079.
- The site does not appear to have implemented a strategy to process the refractory sulphide ore (POX, BIOX, Albion or flotation to sale) based on a cursory satellite plant view. The plant layout resembles a typical heap leach oxide circuit – you can compare this with White Dam satellite imagery, they appear very similar. Image below is pulled from GeoResGlobe and annotated by myself.
Why Wirralie is a likely target for GBM and why it fits well within the Drummond portfolio:
1. Sits within the proposed Drummond processing halo, at 40 km from Yandan as the crow flies.
2. Of a size that is comparable to Yandan, Twin Hills and Mt Coolon projects, and likely an achievable acquisition for GBM given their market cap, cash on hand and track record acquiring Yandan/Twin Hills. Ashburton 2004 resource estimation, with no additional drilling assumed and all oxide mined, of 400 koz sulphides. This is likely to be much higher in 2021 given increased gold price and decreased cut off grades since 2004.
3. Represents an opportunity for GBM management to unlock value by applying PR’s metallurgical know-how and links to the Albion process (see
@Rx- Post #: 49790006) for treating refractory sulphides. An Albion plant could be built at Yandan, to treat any refractory material generated within the Drummond processing halo, with Wirralie providing the early feed.
4. Could be acquired at a discount due to difficult to process refractory sulphides becoming a bridge too far for current owner Solomon's Gold. Based on the satellite imagery, current owners are still processing oxide, but at some point the shallow oxide resource will be depleted, with the deeper, and much larger based on Ashburton 2004 resource, sulphide remaining and exposed for mining.
In Summary, GBM management have demonstrated their acquisition prowess, acquiring both Yandan and Twin Hills at significant discount to Yardstick gold resource pricing used by the industry. Wirralie presents an opportunity for GBM to further consolidate the Drummond and increase total Drummond ounces in an extremely cost effective manner, with some synergies between the GBM management and Wirralie resource available to unlock further value.
(20min delay)