Recent success in Western Australia's historically strong Laverton-Leonora gold region is helping the next generation of explorers who want to get more aggressive with more substantive risk capital, like NTM Gold Ltd.'s new Managing Director Andrew Muir, who is on a mission to get the junior "out of the rut" of frequent small raisings.
NTM's stock has gradually declined since hitting a high of 8.3 Australian cents per share in October 2016, plunging as low as 3.5 Australian cents on July 27, 2018. However, Muir, who was brought on in January when CEO Rodney Foster transitioned to a non-executive director role, wants to change all that.
While Foster drove the exploration campaigns that led to NTM updating the resource base at its flagship Redcliffe project in June for the first time since 2012, Muir has been charged with demonstrating its potential to capital markets and advance the evaluation of commercialization options for what is now a 537,900-ounce mineral resource deposit.
He conceded to S&P Global Market Intelligence that he will have to ask shareholders at some point in the not-too-distant future to suffer some dilution for at least two more substantive equity raisings of more than A$2 million.
"In a perfect world, if we had A$5 million in the bank we could just go to town, get very aggressive with our drilling and really ramp up the exploration of all our targets," Muir told S&P Global Market Intelligence.
"There's no way in the world we could do that with our current market capitalization and share price in one hit, so we'd need to do it in a staged approach over two raisings. That's what I need to do – to get out of that cycle so it gives us a six to 12-month run at just being judged on our exploration merits."
While it will be short-term gain for long-term gain for shareholders, Muir believes most successful companies have been rewarded for being aggressive, not for minimizing dilution, as has been the case with Dacian Gold Ltd. and Gold Road Resources Ltd., who have been rewarded for devoting sizable budgets to drill big resource bases.
Work to be done in action-packed region
However, Muir also knows such a strategy takes time. Having analyzed Redcliffe by enterprise value per resource ounce, he says NTM would need to double its share price to reach the peer average using its 538,000-ounce resource with a 0.5 g/t gold cut-off. To use its smaller but higher-grade resource of 384,000 ounces at 1 g/t cut-off to be more conservative, its share price still needs to rise by between 35% and 40% just to be in line with its peers.
Trevor Dixon, Executive Director of Kin Mining NL — NTM's southern neighbor — said that with Dacian Gold Ltd. pouring first gold at Mt Morgans 20 kilometers west of Laverton in April, solid production coming out of the Laverton side for both Regis Resources Ltd., Gold Fields Ltd. and AngloGold Ashanti Ltd., "the Leonora-Laverton region as a whole is really seeing some action."
Meanwhile, Red 5 Ltd. has made a play for Bullseye Mining Ltd.and Peel Mining Ltd. has successfully spun out Apollo Hill into the Saturn Metals Ltd. IPO, while Independence Group NL's base metals assets are also performing well just to the north of Leonora. Magnetic Resources NL has also sold its iron ore portfolio to start building a large gold tenement holding in the Laverton region.
With all these success stories and recent events, Dixon said "it's going to be easier for the Leonora-Laverton folks to raise money at this point in time. Ounces in the ground in our region are going to become more valuable over time."
Petra Capital mining analyst Brett McKay, formerly an analyst for Deutsche Bank and UBS, said that while some would say the area is a mature gold field, there is "clearly still a lot of gold to be found," citing as an example Kin, which is still finding very shallow, "reasonable-width mineralization" in its well-positioned ground in the central part of the belt.