Nuclear-fuelled gold explorer heads back to the Outback
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Cashed-up former uranium producer Alliance Resources has set its sights on gold and tin exploration in South Australia, writes Barry FitzGerald in his weekly Garimpeiro column.
Nuclear-fuelled gold and tin exploration for Alliance in SA outback:
Just on three years ago Melbourne’s Alliance Resources (AGS) was part of the rare breed of listed uranium producers from its 25 per cent owned Four Mile operation in South Australia’s outback.
But relations between Alliance and the 75 per cent Four Mile owner and manager, the privately held US defence contractor General Atomics, had long been frosty and Alliance thought it best to quit the joint venture which produced its first batch of the nuclear material in 2014.
General Atomics was the obvious buyer and it duly made an offer to Alliance of $57.6m which was rejected. When it increased the offer to $74m in 2015, Alliance said thank you very much, and headed off to do its own thing.
But first it had a problem — what to do with all the cash generated from the Four Mile sale.
The answer was two capital returns to shareholders totalling $58.3 million, leaving enough in the kitty to fund a new direction, as well up as take up some strategic investments.
There is no surprise that Alliance decided to steer clear of the uranium sector.
Apart from memories of the bitter relationship with General Atomics, prices for uranium have collapsed from an already depressed $US35/lb when Alliance quit Four Mile (so-called because it was four miles from General Atomics’ wholly owned Beverley uranium mine) to the distressed $US20/lb it currently fetches.
After looking over dozens of new investment opportunities for its remaining cash, Alliance again turned to the SA outback. But this time it was gold and base metals in the Gawler Craton, namely the Wilcherry project area some 40km north of Kimba.
Alliance’s entry into the project was via its acquisition of a 51 per cent stake from Tyranna Resources (TYX) for $2 million. The deal was cemented by Alliance building an 18 per cent Tyranna shareholding, due in part to Tyranna’s advanced gold exploration efforts elsewhere in the Gawler Craton.
Alliance is going to give Wilcherry a big push which it is well funded to do given at last count, it was still holding $9.5 million in cash.
The cash holding is just a little less than Alliance’s market cap of $9.9 million (at 9.5c a share) which is something of an oddity in the junior resources space where cash is normally running short to fund the next “exciting’’ drilling program.
No such problem for Alliance which is also headed to 80 per cent ownership of Wilcherry after Tyranna decided not fund its shares of the planned $3.2 million exploration program Alliance has mapped out for the project in the coming year.
The program could be worth watching given the likelihood of a leveraged response in Alliance’s share price to any success given the market is currently valuing its Wilcherry interest at next to nothing (after deducting cash from the $9.9 million market cap).
The Wilcherry project has been explored for various commodities since the 1970s. Most recently it was explored for magnetite.
Alliance has been able to draw on an extensive data base from the previous efforts to make gold and tin its focus.
There are 28 existing exploration targets within the project area. The three highest priority exploration targets are the Weednanna and Weednanna West gold prospects, and the high-grade Zealous tin prospect.
Late in August Alliance reported encouraging results from a drilling program at Weednanna which was complete in June to test the geometry and grade of three high grade shoots dubbed Target 1, 2 and 3.
Best results included a 60-metre hit grading 5.65 grams of gold a tonne from 47 metres. A follow-up program is planned for next month.
“As as our understanding of the controls on the gold mineralisation increases, Weednanna should continue to develop toward becoming a significant South Australian gold project,’’ the former significant SA uranium producer Alliance said.