Resources Top 5: One of 2021’s best IPOs hits high grade lithium, Rinehart’s magic touch propels small cap to 164pc two-day gain

LCY is now up 164%, HAW up 76% since teaming up with Hancock Prospecting to develop ‘Mt Bevan’ iron ore project
A8G picks up high grade lithium off the ground at early stage ‘Mt Peake’ project in NT
AQD’s longstanding strategic exploration alliance with major miner S32 extended for a further 2 years

Here are the biggest small cap resources winners in early trade, Tuesday November 16.

LEGACY IRON ORE (ASX:LCY) and HAWTHORN RESOURCES (ASX:HAW)

(Up on no news)

Yesterday, LCY and joint venture partner HAW rerated after a subsidiary of Gina Rinehart’s Hancock Prospecting announced plans to shell out an initial $9m to earn into the ‘Mt Bevan’ iron ore project in WA (LCY 60%, HAW 40%).

In December last year as iron ore prices surged, the share price of tightly held gold explorer LCY skyrocketed to levels not seen since 2012. That’s when HAW and LCY were last trying to bring the mammoth Mt Bevan magnetite iron ore project into production.

Back then, a deal was inked between Legacy and current major investor and financial supporter NMDC, India’s largest iron ore producer.

The part government owned conglomerate would pay $18.89m for 50% of Legacy, part of a plan to spend $500m on overseas acquisitions.

NMDC also planned to underwrite an estimated $1.3bn in Mt Bevan development capex. Legacy was going to be a “foothold into Australia – not only to develop the mines under Legacy but also for acquiring other mines in the country”.

At the time of NMDC making its investment into LCY, iron ore prices were around $US170 per ton.

“Since that time and in the last 12 months, the iron ore price has been hovering around $US130 per ton,” the company said in 2013.

“As a result of this fall in pricing, the board has reviewed its strategy towards Mt Bevan and will continue to work under the Joint Venture structure till a more opportune time.” The project has been in mothballs ever since.

Prices are up and down again in 2021 but that hasn’t stopped Hancock betting on the future of Mt Bevan, which hosts a 1,170 million tonne magnetite resource @ 34.9% iron.

While magnetite iron ore resources are lower grade than hematite in the ground, they can be concentrated into a higher-grade product. Premiums for higher-grade iron ore are increasing, partly because they generate steel with more efficiency.

$331m market cap LCY is now up 164% since the ASX opened for business Monday. It had $7.4m in the bank at the end of September, giving it an estimated six quarters of funding.

$30m market cap HAW is up 76% over the same period. It had $11.4m in the bank at the end of September, thanks to revenue from the small ‘Trouser Legs’ gold mine in WA.

AUSTRALASIAN GOLD (ASX:A8G)

One of 2021’s top performing IPOs has picked up high grade lithium off the ground at its early stage ‘Mt Peake’ lithium project in the Northern Territory.

A rock chip sample returned high-grade lithium mineralisation of up to 1.61% Li2O and 223ppm Ta within outcropping pegmatites, less than three months after the A8G pegged the tenement in late August.

The area is along strike of known spodumene-bearing pegmatites located in the adjacent tenement owned by Core Lithium (ASX:CXO), Australia’s next lithium producer.

While it is only one high grade sample for now, it proves that the area holds significant potential for further lithium bearing pegmatites, A8G managing director Qingtao Zeng says.

“Importantly, only one sample (JC001) was taken from the patchy outcropping pegmatite which could be traced over 250m in length and open both northwest and southeast,” he says.

“Now we look forward to seeing just how much lithium there is in our project and proving up a deposit through further work.

“The next six months will be exciting for A8G as we are well funded to accelerate exploration and commence maiden drilling.”

The $32m market cap stock is up 310% on its IPO price of 20c per share. It had $4.5m in the bank at the end of September.

Close look-up of Sample JC001, ~ 40% spodumene by visual estimation (to be confirmed by laboratory analysis).

AUSQUEST (ASX:AQD)

It’s smart to look more closely at juniors which have the backing of major mining houses.

The idea is that these large miners have done their homework — drawing on their in-house expertise – and made an educated bet that the chosen junior has a better chance of success than most.

Ausquest is one of those junior explorers. It has a longstanding strategic exploration alliance (since Feb 2017) with major miner South32 (ASX:S32), which has now been extended for a further two years.

Over this time S32 will fund all exploration activities, including drilling, over AQD’s copper, zinc and nickel projects in Australia and Peru.

Under the agreed joint venture terms, S32 must contribute $US4.5m to earn a 70% joint venture interest in each project. It can earn an 80% interest in each project by completing a pre-feasibility study.

Six of AusQuest’s projects are currently exploration opportunities under the alliance (three in Australia and three in Peru), with three of these projects (‘Hamilton’, ‘Balladonia’ and ‘Los Otros’) to be drilled very soon.

“The SAA established an innovative framework under which AusQuest could use its extensive expertise to target new deposits and mineral provinces with major ore potential, to generate and secure prospective early-stage exploration opportunities which are offered exclusively to South32,” the company says.

“The two companies have developed a strong working relationship over the past five years and will continue to work together to develop a pipeline of high-potential exploration opportunities both in Australia and internationally.”

The $12m market cap stock had $4.7m in the bank at the end of September.

VENUS METALS (ASX:VMC)

(Up on no news)

This explorer has its finger in a number of pies, including JVs with gold play Rox Resources (ASX:RXL) and number of wholly owned precious, base metal and battery metals projects in WA.

Its early stage ‘Barrabarra North’ nickel-copper-PGE project in the Yilgarn Craton abuts Chalice Mining’s (ASX:CHN) ‘Barrabarra’ project, which is a few hundred kilometres north of Julimar.

It has also managed to find “lithium potential” at its ‘Henderson’ gold–nickel project in the Mt Ida/Ularring Greenstone Belt.

“Interest in the Mt Ida/Ularring Greenstone Belt as a target for hard rock lithium exploration has increased significantly following recent announcements by Red Dirt Metals (ASX:RDT) of substantial intersections of spodumene-bearing lithium pegmatites at their Mt Ida Project, located directly north from and abutting VMC tenement E30/520,” VMC sayisd 27 October.

“VMC has initiated a review into the hard-rock lithium potential of the Henderson tenements.”