Why it pays to back explorers with near-term drill programs like Caeneus Minerals
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Special report: For penny stock investors it’s a great time to be alive.
Stockhead has covered plenty of multi-bagger small caps over the past year that have logged gains of more than 100 per cent – and in some cases more than 1000 per cent.
We recently reviewed the top 100 resources stocks over the past year and highlighted Tungsten Mining (ASX:TGN) which was then ahead by some 2500 per cent.
Two other mining stocks returned more than 1000 per cent over the period: King River Copper (ASX:KRC) and Winmar Resources (ASX:WFE).
Just recently copper explorer Ausmex Mining (ASX:AMG) doubled in the space of a week after hitting 153 metres at an average grade of 1.02 per cent copper.
Ausmex is a fascinating case study because it was not just drilling any hole when it made its discovery.
It was working on a previously drilled hole that had been written-off by the market almost six months earlier in February.
Back in February Ausmex had reported similar copper grade to the latest result.
Share price exploded
But the market wasn’t interested despite the company saying it would re-enter and drill again to prove it was onto something.
The company then hit 160 metres of high-grade copper and the share price exploded.
Why did the market write it off earlier? Savvy shareholders could have made a nice return with a little foresight.
It seems the market got bored when Ausmex took months to re-enter the hole…and even longer to get the results out.
It was a six month wait in total.
That’s why ― in this tough market ― it’s worth backing explorers with near-term drill programs and results.
That reduces the risk of the share price falling, if the market gets bored.
It also maximises your potential reward, if the company makes a ground-breaking discovery.
Similarities with Caeneus Minerals
It’s worth comparing the similarities between Ausmex and another under-estimated stock, Caeneus Minerals.
Caeneus Minerals is on the hunt for the high-grade source of prospective targets it has uncovered at its “Pardoo” nickel project in the Northern Pilbara region of Western Australia.
The explorer (ASX:CAD) has discovered seven previously untested drill targets just 20km from a 50 million tonne low-grade nickel deposit called “Highway”.
The Highway deposit, which lies within Caeneus’ landholding, has been a focus for past explorers wanting to find the source of the large nickel, copper and cobalt deposit.
The deposit was found nearly two decades ago when past explorers didn’t have the technology or the capability of getting down to great depths.
Modern day surveying techniques have now shown where the historic drill holes got to and how far they were off the mark, which means Caeneus has a much better chance of hitting its target.
The company is now ready to start deep drilling after it discovered a highly conductive target of up to 14,000+ Siemens – which is an extremely good indicator of the presence of nickel.
The conductivity diagram below (adapted from Palacky, 1987) indicates that conductivity readings over 10,000 siemens are likely to be massive sulphides.
The company’s competent person and geological consultant Bill Oliver is excited about the upcoming diamond drilling campaign commenting that “The 14,000+ siemens is a very high conductance result and could be indicative of the presence of massive sulphides.”
“There are lot of positive indicators in the area including the presence of sulphides and nickel in recent and historical drilling and the presence of bedrock conductors in recent and previous EM surveys.”
Interestingly, this highly conductive target – which will be one of at least three high priority targets to be drilled in the supply well area of the company’s landholding.
Bill Oliver advised that “Previous explorers have struck high grade and high tenor nickel in the area around Supply Well which has never adequately been explained or followed up.”
Caeneus is also planning to diamond drill to target depths to test priority targets, one of which had ended in mineralised nickel but was 40m short of where the massive siemens conductors were modelled.
Nickel shortfall on the horizon
Nickel miners are a lot more optimistic about the market than they have been in a long time thanks to strong demand for stainless steel and lithium-ion batteries to power electric cars.
Andrew “Twiggy” Forrest’s recent injection of more cash into junior explorer Poseidon Nickel (ASX:POS) shows confidence is returning to the sector.
Twiggy’s investment also follows close on the heels of an investment in another junior nickel explorer by one of the largest lithium-ion battery electrolyte manufacturers in China.
The nickel price has gained 54 per cent since June last year and is trading around $US13,410 per tonne.
Nickel producer Western Areas (ASX:WSA) says its view on the medium to long-term outlook “has never been more positive”.
The forecast is that the market is headed for a deficit of between 100,000 and 140,000 tonnes, which will drive the price higher.
While nickel is the key focus for Caeneus, the company also has an interest in the Columbus Marsh lithium project in Nevada, US.
The company recently identified a second lithium-enriched brine zone at the project containing highly anomalous lithium from surface down to 400m.
Lithium brine deposits are found in salt lakes and play an important role in the world’s supply of lithium. In 2015, subsurface brines yielded about half of the world’s lithium production.
Brine deposits are cheaper to extract lithium from than hard-rock deposits.
Given the significance of the discovery at Columbus Marsh, Caeneus is planning a follow-up drilling program.
This special report is brought to you by Caeneus Minerals.
This advice has been prepared without taking into account your objectives, financial situation or needs. You should, therefore, consider the appropriateness of the advice, in light of your own objectives, financial situation or needs, before acting on the advice.
If this advice relates to the acquisition, or possible acquisition, of a particular financial product, the recipient should obtain a disclosure document, a Product Disclosure Statement or an offer document (PDS) relating to the product and consider the PDS before making any decision about whether to acquire the product.