Tectonic Gold – Specimen Hill results illustrate stock price disjoint

February 11, 2019 | Posted by

Recent news including this morning’s RSN from Tectonic Gold has made for good reading for investors, providing a compelling update on the results of the October/November 2018 diamond drilling programme at the company’s flagship Specimen Hill Project in Queensland, Australia. Every hole was a winner as gold mineralisation was intersected in each of the ten holes (for a total of 2,517.3m) that were drilled.

For those new to the stock, Tectonic Gold is a mineral exploration and development company that is focusing upon the global opportunity that lies within large-scale, high-grade Intrusive Related Gold Systems (IRGS). Our full note can be found HERE. The company has developed its own bespoke R&D, big data and exploration methodology to locate such systems, and which are seen as the new frontier for discoveries of significant large gold deposits that occur in certain tectonic belts worldwide.

Importantly from these first drilling results by the company at Specimen Hill, geologists believe that the core confirms an IRGS diatreme system which is apparently comparable to the likes of the neighbouring multi-million-ounce gold deposits at Kidston (3.7M oz gold), Mt Rawdon (3.5Moz gold) and Mt Leyshon (2Moz gold). This is high praise indeed.

Grades intersected were in excess of 35g/t gold with high grades of silver, molybdenum and tellurium appearing in the assays. These exceptional gold grades came from the epithermal zone, below and adjacent to previously tested and confirmed mineralisation at the Main Lodes. What is becoming increasingly obvious is that mineralised system identified at the Main Lodes is large and has returned high-grade intersections.

Significant intercepts greater than 1g/t gold from the Phase 1 diamond drilling programme at Specimen Hill. Source: Company

This could just be the beginning of the story at Tectonic as this drilling work has confirmed that the mineralised system is open at depth and along strike. Reassuringly, as is typical of such high-intermediate sulphidation epithermal deposits, high grades of molybdenum, silver, tellurium and other tell-tale signature IRGS elements were discovered.

Pretty well all the assay results are now in. There is no doubt that the fundamentals confirm the main sulphidation lode is continuing downwards but drilling results show that the lode is a bit skinny. In all, a total five different episodes of fluid enrichment have been discovered by this work and so a better understanding of the geological process that has taken place is required ahead of further drilling.

The necessary detailed technical research work is being carried out at the Centre for Ore Deposit and Earth Sciences (CODES) at the University of Tasmania. Over the years, CODES has grown substantially and is now widely seen to be a global leader in ore deposit research. So, the technical team will be working on the thorough assessment of these drilling results and then incorporating them into the geological model which is expected to generate some high-quality targets for follow-up drilling.

The plan is to get back to drilling later on in the year based on the results of the work by CODES.  Tectonic’s team know that they are on to it but need the technical people to test the mineralisation model. The next round of drilling is expected to be targeted at extensions. Drilling at Specimen Hill is being executed under the drill for equity agreement with investor/partner Titeline Drilling Ltd with 7,500m left of the original agreement and which could be drilled with the company only having to fund half the cost with its own cash.

Tectonic Gold is of course the old StratMin which disappeared from AIM in 2017. Following the reverse acquisition of Signature Gold (which brought these IRGS opportunities within the group), the company listed on NEX at an initial 2p per share in June 2018. At that time, we initiated research coverage and we determined a target price of 7.28p. Since the re-listing the share price has been under pressure. With the major shareholders being locked out of buying further shares, very light selling has had a big impact on the stock price taking it down to 0.3p at worst.

We stand firm with our target price although it may appear a little lofty at the currently depressed share price but such is our conviction that we have added to the stock at lower levels. It must be pointed out that Tectonic is in the business of generating 3Moz+ IRGS gold projects to be joint ventured or sold to majors. As such, the company represents a highly leveraged play on the gold price. Over recent decades, the majors have become increasingly reliant on the juniors to source their project for the future and recent transactions have provided plenty of evidence of the fancy prices being paid for large gold projects.

Specimen Hill is just one of 10 projects in the company’s portfolio. All these projects have an extensive audited database of past drilling and/or mining and are in known mining areas. The company is an IRGS pioneer, developing bespoke R&D and definitive systems based exploration methods over many years of painstaking work.  These drilling results do confirm that Tectonic’s use of advanced geophysics including Sub-Audio Magnetics (SAM) and DIAS – 3D IP technologies is far more cost effective than the exploration techniques that are traditionally employed. Moving ahead, we believe that Tectonic is now set to benefit from its obvious first mover advantage.


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