By Dr. Michael Green
So much has been achieved by Landore at its Junior Lake property in Ontario. This asset contains the multi-million ounce potential BAM Gold Project and that’s not to mention Battery Metal deposit resources which could go straight into a Preliminary Economic Assessment (PEA). That said, we believe little of the obvious value that has been created is currently being reflected in the share price, so the management team has put a Strategic Review in motion to attempt to increase shareholder value. This was the subject of an announcement earlier on this week.
Landore has been especially busy on the ground over the last few years, seeing some cracking results. Recent exploration and development drilling activity has seen the acquisition of additional mining claims, meaning that the Junior Lake Property now spans some 33,029 ha. Soil sampling has indicated a possible linking of gold anomaly trends over several hundred metres strike length for several Junior Lake prospects.
Meanwhile, the infill and step out drilling conducted for the 2020-21 drilling programmes further confirmed the correlation of previously defined geophysics anomalies within the main BAM gold mineralisation trend and importantly provided upgrades to the BAM Mineral Resource Estimate (MRE).
The 2020-21 diamond drilling consisted of 102 HQ size drill holes for 24,361m, which means that the BAM gold mineralisation trend has now been tested by diamond drilling over a strike length of 4.5 km. The 2020-2021 drilling has not only continued to show the close association between gold mineralisation and the VTEM geophysical anomaly trend, but also confirmed the extension and continuity of the gold mineral resources at depth within the main BAM mineralisation zone
On top of that, the 2020-21 diamond drilling has identified additional gold mineralisation within the hanging wall Grassy Pond Sill unit and demonstrated the continuation of the main BAM gold mineralisation to the east and west. At the same time, infill drilling has also allowed for conversion of the MRE from Inferred to Indicated.
The end result is an impressive Technical Report and a highly compelling PEA on the BAM Gold Project. The MRE now stands at 49.231Mt at 1g/t gold for 1.496Moz, which includes 1.029Moz in the Indicated Category – announced in February 2022.
The PEA indicates that the BAM Gold Project generates pre-tax and post-tax NPVs of, respectively, US$333.6 million and US$231.2 million and pre-tax and post-tax real IRRs of 87.4% and 66.7%. The project was seen to have an after-tax simple pay back of just 15 months from the start of production.
This was based on mining resources inside optimised pit shells of 22.4 Mt at 1.16g/t gold containing 833,000 ounces of gold using a long-term gold price of US$1,800. Construction of a 2.2 Mtpa processing plant was assumed to take place by year 4 followed by 10.5 years of gold production.
With so much having been achieved at Junior Lake and little value being demonstrated in the share price, the management team has put a Strategic Review in motion to attempt to increase shareholder value. Indications of interest should be sent to Strand Hanson which has been appointed as Financial Advisor in connection with the Strategic Review.
Now does look like an opportune time for Landore as the BAM MRE has now reached 1.5Moz of gold and it is becoming fairly obvious that this project boasts multi-million ounce potential. Whilst the Strategic Review is in motion, Landore will continue to advance the BAM Gold Project towards future development, with further drilling planned to begin in July 2022.
At the time Bill Humphries CEO was quick to point out that,“This Preliminary Economic Assessment, combined with the 50% resource increase reported in February 2022, reaffirms the profitability of the BAM Gold Project. The resource has excellent growth potential remaining open at depth and along strike to the east and west, all within established mining leases which cover more than 20 kilometres potential strike length. Other exploration works completed by Landore including exploratory drilling, trenching and soil surveys have identified anomalous gold over this area and the incredible potential for future resource growth.
Over half of the gold resources delineated to date are extractable by cost-effective open pit mining. This coupled with the 98% recovery achieved by conventional milling demonstrates the BAM Gold Deposit’s potential for low capex costs and economical mining operation. Other advantages include the project’s road accessibility and proximity to national rail thus ensuring secure market access.
It is the Company’s belief that the highly prospective Junior Lake Property has the potential to host multi-million ounce gold resources and is now exploring various strategic options to ensure the development of this rapidly-growing asset to the benefit of shareholders.”
The Strategic Review has always been planned once the PEA and the updated MRE had been completed. With 1.5Moz MRE they have got the project to a point where other gold producers will be interested and the multi-million ounce gold potential is beginning to be unveiled. With the project ready for a PFS or additional drilling to increase the MRE, the board is correct that they have taken the project to the right level where gold companies will be able to begin to visualise the true potential. The project is at a stage where it could be very interesting to existing gold producers needing additional ounces.
It is important to realise that the PLC is not for sale. Management is looking to sell the Landore Canada subsidiary which owns the Junior Lake Property licences and leases, or the Junior Lake Property. Failing that they will be looking to find a strategic partner. In our view, there are likely to be a long list of interested parties in North America and Australia. Recent years have seen a lot of Australian gold companies moving into Canada, which is a popular jurisdiction widely seen as a decent place to do business.
It is also important for investors to realise that this project should be sold for a lot more than the current market capitalisation of £24 million. The share price of Landore may have struggled but the selling process will reflect the value of the asset rather than the fickle nature of the market. The Junior Lake Property’s potential will be evaluated by reputable gold mining companies that will recognise the value of such a cracking project. We believe that within a three-month period the board will have a strong idea of the level of interest.
We initiated coverage on Landore Resources in September 2020 when the shares were sitting at 19.2p with a Conviction Buy recommendation and a target price of 81.38p. Since then, we have seen the stock rise over the 36p mark. With the shares currently trading around 22p, we are more than happy to reconfirm our Conviction Buy stance as we see the Strategic Review setting the scene for an improved understanding of the value that has been created at Junior Lake across both gold and the exciting portfolio of battery metals.
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