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FINALISED: 06-12-16 PUBLISHED: 06-12-16

NML Drilling Now on Aussie Gold Exploration Play: Million Ounce Potential

If there’s one thing we like the sound of here at The Next Small Cap, it would be the sound of certain calendar reminder alerts — ones that remind us of imminent diamond drilling in known areas of historic gold mineralisation.

In the currently alluring gold market environment, it would seem several ASX-listed gold explorers have caught onto the coat tails of 2016’s elevated gold prices, to advance their respective projects (and potentially their shareholder’s portfolio valuations).

Navarre Minerals (ASX: NML) is a gold explorer we’ve had our spectacles on for a while, as it attempts to discover a major gold deposit from its Australian assets.

The market appears to be finally catching up with this little stock, with strong buying over the last few days.

NML’s number one priority right now is the Irvine gold basalt dome prospect within its 100%-owned Stawell Corridor Gold Project.

In early November, NML commenced its maiden 4,000m air core drill program to test for gold mineralisation that may be part of the source of approximately 1 million ounces of historic alluvial gold mined in the 19th Century.

Early high grade results have been encouraging and it is these results that will form the basis of what could start the main event for NML: a follow-up diamond drill program to be initiated in early 2017. 

Following a recent capital raising, the tightly held NML has around $2M in the bank account, yet is currently capped at just $10M, meaning a significant discovery from its current and future drill programs has the potential to quickly re-rate the company.

However at the same time, NML is still an early stage play and there is no guarantee this company will make a significant discovery, so if considering this stock for your portfolio seek professional financial advice.

It’s also worth keeping in mind that 50% of NML’s current exploration costs will be covered by the Victorian government co-funding grant.

The Vic Government is just as keen as investors for NML to discover a mineable quantity of gold. There is much at stake for the State government as they look to boost the local economy and generate new jobs.

Mining-sector investors realise that the higher the underlying commodity price, the more economically feasible everything becomes.

In today’s unprecedented market conditions that include billionaires in the White House and negative interest rates, it may be a good time to turn to a precious commodity via a junior gold company ready to hopefully make a discovery at its highly prospective project…

…and do it in a simple, straightforward way that relies on quality over quantity.

Updating you on:

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Navarre Minerals
ASX: NML

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Having recently raised $747,000 from professional and sophisticated investors, Navarre Minerals (ASX:NML) has put itself in a strong position to expand its current exploration program at its Irvine gold prospect.

NML is exploring its Victoria-based gold project(s) adjacent to known reserves of high-grade gold — and this little nugget has all the features to grab itself a worthy chunk of gold mineralisation over the coming months.

On the back of very strong recent drilling results, NML has seen its valuation tick up as high as 109% since our previous article, “Aussie Gold Drilling in the Coming Weeks as Tiny NML Joins Exploration Rush” published in mid-October:

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The past performance of this product is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

First assay results received from NML’s 4,000m of AC drilling currently underway have recently been made available and look highly encouraging, confirming the presence of shallow primary gold mineralisation of the Stawell-style at Irvine.

The best part is, there is more to come from NML.

The mineralised zone is open in every direction, with further assay results due in the coming weeks…

These results represent a new mineralised zone unrecognised by previous explorers, which gives NML the confidence for further gold discoveries as drilling continues.

The results show:

  • 2m @ 41.5g/t gold from surface at drill hole IAC018
  • 6m @ 6.3g/t gold from 66m down hole including 1m @ 24.6 g/t gold
  • 8m @ 1.2 g/t gold from 18m in IAC017 from within a broader zone of 20m at 0.9g/t gold also from 18m.

The lower intercept at hole IAC018 is interpreted to be Stawell-style gold mineralisation.

Here’s a look at those results in section view:

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Should results from about another 50 holes still pending continue to be favourable, NML could be in a great position to make a commercial discovery in the coming weeks and potentially benefit from elevated gold prices, especially when priced in Australian dollars.

