• Topdrill’s drilling-for-equity model is sharing upside with junior explorers, with $500,000-$1 million deals
  • Deals have been made with Torque Metals, Brightstar, Antipa, Aurumin and De Grey Mining and more

  

Getting paid an agreed percentage for contract work in shares of a penny stock might seem like a gamble from the outside, yet it’s helped Topdrill grow from a platoon of 55 employees in 2014 to a 420-strong army of drillers today.

Topdrill, borne out of Kalgoorlie, is helping prop up juniors at the start of its mining exploration journey through shares-for-services deals all across WA’s mining sector.

The drilling contractor is led by Kalgoorlie-based Tim Topham, who sees that, in a fluctuating exploration sector, taking on incentivised explorers with tight margins provides more work and the ability for his company to keep turning over projects and employ a large workforce ready to deploy across Australia.

“When explorers are ready to drill they want to get things moving as fast as possible, and keeping the drill bit spinning for them has been one of the keys to Topdrill’s success,” says Topham.

The company has had notable and successful past partnerships with explorers such as Spartan Resources (ASX:SPR) with its revamp of Dalgaranga and Wildcat Resources (ASX:WC8) at Tabba Tabba.

While these are not equity deals themselves, they’re a testament to the driller’s competence in being able to help prove up a resource.

It’s also poured in to assist Morella Mining (ASX:1MC) unlock lithium at its 51%-owned Tabba Tabba East JV with Sayona Mining (ASX:SYA).

De Grey Mining (ASX:DEG) was one of the first to actually sign on to a drilling-for-equity deal with Topdrill, signing on back in 2016 when it was a $6m-market-capped minnow for a 20,000m drill program where 50% of costs were to be paid to the contractor in shares around the 10-12c mark, escrowed for six months, and any costs incurred over the $1m mark to be negotiated on.

 

Drilling for equity swaps

Lately, drill-for-equity deals are becoming more popular. Topdrill, and others alike, are helping ASX juniors commit to drilling activities at a lower cost by swapping shares in their company for drilling services in an often volatile commodity market.

“We use our equity deals as a tool to partner with the right explorers, right management and right ground opportunities,” says Topham.

“Getting the motivation to drill holes is hard in this market climate, so we thought we’d share some of the risk and also some of the upside with the companies we work with.”

The company just signed a second deal with lithium and gold-focused Torque Metals (ASX:TOR).

TOR holds a drill-for-equity agreement with Topdrill in which 50% of the costs of an expansive drilling program at the flagship Paris gold project southeast of Kalgoorlie in WA will be paid in ordinary shares.

The explorer considers it a cost-effective approach and the agreement sees up to 50% of Topdrill’s drilling costs paid in shares up to a max $1m, including a voluntary 6-month escrow period for the funds to be released.

Back in March, Aurumin (ASX:AUN) announced a top-up of its drill for equity agreement with Topdrill until September 30 this year.

The drill-for-equity agreement allows Aurumin’s flexibility to increase drilling and preserve cash.

“Following recent divestments and share placement, we are now debt free with a strong cash position, having transformed the balance sheet,” said Aurumin’s MD Brad Valiukas in March.

“The drill-for-equity agreement gives us more flexibility, and we can use it, or not use it at our discretion, to either preserve our cash position or drill more metres.”

Gold producer Brightstar Resources (ASX:BTR) has just recently consigned the driller to undertake work across its Sandstone landholding in WA’s Goldfields, where it’s creating a third mining hub. Topdrill has agreed to take $1m in Brightstar scrip by converting drill costs to equity.

As did an explorer surrounding Newmont’s Telfer gold mine. Antipa Minerals (ASX:AZY) just raised $5.75m through a share placement with a further $540,000 backing from Newmont to progress exploration and resource expansion of the GEO-1 prospect at the 1.8Moz Minyari Dome gold project.

Antipa reckons the region is ripe for the pickings, since Newmont has put Telfer up for sale after it bought out Newcrest and the likes of Rio Tinto and Greatland Gold thinking of consolidating projects.

Over in Africa Mako Gold (ASX:MKG) has the company spinning the drill bit for a 1500m RC program with contractor Geodrill at its flagship Napié gold project in Côte d’Ivoire in a similar deal, helping Mako on its journey to prove up its gold resource.

 

At Stockhead we tell it like it is. While Brightstar Resources, Mako Gold and Torque Metals are Stockhead advertisers, they did not sponsor this article.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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