The dream run for newly listed Ventnor Resources continues with further spectacular copper intersections from the flagship Thaduna and Green Dragon Prospects situated 40 kilometres east of Sandfire Resources' (ASX:SFR) DeGrussa Project (14.6Mt @ 4.6%, 1.6 g/t gold).
This follows hot on the heels of high grade copper-oxide intersections from Sipa Resources Ltd (ASX: SRI) at the nearby Enigma Copper Deposit (Thaduna Copper Project, ASX Announcement, 19/8/2011). It appears the region is turning into a copper province.
The Thaduna Prospect returned high grade intersections including;
- 5 metres @ 4.2% Cu from 30 metres downhole and
- 3 metres @ 4.5% Cu from 121 metres downhole.
Significantly the last phase of RC drilling also extended the strike length of the known copper mineralisation along strike to the north. Mineralisation remains open along strike and at depth. Similarly at Green Dragon, the second phase of RC drilling returned numerous potentially ore grade intercepts including;
- 2 metres @ 9% Cu from 85 metres downhole and
- 12 metres @ 5.1% Cu from 80 metres downhole.
Aside from the high-grade copper intercepts this campaign also identified previously undetected mineralisation in both the hanging and footwalls.
Proactive Investors considers that these projects are shaping up to be high-grade open pittable copper deposits consisting of multiple shoots up to 15 metres in thickness. The proximity to DeGrussa suggests potential for a toll treat operation, or if results continue, a stand-alone operation providing contained copper exceeds 150,000-200,000 tonnes.
An impressive start given the Company has only drilled approximately 8,000 metres for what Proactive Investors considers has outlined somewhere in the vicinity of 50,000 tonnes of contained copper.
The Company is currently planning 8,000-12,000 metre RC drilling program, supplemented with 1,000 metres of diamond drilling which will incorporate some metallurgical testwork. Pending the outcome of this program, it is anticipated that the Company will commence environmental and ground water studies ahead of a Scoping Study on Thaduna and Green Dragon.
Our peer analysis indicates a target price of 42 cents per share immediately on the basis of our target JORC Resource of 50,000 tonnes of contained copper with a target of 80 cents within 12 months based on JORC resources of 100,000 tonnes of contained copper. This may well surprise on the upside.
Exceptional Targets: Recent RC drilling at Thaduna and Green Dragon have confirmed their potential to host high-grade potentially economic copper mineralisation that may be suitable for either toll treat (to DeGrussa) or a stand-alone operation. Proactive Investors believes a maiden JORC Resource in excess of 75Kt of contained copper is likely this calendar year.
Known Geology: Given that both Thaduna (30,290 tonnes @ 8.7% Cu) and Green Dragon are both historical mines with untested intersections at depth, the opportunity presented Ventnor Resources with a walk up start. Given the mines are broadly located on the same structure as DeGrussa, exploration can be targeted towards known mineralising structures.
Undervalued: We consider there is immediate upside to +40 cents per share (based on 50Kt of contained Cu) with a 12 month target of 80 cents per share (based on 100Kt of contained Cu) based on our peer comparison
Drilling Imminent: Ventnor Resources is gearing up for an aggressive 8,000-12,000 metre RC and 1,000 metre Diamond drilling program which has an excellent probability of further extensions at Thaduna and Green Dragon both along strike and down dip. Environmental and water studies are also likely to commence as a precursor to a Scoping Study.
Why Doolgunna-Goodin Dome Region? The 2009 discovery of DeGrussa which now stands at 14.6Mt @ 4.6% copper and 1.6 g/t gold for approximately 800,000 tonnes of Copper (equiv) provides investors with around A$6.70 Billion reasons to look for more! Enough said!
Directors & Management: The Company is well placed to gain maximum leverage from this exciting discovery. Managing Director Bruce Maluish has 30 years mining and mineral exploration experience.
Ventnor Resources was listed on ASX in March 2011 with a focus on copper at Thaduna/Green Dragon (Copper), nickel at Warrawanda and Nickel Hills (Pilbara, Western Australia) and base metals and gold in the Georgina Basin (Mount Isa region, Queensland). Figure 1 sets out the Company’s tenement portfolio.
