- Spectacular intersections both within and outside the Resource, such as 50m at 6.46gpt, 29.15m at 11.09gpt, 24.0m at 6.32gpt, 19.9m at 8.12gpt and 19.0m at 6.49gpt
- Resource update imminent
- Near-new 2.5Mtpa processing plant
- Latest results point to potential for at least two more similar discoveries
So given all this, why isn’t there one stockbroking analyst in the country covering Gascoyne? That’s the question being asked increasingly by investors as they watch the company consistently churning out wide high-grade intersections in the heart of Western Australia.
Some unkind souls have pointed out that the lack of coverage may be due to the fact that, with approximately $40 million in the bank, Gascoyne doesn’t need to raise money in the near term and therefore there is a distinct lack of fee-generating opportunities for broking firms.
On the flip side, investors draw much comfort from companies which are not seen as “come-raise”.
Others point out that the broking firms which may ordinarily be expected to cover a growing WA gold stock are engaged by ASX companies which may consider Gascoyne to be a potential takeover target, giving the firm a conflict of interest.
But, as one savvy investor pointed out to Deep Value this week, the absence of analysts’ coverage means there is still a great opportunity because the market is far from recognising the company’s underlying value and upside.
Highly-regarded resources commentator Barry FitzGerald cut to the chase in his column yesterday: “There have been no clues about what the pending update may weigh in at. But drilling results suggest something around the 600,000-ounce mark. Such an outcome would prompt a re-rating for Gascoyne”.
If FitzGerald is on the mark, the valuation equation would go something like this: recent M&A activity in the gold space has thrown up prices of ~A$190 per resource ounce. At 600,000oz, that would equate to something in the order of $115 million.
Industry players suggest the near-new plant would be worth around A$150 million. So, there’s $265 million before allowing for any further exploration success. Gascoyne’s market cap stands at $160 million.
The reality is that with or without analytical coverage, Gascoyne is about to benefit from a greater appreciation of what it has on its hands, with Managing Director Simon Lawson about to embark on an East Coast roadshow.
Lawson will be a key attraction at the Resources Rising Stars Twilight Series, which will see him present to rooms full of investors in Brisbane, Sydney and Melbourne in the week starting July 24.
Gascoyne: What’s all the fuss about?
Gascoyne puts its Dalgaranga gold project in the Gascoyne region of Western Australia on care and maintenance late last year after encountering a series of challenges familiar to operators in the mid-tier gold space – rising costs, labour shortages and, in the case of the original Dalgaranga mine plan, an average head grade of 1gpt from its open pit operation.
Gascoyne’s board made the decision to stem the bleeding at the time and work to preserve the value of the assets by halting mining in the Gilbey’s pit and placing the near-new 2.5Mtpa plant on care and maintenance.
Following a $50 million recapitalisation at 10c, supported by private equity group Tembo Capital and the company’s existing major shareholder, Delphi, the company stepped up its exploration efforts at a series of near-mine exploration targets.
Chief among these was the ‘Never Never’ discovery (named after a famed South Australian gin), which emerged following a significant “step-change” in the geological interpretation of gold-hosting structures at Dalgaranga.
In a nutshell, the new interpretation focused on a different east-west orientation for high-grade mineralisation, perpendicular to the orientation of the main north-south mineralised trend which was the focus of recent mining activities in the Gilbey’s pit.
By turning the drill rigs around, Gascoyne’s exploration team has dramatically changed the outlook for the project, discovering a spectacular high-grade zone of mineralisation at Never Never immediately north of the Gilbey’s pit and less than 1km from the idled 2.5Mtpa processing plant.
The results have been nothing short of outstanding, resulting in the company quickly declaring an Indicated and Inferred Resource of 303,100 ounces at an average grade of 4.64gpt, comprising 1Mt at 2.45gpt for 85,500oz of open pit resources and 0.93Mt at 7.22gpt for 216,000oz of underground resources.
Subsequent drilling has returned a shopping list of wide, high-grade intersections outside the resource. These will be incorporated in the imminent inventory update due later this month,
And Gascoyne revealed earlier this week that the exploration upside goes well beyond Never Never, with the company identifying potential Never Never ‘look-alikes’ along strike. The company said it intended to release more information on this shortly.
To read this week’s Gascoyne ASX update, click here.
What the Fund Managers Say:
Russell Delroy, Founder and Investment Manager with Perth-based resources fund Nero, says Gascoyne will be one of the hot stocks of this year’s Diggers & Dealers mining forum in Kalgoorlie
What the Commentators Say:
Veteran Resources Journalist Barry FitzGerald says:
A resource upgrade is just what a gold stock should be looking to drop into the market now that the gold market is back on the boil.
That’s just what Gascoyne (GCY) will do soon. That is known because Gascoyne boss Simon Lawson said so on Monday.
Lawson said the resource upgrade would be out by late July.
It is also known he is the headline act in Resources Rising Stars’ “Twilight” investors series that swings through Brisbane-Melbourne-Sydney on July 25-27. It always helps to have a good story to tell on the road.
The resource upgrade is likely to be just that, a good news story, perhaps even a game-changer for the company, something it could well be preparing for with its planned name change to Spartan Resources (SPR) in August.
Anyway, the resource update will again shine a light on last year’s Never Never discovery at the company’s Dalgaranga gold project in the Murchison (another reason for the name change, it’s not in the Gascoyne).
Never Never already has a resource estimate of 303,100oz at 4.64gpt. It sits in the shadows of the low-grade pit at the operation which was running less than 1gpt dirt through a newish 2.5mtpa treatment plant before Lawson called a halt last year.
The discovery prompted Lawson to get to work on planning a high-grade future for Dalgaranga with Never Never as the backbone. A bigger resource would be better. So there will be lots of interest in the late July update.
It will be fed into Lawson’s “365” plan for Dalgaranga. It’s about establishing a high-grade 300,000oz reserve at Never Never, a 600,000oz high-grade resource at the deposit, and to deliver an initial high-grade five-year mine life.
There have been no clues about what the pending update may weigh in at. But drilling results suggest something around the 600,000-ounce mark.
Such an outcome is likely to prompt a re-rating for Gascoyne. It last traded 18.5c which is up from 12c since it was last mentioned here on May 26.
It is also worth mentioning that in Monday’s announcement on latest drilling results and the pending resource update, Lawson mentioned that a “number of new high-grade structural gold prospects which represent Never Never look-alikes or repeats” had been identified.
Hear from the Managing Director:
Gascoyne Managing Director Simon Lawson talks to Paul Armstrong in this episode of the RRS Hole Truth podcast.
DISCLAIMER: Please note that Read Corporate does not provide investment advice and investors should seek personalised advice before making any investment decisions.
