Location, as every property investor knows, is the key to success.

It’s the same in mining as Syndicated Metals, a small gold explorer in WA hopes to demonstrate with its Monument project which sits alongside one of Australia’s best gold “re-development” stories.

If there is a difference between property location and mining exploration it’s in the name because prospectors who peg a claim close to a discovery are sometimes said to be applying a pseudo-science called “near-ology”.

Syndicated (ASX:SMD) is certainly near to the Westralia goldmine, a 3.3 million ounce project of Dacian Gold (ASX:DCN) located close to the outback town of Laverton, 900km north-east of Perth.

Last year, Dacian was one of the outstanding stock market success stories, delivering profits of more than 400 per cent to investors who bought at the low of 78c in January and sold at the high of $3.93, which came just eight months later.

The stock is lower today at around $2.07 but that’s largely the result of issuing new shares to help pay for the redevelopment of the Westralia mine.

Helping Dacian deliver its stellar stock-market performance is the price of gold which, in Australian dollar terms, is close to an all-time high of $A1620 an ounce.

This is due to a combination of international investor interest lifting it to $US1230/oz because of its appeal as an insurance policy against global uncertainty, and the Australian dollar exchange rate surging as high as US80c.

Near-ology … Syndicated’s gold project is close to Dacian Gold’s 3.3m oz project
Near-ology … Syndicated’s gold project is close to Dacian Gold’s 3.3m oz project

But the real driver behind Dacian is the discovery of rich ore under an open-pit goldmine first worked as far back as 1896.

Getting to the deeper ore was beyond the technology of the day and was missed by later explorers.

Today, Westralia is the site of beaver-like activity with two deep developments, Beresford and Allanson, being driven off the base of the old pit.

The aim is to produce first gold in about nine months and to then produce 190,000 ounces of gold a year for at least nine years at an all-in cost of less than $A850/oz, implying a handsome margin of $800/oz at the current gold price.

Syndicated’s management team, led by the experienced Andrew Munckton, is watching events at Westralia closely because the Monument project is directly in line with Westralia.

Gold in that part of the world is generally associated with fractures in the earth’s surface through which mineral-rich fluids have flowed.

Strike extensions possible

In geological terms, Syndicated has the potential for gold discoveries which are known as “strike extensions” in the same rock type as that seen at Westralia.

Work to prove this theory is just getting underway with Syndicated clearing the decks by selling a half-interest in a copper project in Queensland that had occupied most management time for the past decade.

CopperChem, a subsidiary of the diversified Sydney-based investment company Washington H. Soul Pattinson, has added Syndicated’s 50 per cent stake in the Barbara copper venture to the half-share it already owned, paying Syndicated $2.3 million.

Soul Pattinson, best known for its interests in big businesses such as Brickworks, New Hope Coal and TPG Telecom, is also Syndicated’s biggest shareholder with a 28.8% stake.

Proving that the mineral system which Dacian has at Westralia continues into Syndicated’s ground is the challenge.

But Syndicated starts that hunt with the knowledge that there are old workings on its side of the border, including the Waihi and Mt Korong mines which operated between 1897 and 1941.

For much of the past 20 years nothing has happened on Syndicated’s property.

But that started to change late last year when an early drilling program encountered gold grades up 7.28 grams a tonne – high by modern standards, and good enough to confirm the potential for the ground to contain a large-scale, high-quality gold system.

At this stage of its life Syndicated is a pure exploration play, with all the risks associated with that description, and a factor in its low share price 1.7c which values the stock at just $10.8 million.

But, with cash from the copper exit, drill-ready targets, and a location immediately adjacent to a significant mine development Syndicated has the potential perform strongly, driven by the flow of exploration news.

Tim Treadgold’s The Explorer column appears weekly in Stockhead.

Tim is a Perth-based finance journalist who has been covering the resources sector for more than 40 years for national and international publications, long enough to know what’s gold and what’s fool’s gold — of which there’s quite a bit in the mining world.


This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.