How Spartan's Never Never stacks up against some of WA's best 21st century gold discoveries

Spartan Resources has made what could be one of the WA gold discoveries of the 21st century
Rejuvenating the Dalgaranga project near Mt Magnet, Never Never now contains ~1.5Moz at … wait for it … over 8g/t
How did investors see returns from some of WA’s biggest recent gold finds?

In red-hot form of late, mining exploration boffin and MD Simon Lawson has steered the now $1.44bn Spartan Resources (ASX:SPR) on a tear through the extraordinary growth of the company’s Never Never deposit.

Spartan has been investor heaven since its discovery, yet it’s already had takeover interest on its way to developing its resource. And why not, with ~1.5Moz at over 8g/t, not many deposits in modern underground mining have the scale and grade of Never Never.

Countering the conventional wisdom that the eyes have already been picked out of the best gold in the State, Never Never is the latest standout project in a pedigreed list of gold finds in WA over the last couple of decades.

It joins the ranks of super discoveries such as Tropicana, Penny West, Gruyere, Bellevue and of course De Grey Mining’s (ASX:DEG) +10.5Moz Hemi.

But how does it match up and what do those discoveries and their development tell us about the potential end game for investors who have ridden the Spartan wave.

Dalgaranga’s Troubled past

Since the opening of Dalgaranga in 2017, the troubled gold operation had battled to survive as it couldn’t produce enough ounces due to less-than-expected grade and strip ratios, raising serious questions about the geological rigour that went into the initial project.

Simon Lawson, a now seasoned veteran of WA’s gold sector, took the reigns of Gascoyne on November 21 after a scheme of arrangement with Firefly Resources – narrowly avoiding an eleventh hour interjection from Peter Cook’s Westgold Resources (ASX:WGX) – and became its new MD.

It is the rare moment when a deposit, it seems, chose its owner.

Under his leadership, the former Northern Star Resources (ASX:NST) senior geo zeroed in on Never Never, introducing a new mindset to the seemingly cursed Dalgaranga that would prove more than fortuitous.

The “why not” of Never Never

It was a ballsy move to shutdown the underperforming Dalgaranga mine and mill to free up cash and take another look at proving up more ounces at the project.

When Lawson wanted to divert funds from production to exploration, he was told that the exploration model showed there wouldn’t be anything out there. “Why not?,” was Lawson’s reply.

Speaking with Stockhead, Lawson says a different mindset was needed, since the geological model had been exhausted to a dead end, yet had pushback internally and externally at the beginning.

That, of course, changed. “I’m not smarter than anyone else, I was just opposed to the status quo,” says Lawson.

“I said, well there’s no drill holes there, there or there for a reason, but what if the model is slightly wrong… well then ‘why not’ take a different approach and see what happens.

“What the worst that could happen? We drill a hole there and find nothing.”

…if you Never Never go

From just 79,600oz at a touch under 3.8g/t in 2022, Never Never has been bombarded with drilling, turning it into today’s monster 5.72Mt at 8.07g/t for a whopping 1.49Moz of contained gold.

Lawson and his team of experts had taken the fractured pieces of a struggling low-grade, open-pit gold miner and rebuilt the company as a “highly successful, high-grade exploration, discovery and development machine”.

It didn’t just stop at Never Never, however, with the discovery of three adjacent prospects – one of which, the Pepper discovery, has now added a 1.78Mt at 7.65g/t gold for 438,100oz.

And it won’t stop there, as Spartan plans to release resource estimates across the Sly Fox deposit and the Four Pillars and West Winds prospects at Dalgaranga mid-year, with an exploration decline also sunk to improve drill density at depth and prepare for a future underground development. Few onlookers would say the cart is being put ahead of the horse there.

With multiple cap raises and the latest coming in at $80m, investors have not been dissuaded, as shares in Spartan are up about 416%.

Miners are watching too. Placing a foot in the door, the $2.2bn market-capped goldie Ramelius Resources (ASX:RMS) snapped up an 8.9% stake in Spartan for $87.7m back in June which soon after doubled to 17.94%.

Ramelius boss Mark Zeptner on Monday this week poured water on the much rumoured flames of a takeover of Spartan, saying it was “a want, not a need”, despite the mothballing of its Edna May mine at the end of this year. But Spartan may well be too expensive for a number of its mid-tier suitors, as Lawson recently intimated, with no limits placed yet on just how big its now ~2.5Moz Dalgaranga project and the high-grade Never Never and Pepper will be.

But how does Never Never compare?

There are a number of ways for a junior company to realise value from a major discovery, all of which depend on the size, nature and risk appetite of the company and management team involved.

Some miners grow through the drill bit, others use the black arts of M&A wizardry to secure their gains. And only a select few see their find all the way through to production.

A history of some of WA’s best 21st century gold finds paints a picture of the many pathways open to our latest gold success stories.

The JV route

The premier gold find of the 2000s decade was the Tropicana JV, a tract of land 330km east-north-east of Kalgoorlie IGO (ASX:IGO) had pegged ahead of its listing as Independence Group.

While its first true dollar was made by acquiring and reinventing the cut-price Long Nickel Mine as part of a Western Mining Corporation firesale of its nickel operations, IGO drafted in South African gold giant AngloGold Ashanti – the owner of Sunrise Dam and part of the Boddington mine in WA – in 2002 as the 70% operator of the Tropicana JV. Its brief was to follow up a gold in soil anomaly from publicly available data taken in the 1990s then IGO boss Chris Bonwick and co. had identified.

