Analyst tips Genesis to triple on back of 760,000oz resource

11th October 2018
Resources Rising Stars

Genesis Minerals (ASX: GMD) burst onto investors’ radar screens this week when it revealed that resources at its Ulysses project in WA had more than tripled to 760,000oz.

What’s more, Genesis said the average resource grade was 3.3gpt, including a higher-grade portion of 628,000oz at 4.7gpt.

And it dangled the carrot of much more to come, saying the mineralisation remained open along strike and at depth   

The stock jumped by as much as 14 per cent as investors contemplated the idea that Ulysses could be about to crack the magic million-ounce barrier.

Argonaut analyst James Wilson was among those seeing upside everywhere, tipping Genesis shares to soar to 10c.

Wilson noted that 59 per cent of the total tonnage and 62 per cent of the ounces were in the measured and indicated categories.

“The Ulysses deposit remain open both at depth and along strike,” he wrote. “Ultimately, we believe the deposit will grow to more than 1Moz of contained gold.

“The current resource is relatively shallow with an average depth extent of just 320m below surface (500m maximum). The 2km defined strike is open to the east and west.”

Wilson said the resource update and “tangible upside potential goes a long way to prove the commerciality of Ulysses”.

He believes the high grade and shallow nature of the deposit could underpin an underground mining operation.

There is also potential for a small starter pit at the nearby Orient Well NW prospect, just 10km from Ulysses, where drilling has returned shallow intersections including 25m at 1.4g/t from 65m and 20m at 1.2g/t from 60m.

“Ulysses’ location in the well-endowed goldfield is populated by a number of operating mills,” Wilson said.

“Given the grade of the deposit and its adjacency to the Goldfields Highway, ore could be economically transported to a number of mills within a 150km radius including St Barbara’s Gwalia, Zijin Mining’s Paddington, Dacian Gold’s Mt Morgans and Saracen Holdings’ Thunderbox.”

Wilson says the prices paid in recent acquisitions made Genesis look cheap.

“Recent metrics for M&A transactions includes Northern Star’s acquisition of Pogo (EV/Resource ~$85/oz, EV/Reserve $468/oz), Orion Mine Finance’s takeover of Dalradian (EV/Resource $89/oz, EV/Reserve $373/oz) and the ongoing bid by Ramelius for Explaurum at $88/oz EV/Resource oz,” he said.

“Comparatively, Genesis is cheap, valued at ~$43/oz EV/Resource oz based on the updated Resource.

“Given the significant number of M&A deals in the gold space over the past months, we view Genesis as a highly appealing target for any one of the players within a 150km radius of Ulysses thanks to its simple geometry, proximity and high grade.

“Argonaut maintains a speculative buy recommendation with a 10c target price.”

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