Alto doubles down on gold exploration but merger talk is a no-go zone
To explore or to develop?
That’s the question that kept Alto Metals directors awake at night — until the “explore” option recently won out, setting the scene for some interesting corporate developments in the new year.
Gold is the target of Alto (ASX:AME) — as it has been for every explorer working in the Sandstone region of central WA for the past 100 years, sometimes with great success, sometimes not.
Alto took on the Sandstone challenge in early 2016, securing most of the ground around the historic mining centre, in a process which also saw it drop uranium exploration assets and change its name from Enterprise Uranium.
Making sense of the geology around Sandstone — located 600 km north-east of Perth (see map below) — has not been easy.
The ground has generally given up relatively small pods of high-grade gold which can be a frustration because the tiny town is surrounded by some of Australia’s biggest goldmines.
The 10 million-ounce Agnew mine of South Africa’s Gold Fields is about 80km to the east.
The six million-ounce Gwalia mine of St Barbara is about 200km to the south-east. The 11 million-ounce Wiluna and 10 million-ounce Jundee mines are to the north-east, and the six million-ounce Mt Magnet mine is to the west:
Sandstone, despite a century of production, can only lay claim to around one million ounce.
Though if Alto’s recent rate of discovery continues it could hit the 500,000oz mark sometime in the next six-to-12 months.
As the resource base currently stands Alto has 261,000oz in a number of old and new deposits, theoretically enough for a deal to be struck with a neighboring miner, Middle Island Resources, which owns a processing plant, with an ore treatment deal potentially being the start of a much closer relationship.
Merger talk a ‘no-go’ zone
Asked questions about a possible merger, the conversation with Alto’s chief executive Dermot Ryan veered into a no-go zone with a polite “no comment”.
“The big issue in front of Alto today is to expand the resource base to a target of 500,000oz,” Ryan said.
“That’s the key for us and we can’t talk seriously about mining while we’re very much focused on exploration.”
That might not have been the case for all board members, with some preferring a fast start on production — another no-go topic which causes Ryan to again put up the shutters.
Interesting as it is to probe the inner workings of Alto, the more important points about the company include the fact that it does have its foot on the lion’s share of a geological structure known as the Sandstone Greenstone Belt. Greenstone is the primary source of gold in WA.
The other owner of interest in the Sandstone region is the neighbour with a treatment plant and a shortage of gold for processing, Middle Island.
For investors, Alto is a work-in-progress, but one with excellent corporate connections at board level that include the highly-successful and well-heeled mineral chemist, Terry Wheeler, and the chairman, Terry Streeter, who’s claim to fame is a fortune made as a big shareholder in a pair of nickel stocks, Jubilee Mines and Western Areas.
When Streeter joined the Alto board earlier this year it was seen as a sign that the company was getting ready to go mining, doing what earlier owners had done by developing (and re-developing) a series of small pods of gold.
That plan appears to be waning as the company steps up its search to find something more substantial — a real possibility if the latest exploration news is a guide, including a drill intersection of 40 metres assaying 3.5 grams of gold a tonne from the relatively shallow depth of 60m in the Vanguard target, and 8m at 4.1g/t from 52m in another target, Tiger Moth.
The latest drill results should bolster the inferred mineral resource covering the company’s large tenement position of 261,000oz in 4.9 million tonnes of ore grading 1.7g/t.
Potential to expand
Significantly, all of the deposits which have contributed to that resource position have the potential to expand as drilling continues.
“We can see 300,000oz being reached fairly easily,” Ryan said, but the real target is 500,000oz, a point we expected to reach early in 2019.”
On the market Alto has not been a star, sliding from 9c at the start of the year to latest sales at 4.9c, a result which reflects uncertainty around the “mine or explore-for-more” question and a need to top up the bank balance which had slipped to $486,000 as at September 30.
Looking for more funds is standard procedure for exploration companies and Alto has a number of well-heeled supporters who are keen to see the stock succeed, not only for the potential profits from a successful gold project but also to prove that Sandstone is more than a patch of small gold deposits.