The blind discovery was made in 2005 and by 2009 when a decision to mine was made AngloGold had tallied up 5.01Moz in resources and 3.3Moz in reserves. The $845m mine came to life in September 2013, and contributed in excess of 20% of IGO’s earnings by the time the 30% stake in the now ~500,000ozpa producer was sold for $903m to Regis Resources (ASX:RRL) for a cool $903m to pay down debt accrued in its acquisition of ~25% of the Greenbushes lithium mine.

While much of its gains were due to nickel and lithium acquisitions, IGO’s value rose from $140m in the year the Tropicana find was made to around $6 billion when it closed off the sale to Regis – in the order of 40x.

On the other hand, Gold Road Resources (ASX:GOR) made the discovery of the world’s richest block of cheese, the Gruyere gold mine, to the north-west of Tropicana on its lonesome in the depths of the 2013 gold bust.

Proving up over 6Moz over three years, the former Eleckra Mining eventually put a $507 million capital estimate on developing the mine boasting a 3.5Moz low grade gold reserve to be mined over 15 years via open pit.

Facing a capital hurdle in a still recovering gold market and the threat of sweep provisions and execution risk if it looked to debt fund the project itself, Gold Road decided to farm out a 50% stake for its Gruyere gold mine to another South African mining giant in Gold Fields, banking $350m and a 1.5% net smelter royalty from the operator of the St Ives, Granny Smith, Agnew/Lawlers and Darlot gold mines.

The operation punches up to about 350,000ozpa and has a current mine life of >10 years. The move has paid in spades over the years. $1.85bn Gold Road’s shares have roughly tripled in price since the sale and it is a dependable dividend payer, sending around $65m back into the pockets of shareholders since early 2021, while it has used both its high-priced scrip and cash pile to purchase the top stake in De Grey.

The go it alone

Closed by in 1997 by Plutonic Gold (one of the many ancestors of the modern concoction of Barrick Gold), the rich ore in the Bellevue gold mine in WA’s Yilgarn Craton was thought displaced by a fault for 20 years.

But it was finally brought to life by Bellevue Gold (ASX:BGL), formerly a Mongolian coal play called Draig Resources, after the collection of investors now dubbed the ‘Richardson Street Group’ back-doored the project and, like Spartan under Lawson, drilled where previous explorers thought the golden veins had disappeared.

From nothing in 2017, the Bellevue resource near Leinster topped 3Moz at 9.9g/t by 2021, when a feasibility study put a roughly $250m price tag on the ~180,000ozpa development. While reserves came in lower than the resource grade, the find was still one of the few underground mines of upwards of 5g/t found in WA this century.

Rather than take an exit strategy, Bellevue self-funded into production, starting with a $200m loan from Macquarie Bank.

It now plans to spend more to achieve a 250,000oz run rate at the mine by 2029. Bellevue’s shares had more than doubled from the 2021 feasibility study and funding announcement to a record of $2.03 earlier this month ahead of its maiden quarterly report as a commercial gold producer, but have since sunk to $1.33 after a surprise discounted $175 million cap raising was announced on July 25.

The miner said proceeds would be used to repay debt and unlock free cashflow to self-fund updated expansion plans.

Then there is De Grey Mining (ASX:DEG), which is currently preparing to go it alone at its +10.5Moz Hemi in the Pilbara. Once operational it promises to be one of Australia’s five largest gold miners, producing 530,000ozpa for its first decade.

While M&A chatter has always circled, with Hemi thought to be big enough to stir some of the big boys like Barrick, Newmont and Agnico Eagle into action, De Grey recently collected $600m on its own through equity to fund the development of what is likely to become one of Australia’s top five gold producing gold mining operations. It also has credit approved term sheets for around $1.1bn in commercial and government debt.

But takeover and selldown rumours will likely remain live, given the project execution risk involved with being a single mine operator, its $1.3bn price tag and the refractory nature of the Hemi orebody.

The straight up sale

This one is a little different, the Penny gold operation acquired by Ramelius in a May 2020 takeover of Spectrum Metals.

Spectrum had proved up a maiden resource of just 355,500oz at the time, not something that seems like a major discovery. But the real fillip was its extraordinary grade.

That has made Penny the ultimate sugar hit – the red ripper of the mining world – turning Ramelius’ Mt Magnet mine into one of the lowest cost operations in WA despite the fact Penny ore is being trucked 150km to the mill.

Spectrum was sold to the miner at a 52% premium via a $228m cash and scrip takeover.

Ramelius then went underground at Penny to discover some seriously high grades of the shiny. Penny contains 270,000oz in resources now at a ludicrous grade of 22g/t, including 28g/t at the main Penny North orebody, with the deposit expected to deliver 380,000t at 15.9g/t Au for 194,000oz from July 1, 2024.

Already a significant mid-tier gold producer when it acquired Penny, Ramelius’ share price peaked at $2.47 later in 2020 amid a general boom for the Australian gold sector. Despite gold prices rising to record levels in 2024 of ~US$2400/oz ($3600/oz), ASX gold plays have been weighed down by costs. But the start of production has given RMS a second wind.

But the real gains were made by Spectrum shareholders. The takeover cystallised a more than 2000% return (~20x) from its penny stock lows.

At Stockhead, we tell it like it is. While Spartan Resources and De Grey Mining were Stockhead advertisers at the time of writing, they did not sponsor this article.