Since listing, the Company has enjoyed remarkable success with its first two phases of drilling at the flagship Green Dragon/Thaduna Projects. Proactive Investors considers a maiden resource in excess of 50K tonnes of contained copper is possible this calendar year
EXPLORATION OVERVIEW: Thaduna and Green Dragon Projects
Location and Access
The abandoned 700 metre long, 80 metre wide Thaduna Copper Mine (Figure 2) is situated approximately 40 kilometres west of Sandfire Resources’ DeGrussa Project (14.6 Mt @ 4.6% Cu, 1.6 g/t Au) and is accessed from the Great Northern Highway by a dirt road for approximately 35km, and then by tracks for another 12km.
The 330 metre long, 70 metre wide Green Dragon Prospect is located just 5 kilometres north of Thaduna.
Previous Exploration and Mining
Thaduna produced 30,290 tonnes @ 8.7% Cu and has stockpiles of 48,400 tonnes @ 2.7% Cu and tailings of 20,500 tonnes @ 2.5% Cu. The nearby Green Dragon (Figure 3) project was operated as a satellite deposit at the same time as Thaduna. In addition, the Ricci Lee copper mine, 3km south-southwest of the Thaduna Mine, was worked from 1942 to 1970 for a production of 2,912 tonnes of ore and concentrates containing 287 tonnes of copper. The Rooney Mine, 5km north-northwest of Thaduna, produced a small tonnage of cupreous ore, approximately 110 tonnes @ 7.7% Cu from small underground workings and a 3-m-deep pit.
Open cut mining and limited underground mining took place from 1955 to 1971.
Reconnaissance exploration during the 1970’s was successful in outlining three copper-anomalous close to the two mines. Successive phases of Diamond drilling in the mid 1960’s and in the late 1980’s/early 1990’s were intersected relatively narrow copper mineralisation beneath the Thaduna and Green Dragon open pit including a best intercept of 9 metres downhole @ 5.22% Cu.
Limited metallurgical testwork in 1993 showed relatively poor flotation tests but encouraging heap leach results with more than 80% of the Cu recoverable over a 70-100 day leach.
Geology and Mineralisation
Mineralisation at Thaduna/Green Dragon comprises high-grade, shear hosted shoots and lower-grade disseminated mineralisation up to 20 metres wide in places. Strong alteration zones of chlorite (after hematite) introduced by hydrothermal fluids envelope the mineralisation. The mineralisation is totally oxidised to a depth of around 50 metres. Secondary copper minerals include chrysocolla, malachite, azurite and cuprite with a supergene zone to 90 metres vertical depth containing chalcocite and lesser covellite. Chalcopyrite and bornite are the dominant copper bearing minerals in the primary zone.
The controlling structures appear to be two graphitic shears trending 90° and 60° which are mineralised with cuprite-chalcocite-malachite at their intersection and form a 50 metre long shoot striking broadly east-west. Two other sub-parallel shoots returned elevated copper from drilling with widths ranging from 0.5-5.2 metres. Supergene mineralisation is found to a vertical depth of 53m.
Since listing earlier this year, the Company has drilled just over 8,000 metres of RC at Thaduna and Green Dragon with a view to following up historical high-grade drill intercepts. This latest phase of RC drilling by Ventnor Resources has extended mineralisation both along strike and down dip in addition to identifying multiple lodes which have the potential to significantly enhance the resource and in turn the project economics of the deposit
Highlights from the 2Q 2011 RC program which targeted historic intercepts (including 10 metres @ 5.4% Cu from 97 metres) included;
- 16 metres @ 3.5% Cu from 80 metres downhole,
- 4 metres @ 4.4% Cu from 87 metres downhole, and
- 7 metres @ 5.7% copper from 757 metres downhole
The second phase - 44 hole, 5,432 metre program tested a 1.5 kilometre strike length to a depth of 150 metres. Over 21 holes returned high grade intercepts (+1% Cu over +2 metres) with better results including;
- 5 metres @ 4.2% Cu from 30 metres downhole
- 3 metres @ 4.5% Cu from 121 metres downhole
- 5 metres @ 5.1% Cu from 100 metres, 4 metres @ 3.9% Cu downhole, and
- 11 metres @ 5.6% from 100 metres downhole
Mineralisation remains open along strike to the north, south and at depth with Figures 6-10 show many of these high grade intercepts remain open up and down dip.
