Barry FitzGerald: Kalamazoo on the hunt for the next ‘Fosterville’
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Kalamazoo Resources’ (ASX:KZR) highly anticipated maiden drilling program for high-grade gold at its Castlemaine gold project in Victoria is finally underway.
With a bit of luck, first results from the drilling could be released before the end of the year, although late January/February is more likely.
The maiden drilling program is what investors have been waiting for since Kalamazoo secured control of the Castlemaine goldfield, a historic producer producer of 5.6 million ounces of gold from mainly alluvial sources.
Rather than rush in and pepper its tenements with holes near historic workings, Kalamazoo took a step back to first subject the project to all of the modern exploration techniques found nowadays in gold explorers’ tool bags.
“We thought we would give ourselves the best chance of success by using the tools and techniques now available,’’ Kalamazoo’s executive chairman, Luke Reinehr, told Garimpeiro.
“And given the cost of drilling, the 400m diamond holes in the maiden diamond drilling is not cheap, it means we are trying to do things a little bit smarter.
“We want to get the best bang for our buck.”
It is a strategy outlined by Garimpeiro back in March when Kalamazoo was trading at 10c. It has since motored on to 26c as anticipation around the maiden drilling program builds.
The first 10 holes will test priority high-grade gold targets within a privately-owned pine plantation in the northern reaches of the Castlemaine project where previous explorers recorded high-grade hits that weren’t followed up.
The initial 4,000m program is expected to take about three months to complete and after a pause to review the results, Kalamazoo plans to follow up with a second stage 6,000m drilling program, with the work funded by proceeds from the sale of a WA gold asset.
The company’s unabashed aim is to find Victoria’s “next Fosterville,’’ a reference to the gold mine near Bendigo owned by Canada’s Kirkland Lake (ASX:KLA) that has emerged in the last couple of years as one of the world’s best thanks to the discovery of the super high-grade Swan Zone at depth.
Reinehr – who along with his brother controls about 38 per cent of the company – has been clocking up some serious kilometres promoting the news that the company’s maiden drilling program is underway, with visits to investors in New York, Toronto, Munich and Australia’s east and west coasts.
He told Garimpeiro that the success at Fosterville, about 65km north-east of Castlemaine via the Midland Highway, was very well known in the overseas markets, and that the investors were keen to know what other companies were involved in Victoria’s north central goldfields.
While Kalamazoo’s shares have performed strongly in the lead up to the maiden drilling program, its market cap of $27m remains relatively modest compared with some of its Victorian gold exploration peers, enhancing its leverage to any success with the drill bit.
Apart from Castlemaine, Kalamazoo also has a big presence in two other high-grade historic goldfields in the Bendigo Zone – Maldon (South Muckleford) and Tarnagulla.
Reinehr revealed that Kalamazoo would be putting its hand up for the southern blocks in the state government’s tender of four big exploration blocks to the north and south of the Fosterville.
Tender bids are due by mid-January, with the winning tenders to be announced later in the March quarter.
Because of Kirkland’s fabulous success at Fosterville (570,000-610,000oz forecast for 2019 at an operating cash cost of $US130-$US150 an ounce), the tender will be fiercely competitive.
“We think every major gold company in Australia, and probably globally as well, is looking at it,’’ Reinehr said.
The financial firepower the big companies can bring to their tenders is not the only factor that determines the winner as it only carries a weighting of about 25 per cent.
According to the government, other factors taken in to consideration include “demonstrated corporate social responsibility and a solid commitment to working with traditional owners, local communities and landholders”.
That’s why small companies like Kalamazoo are in with a shot (it likes the southern blocks because they don’t have the Murray Basin cover constraints found on the northern blocks).
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