Barry FitzGerald: Fresh out of IPO, gold junior Yandal Resources has hit the ground running
‘Garimpeiro’ columnist Barry FitzGerald has covered the resources industry for 35 years.
The opening months of 2019 are set to be owned by the gold producers.
Near record Australian gold prices and the surge in merger and acquisition at both the big and small end of town has made sure of that, with leading gold stocks at or near year-highs.
But it has remained tough going for the junior gold explorers with investor fatigue overwhelming the bullish backdrop for the sector. Things could change if gold holds on to its near record level in Aussie dollars.
In the meantime, the best thing the juniors can do is ensure they have a fresh story to spin to investors. There is no fresher story than one delivered by a junior that has managed to swim against the tide to become an IPO debutante.
That is case with the December 14 IPO debutante, WA gold explorer Yandal Resources (ASX:YRL). Unlike most other IPOs of various flavours in the back half of 2018, it is trading at a decent premium to its 20c issue price.
Yandal was last quoted at 24.5c for a market capitalisation of $13 million. The premium to the float price in an otherwise difficult market for the juniors reflects the buzz around the stock on a number of counts. And besides, it’s a fresh story.
Some will tell you Yandal’s strong showing since its debut is because the $6.1 billion Northern Star became a 15% shareholder through the float. Coat-tailing the likes of the savvy Northern Star is not a bad investment strategy.
Others will say they have made their own assessment of Yandal’s projects and are encouraged by drilling results released by the company since it joined the ASX, with follow-up drilling programs set to kick off early in February.
Whatever the reason for the buzz, it can be said that with its small and tight issued capital – the top 20 hold 80% of the stock – Yandal stands as a leveraged play to more exploration success.
As its name implies, Yandal’s main project areas – Ironstone Well, Barwidgee and the old Mt McClure mining camp – sit on the prolific Yandal greenstone belt, home to Northern Star’s 10m oz Jundee operation at its northern end, and Echo Resources’ mothballed Bronzewing treatment plant to the south.
The company has a dual focus exploration strategy of proving up near-term development opportunities indicated in work by previous owners stretching back decades in a region dotted with third party treatment plants, as well as discovering new resource positions by leveraging off the historical database but with a new geological interpretation.
The initial focus will be at the Flushing Meadows prospect at Ironstone Well where historic pit optimisation studies completed in 2009 suggested the potential for a mining operation. The plan is to have a stock exchange compliant resource estimate in place by mid-year and then think about getting it in to production.
A new drilling program will also test the resource potential of high-grade plunging shoots below the Success pit at Mt McClure. Success was mined as an open-cut between 1993 and 2010 for 38,000 oz of gold to a vertical depth of 80m.
Yandal plans to drill to 150-250m depths to follow up historic intersections beneath the old pit which included best results of 6.6m at 4.12g/t gold from 155m, and 4.6m at 3.61 g/t gold from 186m.
Proximity to treatment plants owned by others is also a feature of Yandal’s Gordons Dam prospect near Kalgoorlie and some 16km north of Northern Star’s Kanowna Belle mine.
The project sparked interest recently when drilling returned primary gold hits below previously identified high-grade oxide gold, suggesting to Yandal it “could be on to a system of significant size” in what is pretty much a virgin area despite being on the doorstep of Kalgoorlie.
One to watch, particularly given Yandal’s current $13m market capitalisation.
Barry FitzGerald writes his legendary Garimpeiro resources column weekly for Stockhead.