Meet the gold explorer that thinks it can be the next Bellevue
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For years we have been searching for the next gold explorer to truly break out and become the next big thing, bolting into the ASX 200 in the legacy of rags to riches success stories like Bellevue Gold (ASX:BGL), De Grey Mining (ASX:DEG) and Gold Road Resources (ASX:GOR).
An unlikely candidate has emerged in Rox Resources (ASX:RXL), a former nickel explorer which is looking to reinvent the historic but forgotten Youanmi gold field in WA’s Mid-West, around 500km northeast of Perth.
Meandering in the portfolio of China’s Oz Youanmi for years, the mine — host to 660,000oz of gold production since its discovery in 1908 — was finally brought back to the ASX by Rox and its JV partner Venus Metals Corporation (ASX:VMC) a few years ago.
At 900m of strike and 3.2Moz of resources at over 3.5g/t, the project looks to have 70-100,000ozpa potential in its current state.
But a new discovery south of Youanmi, where Rox has quickly picked up a 200m strike of mineralised gold, has the potential to transform the site and its owner.
On March 2 this year, the explorer announced it had struck 28m at a whopping 34.81g/t at Youanmi South, more than 1oz of gold for every tonne of rock in the discovery intercept.
MD Rob Ryan, whose credits include a leading role as the GM at Norton Goldfields’ Paddington gold mine and at the head of Bardoc Gold before its $157m scrip sale to St Barbara (ASX:SBM), posits that it could be as long as the Youanmi main lode on ground explorers previously thought to be barren, enough to justify doubling the scope of Youanmi to 150,000-200,000ozpa.
If true, it would place Rox in rarefied air.
“Probably the only comparable company at that sort of scale at the moment, and that grade, is Bellevue,” he told analysts and reporters on a site visit this week.
“So it does become a significant development for the company because post consolidation we’ll be about $120 mil market cap. I think Bellevue is trading at about $1.4 billion at the moment.”
The Youanmi South discovery has dovetailed with a proposal that will see Rox acquire the remainder of the gold rights at Youanmi and surrounding JVs including the region’s next largest historic gold field at Currans Find from Venus, in exchange for a stake in the company of around 18%.
Since the Youanmi South, or Paddy’s Lode, find was revealed in March, Rox’s shares have surged from 14c to 36c.
The 157% gain compares to a 16.7% rise of the All Ordinaries Gold Sub-Index over the same time frame and 7% lift for the underlying gold price.
That shows the market is, for now at least, standing up and taking notice.
A scoping study in October put a $99 million price tag on building a new 480,000tpa plant to re-establish underground mine workings and restart the operation, 25 years after its closure due to low gold prices in 1997.
Rox, with $8.2 million worth of cash in the bank after an until now successful 20,000m infill and expansion drilling program, is funded until the end of the year.
But Ryan now envisages a pause in feasibility studies to see just how big Youanmi can get. With a gravity survey now planned to generate and assess targets, Ryan envisions a 12-18 month period of drilling to outline the size of the prize.
“I look at this and go well, the additional capital to go out to a million tonne per annum for a processing plant isn’t that significant,” Ryan said.
“And then you’ve got the potential on top of that, another underground mine, you’re probably looking at an additional maybe $50 million of pre production capex.
“So you’re looking for $150 million, you could effectively double your production rate to that sort of 150 to 200,000 ounces, which I think will be quite achievable long term.
“We’ll look to explore over the next 12 to 18 months. I think that’s going to add a lot more value than rushing into a feasibility study right now.
“In 12 to 18 months’ time I’d like to be sitting here with a new resource for the area south of Youanmi, potentially on the way to doing a pre-feasibility study and what would be a much more expanded processing plant.”
At Youanmi, Rox controls over 60km of strike across 697sqkm either side of Ramelius Resources’ (ASX:RMS) small but ultra high grade Penny gold mine.
166,000oz of its historic 660,000oz gold production came in the gold rush days, when outcrops of gold visible at surface were dug out of the ground at a heady 15.2g/t from 1908 to 1921.
