Sandfire exits, but White Rock itching to progress exploration in Alaska
Ongoing commitments to more exploration at its Alaska-based, Red Mountain Project, plus plans for its other wholly-owned asset, NSW-based Mount Carrington gold-silver project to bring cash flow to the company within three years, bodes well for Ballarat-based White Rock Minerals (ASX:WRM).
By all accounts the listed junior explorer (market cap $9.2 million) finished 2019 in very strong shape across the two assets under its umbrella. Despite not being reflected in its share price over the past 12 months, shareholders can take some comfort in the company’s clear progression from pure exploration play, to developer, and then producer.
Between its two assets, comprising a rich portfolio of tenements, including high-grade zinc and precious metals, gold and silver, White Rock has the equivalent to 3.7 million gold ounces. But one of the strongest drivers of shareholder optimism in 2020 is the unfinished business at its a high-grade zinc and precious metals Volcanogenic Massive Sulphide (VMS) Red Mountain Project in central Alaska, 100 kilometres south of Fairbanks.
The Red Mountain Project was established as a A$30 million earn-in joint venture between White Rock and its largest shareholder, A$1 billion ASX-listed company Sandfire Resources (ASX: SFR). Based on their shared DNA, managing director and CEO Matt Gill regarded the JV with Sandfire as a win-win on financial, and technical expertise.
Without Sandfire on board, the drilling program at Red Mountain would have been a significantly less ambitious project. Sandfire had committed to investing $20 million over four years, (currently committed $8.5 million), at which time its 11.3 per cent holding would have moved to 51 per cent.
Red Mountain to seek alternative funding
However, in a major blow to funding in Alaska, on 11 February Sandfire advised White Rock of its intention to withdraw from the Red Mountain Project Earn-in the JV option agreement. News of Sandfire’s exit saw the White Rock share price shed 20 per cent to $0.004.
Unperturbed by the Sandfire’s surprise withdrawal, Gill said the retention of 100 percent of the Red Mountain project allows White Rock to seek alternative funding to advance the zinc and precious metals-rich deposits, plus an exciting new gold prospect. “Our aim is to create value for our shareholders through exploration success, a core strength of White Rock Board and management team,” said Gill.
Ironically, news of Sandfire’s withdrawal comes only weeks after the Red Mountain project identified a large, strong and robust gold anomaly named Last Chance, measuring 15 square kilometres, in the area located in the world class Tintina Gold Province. Recent discoveries add to Red Mountain project’s two existing high grade deposits - with an Inferred Mineral Resource of 9.1 million tonnes @ 12.9 per cent zinc equivalent for 1.1 million tonnes of contained zinc equivalent at Dry Creek and WTF (West Tundra Flats).
Red Mountain in good company
Adding an encouraging endorsement of White Rock’s first foray overseas, notes Gill is the knowledge that the Tintina Gold Province has already proven to be an exceptional resource base. The area has played host to gold deposits such as Donlin Creek (45Moz gold) owned by NovaGold and Barrick; Fort Knox (13.5Moz gold) owned by Kinross; and Pogo (10Moz gold) owned by Northern Star.
White Rock recently announced the discovery of two significant surface geochemical anomalies within the Tintina Province. Within the greater gold anomaly, a highly anomalous core area with over 3.5 kilometre of east-west strike length has been defied by four first order stream catchments at >100ppb (0.1g/t) gold, with a peak value of >0.4g/t gold, and a robust gold anomaly defined by 27 stream sediment sample points (see figure two).
In light of these discoveries, White Rock moved quickly to secure an additional 84 square kilometres of tenements over these two high priority, and high quality target areas.
Located along a regional-gold-arsenic-antimony trend that extend to the east, the Last Chance Gold anomaly has never had any historic mining claims staked, and hence remains unexplored. To put the magnitude of Red Mountain’s unexplored potential in context, the project now comprises 894 state mining claims and mineral locations covering 216 square miles (559 square kilometres).
The anomaly is spatially associated with a suite of Cretaceous granites, similar in age to those associated with the major deposits throughout the Tintina Gold Province. As a result, Gill remains confident of White Rock identifying such a strong and coherent gold anomaly that’s yet to be explored for gold. That’s despite the significant placer gold workings downstream, only 12 kilometres from the Last Chance gold target.
Given the massive untapped potential within its 2020 drill program, what’s truly exciting, adds Gill is finding out exactly how significant the resource expansion could be. “We’re itching to get on the ground and check that out once the snow melts later this year,” Gill recently commented.
It remains unclear how Sandfire’s withdrawal will impact White Rock’s 2020 drilling program.
Moose zinc-copper prospect
During the highly successful 2019 field season sampling program, White Rock also discovered the Moose zinc-copper prospect. Lying north of Last Chance, Moose is a 1.5 square kilometre zinc-copper anomaly defined by four stream sediment sample points of more than 5000 ppm (0.5%) zinc and more than 750 ppm copper, with two of these assaying greater than one per cent zinc.
White Rock expects to be able to commence geological reconnaissance and detailed surface soil and rock chip geochemistry during June 2020, prior to the possibility of drill testing targets during the September quarter of 2020.
Meanwhile, the Mount Carrington Project, a 100 per cent owned advanced gold-silver epithermal project located in northern NSW – five kilometres from the township of Drake – could bring cash flow to the company within two to three years. Comprising 22 mining leases, Carrington released late in 2017 an extremely favourable pre-feasibility study (PFS).
Results of the PFS on an existing Mining Lease, and A$20 million of infrastructure from previous owners, confirmed a financially robust operation. This includes a maiden Ore Reserve in accordance with the JORC Code (2012) for the Mt Carrington Gold First project of 159,000 ounces of gold, resources of 341,000 ounces of gold and 23.2 million ounces of silver.
The Stage One mine includes two gold resources, the Strauss and Kylo deposits, including 188,000 ounces Au (4 million tonnes @ 1.4g/t gold).
It is projected to generate in excess of A$36 million undiscounted cash flow over the initial four and half year Gold First mine plan, and deliver a strong Internal Rate of Return (IRR) of 34 per cent. The mine will produce 35,000 ounces of gold annually at an all in sustaining cost (AISC) of A$1,200 per ounce.
There is also significant potential upside in subsequent silver production and future gold and silver exploration.
While the Mount Carrington project will have an initial four to five year mine life of gold, an additional two or three years of mining of the silver dominant deposits (8 million ounces) of silver already indicated category, with an estimated payback under two years.
Having already raised $1 million from shareholders, the White Rock’s funding shortfall remain at around $4 million, but future funding announcements will follow a capital raising which closes 12 February.