Alchemy Resources locks-in cobalt and nickel projects, while gold results disappoint

Alchemy Resources (ASX: ALY) has locked-in two more cobalt-nickel projects in New South Wales, while drilling at its Karonie gold project in Western Australia has failed to produce economic gold grades.

Initial rotary air blast drilling at the Dragon and Manhattan prospects at the Karonie project returned low gold grades with better results at Dragon including 8m grading 0.13 grams per tonne gold from 32m and 1m grading 0.11g/t gold from 44m.

Manhattan didn’t fare much better with that prospect returning 8m grading 0.12g/t gold from 44m and 4m grading 0.11g/t gold from 56m.

Despite the low grades, Alchemy’s managing director Leigh Ryan said the company was “very encouraged” by the results and was looking forward to its phase two drilling program which will start later in the current quarter.

Cobalt and nickel acquisitions

On a more positive note, Alchemy’s news today also includes the official execution of an option agreement for two new cobalt and nickel projects.

The two new projects have been added to Alchemy’s existing farm-in agreement with Heron Resources (ASX: HRR) and include the nickel and cobalt Nyngan licence, and Woodsreef which has nickel, cobalt, copper and gold mineralisation.

Alchemy entered an option agreement with Heron to lock-in an 80% stake in the projects in mid-March and has now officially executed the agreement.

As part of the agreement, Alchemy will issue Heron 10 million shares and 10 million options. The options are exercisable at A$0.05 and have a three-year expiry date.

Including the new projects, the farm-in agreement with Heron allows Alchemy to earn 80% in eight tenements across NSW by spending A$1.5 million on exploration over three years.

Nyngan and Woodsreef

The Nyngan licence encompasses 100 square kilometres and includes the West Lynn prospect.

Only 10km from Nyngan, the project is next to Girilambone which is already part of the farm-in arrangement between Alchemy and Heron.

An historic indicated resource has been calculated for West Lynn of 16 million tonnes grading 0.83% nickel and 0.06% cobalt.

Previous drilling at West Lynn struck 19m grading 1.21% nickel and 0.10% cobalt from 36m, 16m grading 0.98% nickel and 0.07% cobalt from 37m, and 11m grading 1.02% nickel and 0.04% cobalt from 27m.

Nyngan also hosts the Summervale prospect about 5km along strike from West Lynn. Historic drilling at Summervale returned 13m grading 1.41% nickel and 0.08% cobalt from 51m and 11m grading 1.02% nickel and 0.04% cobalt.

Alchemy evaluated previous exploration data and has developed a conceptual resource target with the higher end of the estimate sitting at 30mt grading 0.9% nickel and 0.07% cobalt.

The other new project Woodsreef is 35km north of Tamworth and includes 281sq km of nickel, cobalt, copper and gold mineralisation.

Alchemy has planned to begin resource drilling across West Lynn and Summervale in the December quarter to produce a JORC 2012 resource.

The campaign will include 108 aircore holes for 6,500m at West Lynn and 74 holes for 4,000m at Summervale.

Additionally, Alchemy has sourced some lab pulps from previous drilling at the prospects and plans to analyse the samples for scandium, aluminium and iron.

“Alchemy is looking forward to commencing the drilling aimed at converting the exploration target into a 2012 JORC compliant resource later this year, and progressing a review of the scandium, aluminium and iron resource potential at West Lynn,” Alchemy managing director Leigh Ryan said.

Shares in Alchemy had risen almost 5% to A$0.022 by mid-morning trade on the cobalt and nickel news. However, after the company posted its gold results, the share price plunged almost 20% to hit A$0.017 at mid-day.