Barry FitzGerald: All eyes on Minotaur as it closes in on maiden Jericho copper resource
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Minotaur is a famous name in the local exploration scene thanks to the 2001 discovery of the Prominent Hill copper-gold deposit in South Australia’s Gawler Craton by the junior explorer Minotaur Resources (MNR).
MNR was taken over by Owen Hegarty’s Oxiana (now OZ Minerals) for $100m in 2005, with Prominent Hill going on to become a big copper-gold producer which to this day underpins the $3 billion OZ.
It was a feature of the 2005 takeover that the non-Prominent Hill assets of MNR were bundled up into a new ASX-listed company, Minotaur Exploration (ASX:MEP), with shares in the new company distributed to MNR shareholders on a one-for-one basis.
It means that MEP has rich explorer’s DNA compared with most of the 700-odd listed explorers on the ASX.
And like its successful antecedent, MEP continues to de-risk its exploration hunt by parlaying its geological skills and knowledge into attracting companies with deeper pockets to fund quality exploration projects.
The JV approach has limited the cash call on shareholders ever since MEP replaced its antecedent on the ASX. Last year for example, 82 per cent of MEP’s exploration expenditure of $9m was contributed by JV partners.
A real benefit of that is that unlike most junior explorers which have been around as long as MEP has been, the company’s issued capital remains nice and tight at 334m shares, giving the company a $17.7m market value at Friday’s closing price of 5.3c a share.
Knock off the $4m cash MEP was holding at June 30, and the company’s modest enterprise value of $13.7m tells you that it has yet to replicate the Prominent Hill success of 2001.
But true to its DNA, MEP has notched up exploration success in the Cloncurry region of north-west Queensland, as well as generating new exploration plays to ensure a full pipeline of new joint opportunities.
Again reflective of its DNA, the Cloncurry exploration success is shared with OZ in three formal joint ventures – Jericho, Eloise and the broader Cloncurry exploration alliance.
Jericho is the most advanced and contains the 2017 copper discovery of the same name worked up by Minotaur’s in-house exploration team. It was the first significant discovery in the broader Cloncurry copper province in 20 years.
MEP is manager and operator of the JV, with OZ holding 80 per cent and MEP 20 per cent, with OZ funding MEP’s share of expenditure until positive cash flow is achieved at a mining operation.
Jericho lies 3km to the southeast of the Eloise copper-gold mine, originally a BHP discovery and now owned by the privately held FMR Investments.
Eloise has been in operation for more than 20 years and somewhat ironically, the access road to the mine runs over the top of Jericho. More than 12 million tonnes of mineralisation grading 2.2 per cent copper has been mined at increasingly greater depths at Eloise.
While Jericho itself has returned some impressive results – including the 8.9m hit grading 4.4 per cent copper and 1.5 grams per tonne (g/t) gold reported last month from a high-grade shoot under thin cover on one of Jericho’s two lode systems – the market has held off getting too excited, something reflected in MEP’s current market valuation.
The reason for the lack of excitement has been the absence of a maiden resource estimate for Jericho. But that is now in the works, with an initial estimate for the central zone of the two defined lodes expected before the end of the year.
The maiden estimate could well trigger studies in to an early “starter’’ pit and underground workings, ideally on a standalone basis, but with a toll treatment arrangement also a possibility.
Importantly, Jericho is expected to be only the start of the story as the Eloise JV and the Cloncurry exploration alliance with OZ are likely to serve up new development opportunities that could result in Jericho becoming a regional development hub.
Ahead of news on the maiden resource estimate for Jericho, newsflow from MEP’s Windsor base metals joint venture with private interests, 200km south-west of Townsville, and its wholly-owned Peake & Denison Range copper-gold prospect, east of Coober Pedy in South Australia, will be worth watching.