Kristie Batten: M&A buzz in the Paterson could urge a merge with this junior explorer

One of Australia’s top mining journalists, Kristie Batten writes for Stockhead every week in her regular column placing a watchful eye on the movers and shakers of the small cap resources scene.

After a few years of subdued activity, Western Australia’s remote Paterson Province is looking interesting once again.

The Paterson became an exploration hot spot in 2018 after rumours started circulating about a major copper discovery by Rio Tinto.

Winu turned out to be a solid copper-gold discovery and the region quickly got a further boost by Greatland Gold’s discovery of the Havieron gold-copper deposit nearby and subsequent farm-in by Newcrest Mining.

In recent years, enthusiasm for the province has waned as Rio slowed development plans for Winu and Havieron’s rock conditions proved more challenging than expected.

Newcrest was subsequently acquired by Newmont Corporation, which deemed its 70% stake in Havieron and the nearby Telfer mine as non-core.

However, in the past few months, things look to be changing.

In August, it was reported Rio was looking to sell all or part of Winu, with South32 and IGO rumoured to be interested.

Weeks later, Perth-based, London-listed Greatland announced the US$475 million acquisition of Telfer and the 70% stake of Havieron it didn’t already own.

Greatland recently reported that the acquisition was on track to close in early December.

Antipa advancing

No one is happier to see things moving in the Paterson again than Antipa Minerals (ASX:AZY) managing director Roger Mason.

Antipa holds around 4000km² of ground in the province, including the ground between Telfer and Winu.

“Over the last seven years, the Paterson Province has seen its endowment growth by about 20 million ounces of gold and about three and a half million tonnes of copper from greenfields discoveries,” Mason told the Noosa Mining Investor Conference earlier this month.

“And due to these discoveries, the province boasts three large-scale potential gold-copper development projects, including our Minyari Dome asset.”

Minyari Dome has a resource of 2.3Moz of gold and 84,000t of copper, as well as silver and cobalt.

A month ago, Antipa released a scoping study for Minyari Dome, outlining a 130,000oz per annum operation over 10 years at all-in sustaining costs of A$1721 an ounce.

Based on a $3000/oz gold price, around $600 lower than current levels, the project delivered a post-tax net present value of $598 million and internal rate of return of 46%.

Mason said the $306 million development of Minyari Dome was “inevitable”, given the economics were so strong.

Location, location, location

Minyari Dome sits just 35km from the 22 million tonne per annum Telfer mill, the third-largest gold plant in Australia.

Shaw and Partners analyst Dorab Postmaster said the close proximity allowed for economic trucking to Telfer and could save Antipa around $216 million by negating the need for a standalone 3Mtpa mill.

“This huge Telfer plant runs out of ore very soon, and their deposit, Havieron, will only use 25% of the capacity of that plant with the plant largely laying idle, so it’s an imperative for Greatland that they secure additional ore feed to optimise that facility, keeping mind that Antipa is a development opportunity,” Mason said.

Antipa also is free-carried on farm-in projects with major partners.

Newmont can earn 75% in the Wilki project by spending $60 million, while IGO can earn 70% of the Paterson project by spending $30 million.

The 1500sqkm² Wilki project does not automatically transfer to Greatland and requires Antipa’s consent.

“Dominating Antipa’s thinking is the exciting Parklands target, which is located on the Wilki farm-in project, very close to Telfer,” Mason said.

Surface geochemical sampling identified a “Telfer-sized” 3km by 1.5km gold target called Parklands, 10km from the mine.

“Parklands has a peak surface geochemical result of 1.5 grams per tonne gold and multiple results greater than 0.1 grams per tonne and the anomaly remains open in several directions,” said Mason.

“It’s easily one of the best gold targets seen in the Paterson province for a very, very long time.”

Strong backing

While M&A is not certain, Antipa is well-placed to go it alone.

The company is drilling, with results expected to flow from December to February.

It is also extremely well funded with $23 million cash at the end of September after recently selling its stake in the Citadel project to farm-in partner Rio for $17 million.

Antipa also has a strong share register with Newmont (soon to be Greatland) holding 8.5%, Hedley Widdup’s Lion Selection Group with 4.1% and IGO with 3.1%.

Late last month, Shaw’s Postmaster said Antipa was a potential M&A target given its large strategic landholding and multiple joint venture partners.

He reiterated a buy rating and 4c price target, which represents 66% upside from current levels.

In the meantime, Mason says it’s business as usual for Antipa.

“Our main objective continues to be to maximise the company’s value, and that’ll be achieved by a further focus on drilling for resource growth, discovery and development potential.”

At Stockhead we tell it like it is. While Antipa Minerals is a Stockhead advertiser at the time of writing, it did not sponsor this article.