Early-stage, high-grade, exploration upside
With the proceeds from the NZ$1.3m October rights issue, New Talisman Gold Mines (ASX:NTL) is funded into the first phase of small-scale gold mining at its Talisman mine as a precursor to a larger-scale operation as development, exploration and de-risking progress. NTL is exploring a >4km vein system with high exploration potential.
Staged project development
The Talisman gold project is located in the North Island of New Zealand. It is operated by NTL and has a JORC 2004 compliant measured, indicated and inferred resource of 917,690t at 6.9g/t gold containing 204,760oz. In this resource is a high-grade reserve of 82,500t at 10.8g/t gold for 28,800oz, based on a cut-off grade of 1.7g/t. NTL completed a pre-feasibility study in 2013. Since that time, further work has been carried out to advance the project. NTL is planning an initial Phase 1 small-scale ‘trial’ mining operation based on existing adit access and workings. This will open up areas for mining and permit further exploration. As the project is de-risked, additional financing options and internal cash flow will lead to Phase 2, where a higher mining rate is planned.
Epithermal vein system with bonanza grade shoots
While construction of a processing plant is an option for the future, NTL has had discussions with parties for the toll treatment of Talisman ore, including Newmont, which operates the nearby 100,000oz per year Waihi mine and plant. Historically, gold recoveries of c 95% have been achieved on local gold-bearing material using conventional gold processing technology. NTL has sent bulk samples of stockpiled material for testing at Newmont’s plant. The Karangahake deposit is an epithermal quartz vein system with bonanza-grade gold shoots in a 4km by 3km area of hydrothermal alteration. Despite historic mining, the Mystery vein is an example of a new discovery, accessible from existing workings. NTL believes there is geological potential for the discovery of an additional 0.5-2.0Moz.
Valuation: Exploration to add value
Based on global average unit costs of discovery, NTL’s resource of 205koz should have required an investment of US$2.6m to delineate, or NZ$16.15/oz (US$12.60/oz). This compares to NTL’s current resource multiple of NZ$32.82/oz, or US$25.60/oz, against a global valuation average of US$11.37/oz. This suggests the market may be either applying a premium valuation to the existing resource (thereby making it value accretive to NTL to continue exploration drilling to extend the resource) or already discounting the expansion of the resource by 2.25x to 452koz (at global average valuation) for a relatively modest investment.
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