After underground production around World War 2, the revival of the gold market in the 1980s saw the operation restarted by Eastmet Ltd as an open pit which churned out 263,000oz over six years from 1987.
A high grade underground (9.7g/t) followed before the gold price’s dive to US$450/oz killed the operation three years before Y2K.
It is now upwards of $3000/oz Australian and around US$1960/oz, having threatened for the third time to break the resistance at the record of ~US$2075/oz set in August 2020.
In the shadow of last year’s runaway inflation and the largest banking crisis to hit the US since the GFC, Ryan thinks conditions could be ripe for another gold bull run.
“If I was a betting man, I wouldn’t bet on the gold price, I think I’d probably always lose because you can always say it’s gonna go up or it’s gonna go down,” he said.
“But I think there’s a lot of things that we’ve looked at, through history (that suggest it’s in a good position).
“When the GFC initially happened the gold price didn’t hit its peak for another three or four years.
“Now what we’ve had … is a major sort of catastrophic event in global financial markets, there was all this money printing over a three-year period.
“And now we’re starting to see other results of that financial impact. Now, if you look from when the first bank went bust in 2009, to peak gold price in 2011, we’ve only just had one bank go bust or a couple of banks in the US go bust now.
“There could be quite an acceleration over the next few years in the gold price if you sort of look at history.”
Relatively unique for what is effectively a large exploration site, the main pit at Youanmi is around 900m long and over 100m deep. Old underground workings are buried beneath the water in the base of the pit.
There are three smaller pits to the north, all mined across an east-west cutting structure along with a number of historic shafts and trenches where gold outcropped.
Exploration manager Travis Craig thanks the explorers who decided not to drill past the cover underneath shrubbery to the south, where the 30-40m of sill obscured Paddy’s Lode, now the primary drilling target at Youanmi where Rox hopes to make its fortune.
Diamond drilling was commissioned immediately following the initial ‘bonanza’ RC hit, which identified the orebody some 204m below the surface, enabling Rox to confirm the consistency and structural orientation of the deposit at depth.
This bears similarities to the Bellevue story. Closed around the same time, a fault at that mine was thought to have offset the gold despite the mine producing 800,000oz at 15g/t in a little over a decade.
But drilling starting in 2017 identified the Tribune Lode, now part of an emerging 200,000ozpa mine which will pour first gold later this year.
“There are a lot of comparisons here. There’s not just the main lode, which in my opinion is a very good project, it could easily be a 70-100,000 ounces per annum operation,” Ryan said.
“But the opportunity to be able to sort of find a whole new zone has the ability to be able to double production.”
Many a star have shone brightly before fading, and there remain many questions for Rox to answer, both inquiries of opportunity and critique.
On one side of the ledger, there are a number of strong regional targets still to be investigated at Youanmi, while drill hits have successfully identified possibilities to infill and grow the resource beneath the main lode at the Link prospect and Midway, to the east of the Youanmi hanging wall.
But brokers and analysts are curious of the potential capex bill for an expanded operation (not that Rox can really put a finger on that until this 12-18 month return to exploration is complete).
Capital is also harder to raise right now, though Rox’s consolidation of the Youanmi asset should make it more attractive for brokers, investors and financiers or a potential suitor should it find glory through the drill bit.
The gold at Youanmi is also associated with arsenopyrite, an arsenic enriched iron sulphide mineral and is refractory in nature.
Early indications from test work are that a concentrate can be produced with low arsenic levels (Chinese buyers don’t like taking anything above 6%), with Rox reviewing refining methods that could be installed at its future processing plant should it outline a deposit with the grade, scale and mine life to support the economics.
But refractory gold projects have been successful both in Australia and elsewhere.
With the consolidation expected to complete after a general meeting on June 23, Ryan thinks the exploration upside is palpable.
“We do see a lot of potential for the company to continue to grow post the transaction, it does give us a different outlook on what we can actually do,” he said.
“There’s quite a barren landscape, there’s very little mining activity that’s occurred over this area and there’s very little exploration as well.”