In particular the northernmost section on section 7176540mN is 130 metres north of the existing Thaduna pit with two holes (THRC013 with 4 metres downhole @ 3.5% Cu and THRC021 with 5 metres downhole @ 4.2% Cu) intersecting shallow mineralisation which remains open up and down dip.
THRC 041 is the deepest drillhole at Thaduna at 250 metres down hole (around 190 metres vertical depth), and all mineralised lodes appear to be open both up and down dip as well as along strike to the north.
The recent program tested a strike length of 500 metres to a depth of up to 130 metres with 26 holes for 3,020 metres. 16 RC holes intersected high-grade mineralisation (>1% Cu) with generally good continuity between sections-an observation that has only now become apparent. The highlight of this phase was the intersection of multiple zones of mineralisation that remain open to the north, south, and up and down dip along the known trace of mineralisation.
Another interesting point is the intersection of an additional high-grade footwall zone which brings the total mineralised zones to three. A further zone has also been intersected on 774900mE and will be the subject of follow up drilling over the next few months. The shallow orientation also brings recently identified footwall zones into play with potential to add significantly to a JORC Resource.
The highest grades were intercepted below 774940mE with four holes, GDRC004, 020, 021, 025, intersecting three zones with the highest grades situated on the main lode and footwall positions. Holes GDRC021 and 025 intersected higher grades on the footwall zone.
Warrawanda Nickel Project (Pilbara, Western Australia): The project is located approximately 40km south of Newman and is prospective for nickel-cobalt laterites, chrome and nickel sulphide mineralisation (Mt Keith style) and comprises an apparent 17km of lightly tested ultramafic rocks.
The Warrawanda South Greenstone Belt, which hosts the Warrawanda Project, is a 30-km-long, 200-800m-wide, easterly trending ultramafic body with in excess of 70 drill intersections >0.2% Ni in laterite.
Results from a recent 2,800 metre RC drill program targeting EM and magnetic anomalies over the Warrawanda and Nickel Hills prospects is anticipated shortly. The program was targeting large-tonnage, low-grade disseminated sulphide Ni deposits.
Nickel Hills Project (Pilbara, Western Australia): Situated just 8 kilometres north of Warrawanda, the project comprises two Exploration Licenses covering around 82km2. Pacminex explored Nickel Hills in the early 1970s and three copper anomalies were identified. This included limited drilling over the ultramafic intrusion contact. One hole was reported to contain the nickel sulphides violarite, millerite and heazelwoodite.
The Warrawanda North Greenstone Belt which hosts the Nickel Hills Project consists of an east-trending BIF, shale, schistose amphibolite and serpentinite. The tenements are mostly underlain by ultramafic lithologies. Drilling in the 1970s Pacminex reported nickel sulphide intercepts. The target is an ultramafic-mafic contact interpreted to be the base of a thick ultramafic volcanic flow. SRK have also confirmed the presence of gossanous sulphide float at surface. It is likely that the Company will commence exploration over previously identified high- grade zones in the coming quarter.
Georgina Basin (Mount Isa Region, Queensland): The Project is situated approximately 200 kilometres southwest of Mount Isa, a world class Ag-Pb-Zn, iron-oxide copper-gold (“IOCGU”) and massive sulphide province. Ventnor Resources’ tenements have no outcrop of prospective rocks of the Mount Isa Inlier with the Proterozoic sequences covered by post-Proterozoic sedimentary basins. Geophysical surveys in 2008 highlighted several magnetic and gravity features broadly consistent with a concealed IOCG model.