If we run through NML’s latest developments, it may be a case of processing this nugget before the bigwigs do

NML has two gold projects within Australia’s historic “Golden Triangle” — the early stage Ararat Gold Project and the more advanced Tandarra Gold Project.

NML is looking to tap into the history of the Ararat/Stawell goldfield region and perhaps make some history of its own, starting in February when it commences Diamond Drilling with the finance to back its program.

Interestingly, approximately six million ounces of modern and historic gold production has occurred in Ararat and Stawell.

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NML is squarely focused on its Ararat and Tandarra Projects and it is Ararat that currently has eyebrows raised.

Looking at Ararat

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In the map above, you can see NML’s focus area is the Ararat Goldfield and its trend south under cover.  The ‘yellow sausages’ are the basalt domes which mirror the geology of the Magdala Gold Mine. And Irvine appears a dead-ringer to be a Stawell look-alike.

The historic Stawell Goldfield produced over two million ounces of gold of the total 5 million ounces of historic gold production in the gold rush days between 1853 and 1926, with the field lying dormant until the early 1980s when the prolific Magdala Gold Mine was re-established.

NML’s Irvine prospect is located in similar rocks just 15km from Stawell’s four million ounce Magdala mine, which is the largest mine in this golden corridor. 

NML is hoping to discover another Stawell-like “1 million ounce plus” gold deposit, and early indications are that it may well be on the right track to do so.

The company instigated its 4,000 metre air core drill program in early November 2016.

Drilling is being conducted in multiple traverses of angled AC holes across 12 identified targets to around 60 metres depth.

All targets have nearology to historic mine workings which, bar one, have never been drilled.

The target that was drilled in 1994 returned 0.5m@7.2g/t gold from 86.5m and remains open in all directions…

It is one of the targets that NML is hoping will provide it with a major opportunity to tap into this region’s history by identifying the source of alluvial gold and potentially raising its valuation at the same time.

Whether this happens is speculation at this stage, so do your own research and apply caution to your investment decision if considering this stock for portfolio.

NML expects that its Irvine gold prospect will lift the lid on potential sources of gold that contributed to the 1Moz ‘geochemical signature’ from historic alluvial gold mining…

While Irvine could be the butter for NML’s bread, its Tandarra Gold Project is also humming along nicely.

Tandarra could send hearts fluttering if high-grade results continue to advance the project with further drilling

Take a look at the early assay results from Tandarra…

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The Tandarra Gold Project is a gold discovery under shallow cover, 40km north of the 22 million ounce Bendigo Goldfield.

This exploration project is a Bendigo Goldfield analogue with confirmed high-grades of gold associated with several quartz reef structures.

Project manager Catalyst Metals has the right to earn a 51% equity interest in the Tandarra Gold Project by incurring exploration expenditure of $3M over four years to September 2018.

NML doesn’t have to spend any more funds on exploration at Tandarra until Catalyst earns a 51% interest or elects to dilute, at which time it will need to contribute pro rata to exploration…

…but it will earn 49% of its proceeds as long as Catalyst Metals can get this prospect into production.

In Q3 2016, Catalyst’s latest assays taken from over 4,000m drilling showed significant high-grade gold mineralisation in multiple gold zones.

More work must be done but the early signs are positive for Tandarra.

NML’s funding status has been beefed up

One aspect we liked about NML from the get-go was its government-assisted funding package. NML was awarded Victorian Government TARGET co-funding grant of up to $626,000 earlier this year.

So on a $1.2M exploration program, the State Government is picking up 50% of the tab. The funding package includes geophysics (now complete), air core (about 50% complete) and diamond drilling (to come in Q1 2017).

In August, NML completed a $1.4M capital raising, in the form of a Placement, to professional and sophisticated investors and a fully underwritten 2-for-5 pro rata entitlement offer to existing shareholders, both at an issue price of $0.029 per new share.

