Competitive tension is heating up in WA's Laverton gold district. Pic: Getty Images
Everyone wants a slice of WA’s Laverton gold field, and these explorers are hunting the next major discovery
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- Gold prices are sitting close to record highs
- A number of miners want to restart and refill mills in areas like WA’s Laverton gold field
- That’s bringing competitive tension for discoveries by junior explorers
It’s often said the business world is dog eat dog, but the nature of the mining ecosystem dictates that big miners need little ones to maintain balance.
That is certainly true of the WA gold industry, where the competing priorities of the sector’s large mining houses leave neglected crevices where juniors must fill the void.
This manifests in a multitude of ways.
An ageing operation in need of revitalisation may fall short on the exploration required to return it to its former glory in the hands of conglomerates with their focus on larger assets elsewhere. That was certainly the story with the WA Goldfields mines acquired by upstart juniors Northern Star Resources (ASX:NST) and Evolution Mining (ASX:EVN) from Barrick and Newmont.
By navigating the dark the global supermajors were unprepared to explore, both have transformed into multi-billion dollar companies of their own.
Conversely, other large companies with more constrained budgets can become tunnel-visioned, forced to focus in and around ageing mines to keep their assets running, with less risk-averse juniors left to take on the task of making new, innovative discoveries.
With gold prices at levels unseen until 2024, sitting just one month ago at record highs of US$2790/oz ($4250/oz), the role of juniors in underexplored Aussie gold fields has never been starker.
Faced with dwindling reserves, hungry mills and a lack of investment in greenfields exploration over the past decade, majors and mid-tiers alike will increasingly need to look down the curve to secure their supply and capture the benefit of strong gold prices.
Here’s how that dynamic is playing out in the previously overlooked Laverton gold field of WA.
Competitive tension
390km north-east of Kalgoorlie, gold was first found at Laverton in 1896, with prospectors emerging en masse across a host of fields from the township itself to Mount Morgans in the west and Duketon to the east.
Nowadays a modern day gold rush and the chasm between ASX gold’s major names NST and EVN and the bottom end of the market has seen a score of miners consolidate assets in the region.
There is now serious competitive tension for anyone who makes a decent gold discovery in the area.
Among those names are Raleigh Finlayson’s Genesis Minerals (ASX:GMD), Alex Rovira’s Brightstar Resources (ASX:BTR), South African giants AngloGold Ashanti and Gold Fields, Chinese-backed Focus Minerals (ASX:FML) and Duketon gold project owner Regis Resources (ASX:RRL).
The value of a new discovery in this part of the world has been highlighted also by the 130% gain in the past five years of Magnetic Resources (ASX:MAU), now a +1.5Moz explorer worth over $300m rumoured as a takeover target for Genesis and Gold Fields.
“It’s a Game of Mines,” said Matt Keane, a one-time resources analyst at WA stockbroker Argonaut, who now runs WA and Queensland gold explorer Great Southern Mining (ASX:GSN).
While the past couple of years saw market watchers glued to the battle between Finlayson’s Genesis and Vault Minerals (ASX:VAU) predecessor Silver Lake Resources to control the nearby Leonora region, the detente there has sent dealmaking speculation further east, Keane hinted.
A number of companies now have process plants there in need of feed.
Genesis is bringing its Mt Morgans mill, acquired in a takeover of Dacian Gold, online this quarter.
Gold Fields is likely to be on the lookout for toll treatment customers at the Granny Smith plant, fed by the large but deep Wallaby deposit and understood to be around half-full.
AngloGold Ashanti has procured third party ore for years at its Sunrise Dam gold mine, acquisitive Brightstar is chasing critical mass to restart its mill of the same name after picking up privately owned Linden Gold and its Second Fortune asset this year and Regis is seeing gold output dropping and mill capacity opening up as its Duketon network shifts from low grade, bulk open pits to smaller underground mines.
That understandably places a premium on both greenfields and brownfields discoveries drilled by explorers in the region.
“It’s almost a race for these guys to get the resources developed before these mills run out of their own reserves,” Keane said.
Scratching the surface: Arika
Great Southern isn’t the only explorer chasing ounces in the vaunted but overlooked region.
Newly rebadged Arika Resources (ASX:ARI) is getting ready to accelerate exploration at its 80% owned Yundamindra project. Previously held up by corporate machinations, recent drilling has delivered stellar hits including 14m at 15.48g/t from 46m and 33m at 3.35g/t from 22m at the Pennyweight Point prospect.
