Silver City is the newest member of the Lachlan Fold Belt club
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The Lachlan Fold Belt (LFB) in New South Wales has been the centre of intense attention thanks to the Boda discovery proving that there are other copper-gold porphyries to be found outside of the giant Cadia deposit.
Now, Silver City Minerals (ASX:SCI) is set to be the newest, and for investors one of the lowest cost of entry stocks (more on that later), into this prospective play.
The company has executed a binding option to acquire an exploration package, known as the Wellington project, that covers more than 200sqkm just 15km south of Alkane Resources’ (ASX:ALK) Boda discovery.
The ground sits within the Molong volcanic belt, with most of the package containing the same rocks that host both the Boda discovery and Newcrest Mining’s (ASX:NCM) operating Cadia mine.
“Given that these porphyry style deposits have the tendency to occur in clusters, and the fact that historical geochemical sampling confirms gold already in the system here, we have the right rocks so it confirms the significant potential of what is available to Silver City to explore here, and it warrants a good level of excitement for what is ahead of us,” director Tom Pickett told Stockhead.
This excitement is understandable as porphyries tend to be very extensive and can make a lot of money over a long period of time.
Pickett said Silver City considered itself lucky to have secured the Wellington project given its proximity to other significant gold projects in the region.
Now back to the bit about Silver City being one of the lowest cost of entry into the LFB for investors. Here’s the rationale for that:
Assuming the option and the attached placement to raise $250,000 through the issue of 25 million shares proceeds as planned, the company will have a market cap of about $3.8m and cash of $800,000 to $850,000, giving it an enterprise value of about $3m.
This puts the company right at the bottom end of the list of companies that operate in the LFB.
Firm commitments for the share placement have already been received from sophisticated and professional investors.
While Silver City is one of the largest landholders in the Broken Hill region, its immediate focus is now on the Wellington project.
“The coming months will be spent conducting a geological review of the available historical data, along with initial geochemical surveys across some prospect areas, which will form the basis of follow-up geophysical surveys to increase the level of confidence the company has in the various prospect areas within the suite of tenements for confirmation by a later drilling program,” Pickett said.
Silver City has 14 days to decide on whether it will go ahead with the project acquisition after executing the option.
To exercise the option, the company has to issue the vendor Syndicate Minerals 15 million shares and 7.5 million options, exercisable at 2c, that expire on October 31, 2022.
Syndicate Minerals will also receive a 1.5 per cent net smelter royalty for all metals and minerals produced from the tenement.