Barry FitzGerald: Emmerson could be a prime target for a partner on its NSW porphyry hunt
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Emmerson Resources (ASX:ERM) could be one to watch in coming months on two fronts.
First, there is its unfolding exposure to royalties and profit shares from high-grade gold production at Tennant Creek in the Northern Territory.
And there is its exposure to copper-gold porphyry exploration in NSW’s “hot” Lachlan Fold Belt.
Emmerson is currently trading at 11c for a market cap of $47m, the bulk of which is represented by its coverage of Tennant Creek where over the last 12 years since listing it has made a number of small but high-grade discoveries.
Most, but not all of them, have been bundled up into a royalty/profit share deal with the privately held Territory Resources, which picked up the mothballed Warrego mill from Emmerson awhile back, the idea being to have what will be Tennant Creek’s only processing operation back up and running in the new year.
The strategic alliance between the pair – it also includes a $5m earn-in by Territory over Emmerson’s southern project area – involves ore from a portfolio of Emmerson’s smaller mines being treated at Warrego on a 75/25 per cent profit share basis.
Ore treated from Emmerson’s bigger Edna Beryl and Chariot deposits will be the subject of 12 per cent and 6 per cent production royalties respectively.
It is all very sensible stuff as it is a way forward to capitalise – at a time of near record Australian dollar gold prices – on Tennant Creek’s generally high-grade but “poddy” and currently stranded gold deposits, while the hunt for a game changing big one (the field does have a history of 1moz high-grade deposits) continues.
There are no development scenarios and mine plans wrapped around the Tennant Creek alliance. But once Warrego gets going again, the payments to Emmerson could be very meaningful in terms of its current market cap, and funding its exploration needs.
Having said all that, the immediate interest in the stock is in its NSW porphyry hunt, made all the more interesting by the market’s strong response to the recent Boda porphyry discovery by Alkane Resources (ASX:ALK) which is now the subject of more drilling to confirm it is something special.
Emmerson is not a Johnny-come-lately to the NSW porphyry excitement. It moved into the Lachlan Fold Belt about four years ago based on some good science and reckons its Whatling Hill and Kiola projects will be worth watching.
Drilling at Whatling Hill started this week. It is following up first pass drilling done earlier this year that intersected the outer zone of a porphyry copper system (8m at 0.4 per cent copper, and 1m at 1.4 per cent copper) under shallow cover.
The latest hole is aimed at testing the hotter and higher grade guts of the interpreted porphyry at depth.
As an aside, Whatling Hill is named after the farmer whose drought-affected property hosts the prospect.
As an act of goodwill, Emmerson drilled a water bore for the farmer – John Whatling – which is now pumping out water at a rate of 1,000 litres every 20 minutes.
It means that cropping at the sheep/cropping farm might be able to resume despite the ongoing drought.
It is a nice bit of friendly engagement by Emmerson and puts paid to the notion that NSW farmers all want to lock their gates to exploration.
Kiola is also rated by Emmerson. It’s where the company has previously announced anomalous rock chip samples of up to 19.6 per cent copper and 0.36 grams per tonne (g/t) gold in an area with historic copper workings.
Survey work is underway to determine the depth of the suspected porphyry ahead of drilling.
It is the kind of target that major miners would love to get their hands on after being reacquainted with NSW’s porphyry potential by the Boda discovery, so it won’t be a surprise if Emmerson gets some approaches for a farm-in deal.
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