Along with the Kookynie project near Menzies, Yundamindra is an example of the prospective tenure ignored by majors for years.
Around 45,000oz was mined at grades of over 19g/t up to 1970, but it remains underexplored with 97% of the drilling in the 1980s and 1990s only targeting shallow oxide resources less than 80m from surface.
“The reality is the area’s got a number of mills and a number of significant producers whereby, as we continue to build the story, the resource builds and those players that are surrounding us, the Genesis, Gold Fields, Northern Star, all these companies we’ll be on their radar,” Arika managing director Justin Barton said.
“We probably already are with the intersections we’re hitting. It’s high-grade, shallow, close-to-surface gold on mining leases.
“We’re under no illusions that as we continue to build the story, at some point one or more of those parties are going to come knocking on the door or looking to take these deposits off our hands.”
Barton said at Yundamindra, which was initially restricted by now-cleared plaints when Arika first farmed in, the explorer is ‘just scratching the surface’.
“When we secured that tenure back in February we were really keen to get into that area because Yundamindra was within a stone’s throw of Sunrise Dam and Wallaby, which are obviously huge multi-million ounce resources that have been in production for 30 years,” he said.
“Yundamindra sits in a similar structural setting and has all the ingredients that it could potentially be the next significant discovery in the area.”
At Kookynie, where Arika has consolidated ground once held by disparate prospectors in a smaller scale version of Finlayson’s jigsaw puzzle strategy in Leonora, Barton says the historic 331,000oz Cosmopolitan gold mine has the hallmarks of a “Spectrum” story.
That’s a reference to Spectrum Metals, which was sold in a $280 million cash and scrip deal to Ramelius Resources (ASX:RMS) after identifying one of Australia’s highest grade resources in an untested extension of the Penny West gold mine in WA’s Mid West.
Two-pronged approach
Back to Great Southern and it has two major exploration assets in the Laverton region, each with their own pathway to value creation.
Its Southern Star prospect is uniquely placed to feed into Regis’ Duketon gold project, which has gone from a peak of 363,000oz at all-in sustaining costs of $1029/oz in FY2019 to guidance of just 220,000-240,000oz at $2500-2800/oz in FY25.
Revitalising Duketon, Regis’ largest asset ahead of its 30% stake in AngloGold’s Tropicana mine, has taken on even greater significance after a prohibitive $996 million price tag was placed on developing its McPhillamys gold mine in New South Wales.
Even without those economic challenges, it’s now virtually off the table after Federal Environment Minister Tanya Plibersek controversially upheld an Aboriginal heritage complaint banning its proposed tailings dam – a legal review not withstanding.
Regis MD Jim Beyer insists the field remains underexplored, recently pointing to the relative dearth of modern exploration at Duketon compared to more renowned gold belts like the Kalgoorlie and Leonora fields.
But it could well be another company such as GSN to hold the keys for unlocking the next phase of the district’s life.
GSN’s portion of the Duketon belt includes 8km of the Erlistoun Trend, 7km of the Garden Well Trend and 11km of the Rosemont-Ben Hur trend, all three of which have played host to major gold deposits mined by Regis.
Assays from a recent 15-hole, 1950m RC drill campaign showed plenty of promise, with grades as high as 12.45g/t seen in intercepts at the Golden Boulder prospect.
Closer to Laverton itself is the ‘shovel ready’ Mon Ami project, which contains a JORC 2012 resource of 1.56Mt at 1.11g/t for 55,500oz of gold, an attractive proposition for large gold miners looking for open pit feed, while there remains potential to find more gold at depth with drilling alone constraining the resource at 150m deep.
Keane said near record gold prices were bringing inquiries from across the sector.
“You’re getting inquiries from all around,” the GSN managing director said. “Other juniors are looking to grab small projects or tenure, the majors are inquiring to see where you’re at, Regis are obviously talking to us a bit more and on a more regular basis.
“The other side are the brokers and the financiers. I think you’re seeing a lot of the funds that are coming down the curve again rather than just sitting in the producer space … it’s where the value is in the sector.”
Gold was trading on Monday at $3997/oz or US$2584/oz.
At Stockhead, we tell it like it is. While Great Southern Mining, Magnetic Resources, Brightstar Resources and Arika Resources are Stockhead advertisers, they did not sponsor this article.
