Dragon Energy (ASX: DLE) is on the hunt for gold in the highly prospective Yilgarn Craton in Western Australia, with the company's Carters Well Project located 30 kilometres south of historically gold rich Mount Magnet.
Dragon has now commenced a 1000 metre reverse circulation drilling program, targeting a series of gold and slightly elevated coincident silver anomalies which were identified from Mobile Metal Ion (NYSE:MMI) soil sampling conducted in 2011.
Drilling is expected to take 5 days with the assay results are expected to be available 3 weeks after the program finishes.
These surface gold anomalies are up to 50 times background and strike NNE and are up to 3 kilometres in length.
Gang Xu, managing director, highlighted how important the gold drilling program is for Dragon: "While the development of the Pilbara Iron Project remains the focus of the company, we will have no hesitation to drill test quality exploration targets. We are committed to pursuing new discoveries.
"The commencement of the Carters Well gold drilling program marks the first step in testing our gold and base metal targets on Dragon's projects in the Midwest".
The tenement overlies the Coolaloo Dome, a granite batholith having a prominently magnetic margin.
Dragon said that the aeromagnetic data clearly defines this structure and may reflect the presence of a hematite-magnetite-quartz shear adjacent to the contact, although there is limited outcrop due to transported cover.
This type of structure has the potential to host gold and base metal mineralisation.
The project covers 142 square kilometres - and importantly copper, lead and zinc anomalies have also been identified, with these elements often used as pathfinders for some gold deposits in the Mt Magnet district.
Dragon Energy is leading from the front with Gang Xu, who brings over two decades of solid experience to the role in the mining and energy industry in China and Australia, including senior roles at Sino Gold Ltd and China National Nuclear Corporation.
Xu is the founder of Dragon Energy, and holds a 6.6% stake. The China Shandong Group holds 70.3%.
Carters is just one of a strong portfolio of projects for Dragon, with the company acquiring the Rocklea Project in August 2012 which consolidated its Iron Ore assets in the Pilbara with an extra 89 million tonnes of iron ore added to the global JORC Resources.
Recently Dragon also completed resource upgrades for the Rocklea and Nameless deposits with JORC Resource for flagship Pilbara Iron Ore Project growing to 263.6 million tonnes at 52.6% iron (58.8% caFe).
A Scoping Study at the project at the end of 2011 highlighted strong project economics with Case 1 delivering a scenario of 2 million tonne per annum production for 62.7 million tonnes over 33 years, with a NPV of $344.8 million and an IRR of 31%. Estimated CAPEX is $46.4 million and Estimated OPEX $45.82 / tonne.
Importantly - the project has multiple paths to market for both large and smaller volume operations, which includes Anketell Point, Port Headland and Cape Preston.
Dragon is targeting production from the project in 2014, with the company also looking to pursue new equity investment to reduce dominance of major shareholder and improve liquidity, while also focusing on exploration and resource expansion.
Apart from the Pilbara Iron Ore tenements, the company also has 24 additional tenements across 7 projects covering 1500 square kilometres, prospective for iron, gold and base metals.
With these quality assets and over $5.4 million in cash at the end of the September 2012, the current $25 million market cap. and enterprise value of less than $20 million appears slight.