- Follow-up drilling may not demonstrate sufficient continuity down-dip, up-dip and along strike to allow the calculation of a JORC Inferred Resource
- The relatively small tenement holdings may cap the resource upside of Thaduna and Green Dragon with upside more limited to down plunge extensions which may require higher stripping ratios (and therefore higher mining costs) or more capital intensive underground mining methods
- The Company is primarily exposed to copper (and to a lesser extent at this stage, nickel) which has weakened from recent highs of just over US$10,000/tonne in February 2011, however on Friday (26/08/2011) copper ended higher for a fourth straight day as investors banking on second half demand revival from China and longer term supply tightness increased purchases. Proactive Investors therefore sees more upside risk for copper in coming months
- Further declines in equity markets may continue to put pressure on junior resource companies as investors switch out of “risk” into perceived safe haven investments such as cash, gold and counter cyclical equities. Our medium term view is that the risk premium has been eroded for many junior resource companies and we see near term upside
- A strengthening Australian dollar (as funds flow back into riskier currencies) may make the price of copper in local (Australian) currency terms less attractive. This could have negative influences on Australian copper miners however it is more relevant to producing companies
PEER ANALYSIS AND ESTIMATE OF VALUE
We have excluded ASX listed companies such as OZ Mining Limited, PanAust Limited, Anvil Mining Limited and Aditya Birla Minerals Ltd as they are currently in production and not directly comparable to Ventnor Resources situation. We have however incorporated (Figure 17, Table 1) companies such as Sandfire Resources (ASX: SFR), CuDeco Limited (ASX: CDU), Haviliah Resources Limited (ASX: HAV), Hillgrove Resources Limited (ASX: HGO), Rex Minerals Limited (ASX: RXM), Discovery Metals (ASX: DML) Altona Mining (ASX: AOH) which are still in the exploration, feasibility study or pre-development phase. We have also taken into consideration the recent trade sale by Exxco Resources Ltd (ASX: EXM) of the Cloncurry Copper Project for A$175 million which valued the 630Kt of copper (Equiv) at around A$275/tonne. We also anticipate Voyager mineral (market capitalisation A$130 million) to come out with a high-grade copper resource shortly from its KM Porphyry Copper Project in Brazil shortly.
EV/T Cu equiv ($)
Resource Tonnage (Mt)
Cu Equiv (Mt)
Discovery Metals Ltd
Rex Minerals Ltd
Hillgrove Resources Ltd
Havilah Resources Ltd
Exco Resources Ltd
Sandfire Resources Ltd
*Ventnor Resources Ltd
Intrepid Mines Ltd
Altona Mining Ltd
*Assumes maiden JORC Resource of 50Kt of contained copper
A note of caution is the relatively small size of our Ventnor Resources compared to these piers (roughly 6-12% of Sandfire Resources based on scenarios of 50-100K tonnes of contained copper). Our comparison focuses on total JORC resources at this stage. We note that Sandfire’s high grade and large tonnage will warrant a premium valuation.
Ventnor certainly looks cheap on EV/Resource multiples, however resource growth may be somewhat less rapid than DeGrussa (Sandfire) for example.
We derive a peer group average enterprise value per resource tonne contained copper of $490/tonne, with the higher grade deposits such as Sandfire Resources and Discovery Metals attracting a premium. In contrast, lower grad/larger tonnage deposits such as Intrepid Mines Tuju Bukit deposit (990Mt @ 0.40% Cu) have been discounted by the market.
On this basis, and upon initiation of a scoping study, applying our average EV metric of $490, we derive an enterprise value of around A$25 million or around A$0.42 representing an approximate premium to the current share price of 91%. We anticipate that the maiden resource may well be in excess of 100,000 of contained copper which would equate to a Ventnor Resources share price approaching A$0.80 based on similar metrics. Clearly a resource approaching 150,000-200,000 tonnes of copper would push valuations higher as this is the approximate tonnage required to justify a stand-alone operation.
Disclaimer / Disclosure
This report was produced by Proactive Investors Pty Ltd, which is a Corporate Authorised Representative of RM Capital Pty Ltd (AFSL 221938). Proactive Investors received a fee for the compilation and distribution of the research report. Proactive Investors has made every effort to ensure that the information and material contained in this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of the information and material and it should not be relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, Proactive Investors does not accept any liability, including negligence, for any loss or damage arising from the use of, or reliance on, the material contained in this report. This report is for information purposes only and is not intended as an offer or solicitation with respect to the sale or purchase of any securities. The securities recommended by Proactive Investors carry no guarantee with respect to return of capital or the market value of those securities. There are general risks associated with any investment in securities. Investors should be aware that these risks might result in loss of income and capital invested. Neither Proactive Investors nor any of its associates guarantees the repayment of capital.
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DISCLOSURE: Proactive Investors and/or its directors, associates, employees or representatives may not effect a transaction upon its or their own account in the investments referred to in this report or any related investment until the expiry of 24 hours after the report has been published. Additionally, Proactive Investors may have, within the previous twelve months, provided advice or financial services to the companies mentioned in this report. As at the date of this report, the directors, associates, employees, representatives or Authorised Representatives of Proactive Investors and RM Capital may hold shares in Ventnor Resources Limited.