Then on 1 November the company raised an additional $747,000 at $0.038 per share.

The additional injection of funding at this crucial stage to NML’s development effectively underpins the next phase of exploration, including a maiden drilling program at NML’s gold prospects and allows the company to match the grant of co-funding received from the Victorian Government under the TARGET Minerals Initiative.

Going for a song in the gold market

Despite a slight retracement recently, the steady rise of gold prices in 2016 (alongside many other base metal and mineral metals) could indicate that the old commodities doldrums are well and truly over — and if we look at valuations of other gold explorers/producers, it’s clear why gold miners have a spring in their step and quirk to their drill bits:

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Newmarket Gold Inc. (TSE:NMI), now (TSE:KLG) happens to be one of NML’s largest shareholders — a gold miner in its own right — and is catching favour with investors on the back of gold prices.

Just days ago, Newmarket was merged with mid-tier Canadian miner Kirkland Lake Gold for an all-stock transaction valued at approximately CAD$1BN (AU$739.7M), to form KL Gold.

The new entity goes back on the TSE boards today, but looking at Newmarket’s share price performance just before the merger, it would seem the junior gold play was going strong and could now be even stronger:

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The past performance of this product is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

Importantly for NML, one of the world’s premiere gold and silver investors, billionaire Eric Sprott is the non-executive chairman of Kirkland and through this merger now owns part of NML.

Sprott has caught a spratt it would seem and NML could be a beneficiary.

Here’s Eric Sprott talking about gold prices earlier this year:

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The other important thing to note is the metrics surrounding NML and its project.

NML has a $10M market cap and around $2M cash in the bank, which gives it a $8M enterprise value.

Let’s break that down… Hancock Prospecting is spending $4.2M to earn 50% of Catalyst’s Four Eagles adjoining Tandarra project.

Assuming 4 Eagles and NML’s Tandarra project are roughly same (although Tandarra is much more shallow than 4 Eagles), then Tandarra would be worth about $4M giving a $1M valuation to all other projects in the area including Irvine.

Or, if we look at Catalyst’s current market cap of about $24M, then 4 Eagles and Tandarra are worth about $12M each!

Suffice to say, it’s a good region to be in, at a time that could prove quite lucrative.

However, success here may not eventuate and no investment decision should be based on this type of speculation alone. If you are considering investing in this stock, seek professional financial advice.

NML’s inside track to gold revenues in Victoria

With NML having released its positive aircore drilling results, as a prelude to diamond drilling, it is well placed to make a significant gold charge in 2017.

As we touched on earlier, one key factor that may give NML just that little bit more chance of one day becoming a successful future gold producer is that one if its major shareholders happens to also be the operator of the largest mine in the region: the Magdala Gold Mine.

Magdala is the largest gold mine in the Stawell Corridor, and produces gold mined to depths in excess of 1,600m. Modern gold mining at Stawell has been continuous since 1982 with Magdala contributing more than 4 million ounces of the total 5 million ounces of gold produced to date from the Stawell Goldfield.

Also a little known fact is that many of NML’s management and directors have worked on the Stawell Gold Mine from their time with Leviathan Resources and MPI Mines and have a strong understanding of the geology.

In the chart below, 6 ASX-listed gold producers have all recorded double-digit growth in percentage terms so far this year…

…and NML hopes to emulate their respective paths to commercial success over the coming 6-12 months.

nml-pic9

The past performance of this product is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

With further drilling results imminent, and diamond drilling to commence in January, NML is well on its way to confirming the presence of strong gold mineralisation that could potentially lead to a resource definition drill out.

And it has the funding to meet this objective.

NML could be a great stock to leverage the thawing metals markets and establish exposure to the Aussie small-cap/mid-cap gold frenzy that’s seeing valuations rise as if lifted by a tide.

 

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S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of Longhou Capital Markets Pty Ltd (AFSL No. 292464). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

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