Barry FitzGerald: Blackstone Minerals heats up as ‘licence to print money’ beckons
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Newcrest’s $1.14 billion acquisition of a 70% stake in the Red Chris mine in British Columbia has alerted Aussie investors to the big-time appeal of BC’s abundant porphyry copper-gold deposits despite their low grades.
That’s great news for ASX-listed junior Blackstone Minerals (BSX) which is trading at 9.5c for a market value of $10.6 million.
Blackstone has made a name for itself in recent years as a high-grade cobalt explorer at what it calls its BC Cobalt project, about 180km north of Vancouver.
Its flagship Little Gem cobalt prospect within the broader BC Cobalt project area continues to shape up as future supplier of the critical lithium-ion battery ingredient to a world increasingly nervous about the dominance of supply from the Congo in central Africa.
But watch out for investor interest to step up in the stock as the winter snows melt away in BC in coming months, allowing Blackstone to drill some holes in to its Jewel copper-gold-cobalt porphyry prospect, 1.1km north-east of Little Gem.
The Jewel prospect is associated with a small underground mine that produced high-grade gold and copper between 1938-1940. But the real (potential) prize at Jewel is a big buried copper-gold-cobalt porphyry system.
As the Newcrest acquisition highlighted, porphyry systems can be highly valuable, even if the grades are low (Red Chris has a measured and indicated resource of 1 billion tonnes grading 0.35% copper and 0.35g/t gold).
It is the scale of the resource that made Red Chris attractive to Newcrest because of its particular expertise with the block cave mining technique.
Block cave mining operations are expensive to set up but once they are established, they can be a licence to print money for 20 years, 30 years, or more.
It is how Newcrest mines its Cadia mine in NSW which has similar low-grade resource values to Red Chris. Cadia is one the world’s biggest and most profitable gold mines (after copper credits).
It is mined at and treated at an annual rate of 30mtpa. Thanks to the block cave mining method and its copper credits, Cadia was able to generate a fabulous all-in sustaining cost margin of $US1,114 an oz in the December quarter on gold output of 240,000 ozs.
Blackstone is a long way off from having a Red Chris or Cadia porphyry system amenable to block cave mining on its hands.
But its small market value gives it extreme leverage to exploration success, meaning its 2019 field season is set to be closely watched, both for the potential porphyry system at Jewel, and the unfolding cobalt story at Little Gem and elsewhere in the project area.
Drill rigs should arrive on site in late May, early April. The Jewel prospect has never been drilled despite its high-grade production history, albeit a brief one.
Surface rock chip samples taken by Blackstone from Jewel have delivered high-grade results, including 5.6% copper. The company has also outlined a 1.5 km long soil anomaly which coincides with geophysical targets at depth, indicating what Blackstone has previously described as a “large sulphide bearing body at depth.’’
Blackstone got ready for the 2019 field season (it runs from May to October in BC) last December when it pulled in $1.2m from a placement of shares at 10c each.
The funding also allowed the company to advance work at its Silver Swan South nickel-gold project in Western Australia while the BC Project remained snowed in.
The Silver Swan South project area is along trend from the Silver Swan high-grade nickel deposit mined previously by others, and 8km north-west of Northern Star’s 5m oz Kanowna Belle gold mine.
Drilling at the Black Eagle prospect at the project has provided encouraging results, including 10m at 3.2 g/t from 68m. Follow up work is planned.