Barry FitzGerald: Will Encounter be the next junior to celebrate a big find?
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There’s been plenty of excitement in the last year or so on the exploration front, from both the big end of town and the juniors.
Recent discoveries that have set the pulse racing include Winu (Rio Tinto) and Havieron (Newcrest/Greatland) in WA’s Paterson province; Oak Dam (BHP) on the Stuart Shelf in South Australia; and Boda (Alkane Resources) in NSW’s Lachlan Fold Belt.
There has also been a bunch of gold finds, mostly characterised by junior companies like Bellevue Gold (ASX:BGL) and Spectrum Metals (ASX:SPX) finding lode extensions beneath historic mining operations in WA.
The latest addition to the roll call of game-changing discoveries is the 40 per cent copper hit at Stavely Mineral’s (ASX:SVY) Thursday’s Gossan property in western Victoria.
The leveraged response by Stavely to the find has been something to behold.
What was a 24c stock last Wednesday became a $1.07 stock by the close of trade on Friday – a 345 per cent gain if you don’t mind.
The price surge was a handsome reward for those shareholders that have backed Stavely’s hunt for big-time copper/gold in its broader namesake Stavely project area since it joined the ASX in 2014.
But the bigger point today is that it is much more rewarding to hold stock in a junior that has made a special discovery, than it is to have exposure to a discovery made by one of the major miners.
Rio (ASX:RIO) barely moved on news of the Winu copper/gold discovery. The truth is that a $1/t move in the iron ore price is more important for Rio than whatever it comes up with beneath the sand dunes of the remote Paterson province.
The same could be said about Havieron for Newcrest Mining (ASX:NCM), and Oak Dam for BHP (ASX:BHP).
For the smaller Alkane Resources (ASX:ALK) though, excitement over its Boda copper/gold discovery — announced on September 9 — has seen its stock just about double to 68c.
The leveraged response of the juniors to exploration success is not without risk; the main risk, of course, being that they don’t make a discovery in the first place.
Follow up work to the discovery hole can also disappoint, with leverage to the downside as potent as it can be to the upside.
Still, seeking out juniors that just might deliver some exploration success is something of a national past time. We are after all, all full to the gills with boring bank stocks.
It is an impossible one to answer. But it is possible to suggest that there are some juniors out there that are more likely than others to come up with something that could excite.
And amongst the more highly rated explorers, the share price can actually start moving ahead of a well-put-together drilling program kicking off.
Encounter Resources (ASX:ENR) is an example. Mentioned here back in late February on the strength of its unfolding 2019 field season when it was trading at 6.8c a share, the stock has since motored on to 13c ($36 million market cap).
Encounter’s project generation model has led to the formation of joint ventures with major miners Newcrest and Independence Group (ASX:IGO). Add in its 100 per cent owned projects, and Encounter has exposure to a dozen or so Tier 1-type exploration targets.
It has been anticipation (and hope) of what might come from the programs which has been behind Encounter’s share price almost doubling since February.
As it is, the first phase of drilling at the Hutch’s Find prospect in the Tanami region of WA, a joint venture with Newcrest which is sole funding the program, has just started with first results likely to be reported in November.
The 17-hole program will be keenly watched and will be followed up with drilling at the joint venture’s Selby ground.
Put simply, both are targeting large-scale deposits, the potential for which got Newcrest’s interest up in the first place.