Ground Breakers: Did this lithium deposit live up to its billing?
Your large cap ASX mining news, Wednesday December 27.
“big and very good.”
Those words, lack of capitalisation not our own, came from the pen of David Flanagan back when he was the boss of lithium explorer Delta Lithium (ASX:DLI).
He was talking about the then pre-resource Yinnetharra project in WA’s Gascoyne region in an August presentation at the Diggers and Dealers forum in Kalgoorlie.
The ‘so bad it’s good’ presentation from the mind of one of the WA mining industry’s great entertainers may or may not have tanked the company’s share price that day.
Flanagan was also deposed not too long after by interloping major shareholder Mineral Resources (ASX:MIN), which installed NED James Croser as interim managing director and parachuted its boss Chris Ellison in as chairman of the board.
Ellison wasn’t keen on plans to run a direct shipping ore operation out of the 14.6Mt at 1.2% Li2O Mt Ida operation, instead thinking the Mt Marion owner’s investment should drill to boost its resources.
Well, the jury’s out. After almost 500 holes and over 115,000m of drilling, the maiden resource at Delta’s Malinda prospect has come in at 25.7Mt at 1% Li2O at a 0.5% Li2O cut off.
26%, or 6.7Mt, is in the indicated category, meaning it is drilled to a density with a high enough confidence to back mineral reserves.
Apples and oranges here, of course. Every hard rock lithium deposit is different and mineralogy too is a massive factor when it comes to their economic potential, something we’ll only find out later down the line.
At 1%, the grade of the Yinnetharra deposit is towards the lower end of the scale when it comes to economic lithium resources in WA.
At the top end, the legendary Greenbushes mine carries a resource grade of around 2% — that’s an outlier, but other relatively high grade projects like Mt Holland and Kathleen Valley range from 1.3-1.5%.
Many of the large deposits, drilled when the lithium exploration industry was dominated by micro-caps with far less capital in hand than the current crop of junior explorers, were small when they started up.
Pilgangoora came into the Pilbara Minerals (ASX:PLS) portfolio with around 8Mt in its lithium resource inventory, growing to 16.6Mt at 1.16% Li2O in less than a year.
By the time a PFS was compiled in 2016, the now +400Mt Pilgangoora boasted over 80Mt in resources.
Liontown’s (ASX:LTR) Kathleen Valley currently boasts 156Mt at 1.4% Li2O in resources and 68.5Mt at 1.34% Li2O in reserves.
But its initial resource came in at 21.2Mt at 1.4% Li2O and 170ppm Ta2O5 at a 0.5% Li2O cutoff.
With a virtually identical market cap in the $300 million range, Global Lithium (ASX:GL1) boasts 50.7Mt at 1% Li2O across its Marble Bar and Manna projects in the Pilbara and Goldfields respectively, having compiled those resources on around 85,000m of drill data.
But Delta — total inventory 40.4Mt at 1.1% Li2O — says there is more to come at Yinnetharra, where it has been exploring for around a year, with the high priority Jamesons prospect now granted.
“This is a fantastic milestone for the development of our Yinnetharra lithium project,” MD James Croser said.
“The speed with which this MRE has been defined since the acquisition of the project in late 2022 is a true credit to the teamwork and tenacity of Delta’s staff. Yinnetharra was a blank canvas 12 months ago, and our people have overcome many challenges to punctuate the end of 2023 with its release.
“This MRE is the foundation from which a mining lease application, scoping studies and further growth at Yinnetharra will proceed, with real potential now to support a significant lithium mining operation of large open pit scale. We believe that this is just the beginning for the Yinnetharra Project, with multiple mineralised LCT prospects yet to be tested over the massive project area.
“After a short break for the holidays, we will commence 2024 with renewed energy to build on this confidence, and for while this weakness in lithium prices may persist the Company will prioritise investment spend at Yinnetharra to explore for the significant upside potential.
“Ultimately, our work at Yinnetharra strives to deliver outstanding value for shareholders, which remains our enduring goal.”
Delta shares were up 1.5% at 11.30am AEDT.
MinRes owns 24.27% of the tightly-held Delta after underwriting an entitlement offer which saw other significant holders Idemitsu and Waratah Capital have their stakes diluted. Gina Rinehart’s Hancock Prospecting, which has plowed cash into lithium stocks this year, also upped its stake to 12.07%.
Off to Africa now, where OreCorp (ASX:ORR) suitor Silvercorp Metals has made a late effort to get its bid for the Tanzanian gold hopeful across the line.
Nick Giorgetta and Tim Goyder backed OreCorp, owner of the Nyanzaga gold project in the east African country, has been supportive of a deal that would see cash and shares change hands and see TSX-listed, China focused silver producer Silvercorp take the reins.
Only its scheme offer was scuppered twice, first when shareholder discontent over the idea of getting scrip in the struggling SilverCorp prompted the suitor to up the cash component of the bid.
Second, when ASX-listed West African gold supremo Perseus Mining (ASX:PRU) muscled in to take a 19.9% stake and announced its intentions to vote against Silvercorp at a now dumped scheme meeting.
With the scheme bid dead, Silvercorp has instead announced an off-market takeover offer which will go ahead as long as it gets 50.1% minimum acceptance from OreCorp investors.
Backed by the target’s board, the offer will match the scheme consideration of 19c per share in cash and 0.0967 Silvercorp shares per OreCorp unit, an implied value of 58.9c per share.
That’s a 40.1% premium to OreCorp’s VWAMP on August 4 and 21.8% premium to the 20-day VWAP on December 22 and values OreCorp at $276.5m, according to a market filing today.
“We are delighted to have reached this position with Silvercorp. It became clear in recent weeks that the proposed Scheme was at risk of not proceeding to completion,” ORR MD Henk Diederichs said.
“We believe this would have prevented OreCorp shareholders having the opportunity to receive a significant premium on their OreCorp Shares and exposure to a company that is geographically diverse, with a strong balance sheet and solid mine building and operational experience.
“This new Silvercorp Offer provides shareholders with a level of certainty and the Board believes this is an excellent outcome.”
It also puts the ball in cashed up Perseus’ court to put up or shut up and make a competing bid in the risk of winding up a minority in a SilverCorp controlled company if it does not accept the bid.
A spokesperson for Perseus said it would not be commenting on the offer.
OreCorp shares rose 12.75% this morning to 57.5c, with Perseus up slightly.
In the broader market, a big lift for lithium and iron ore stocks led the materials sector to a 1.22% morning gain.