Upcoming ASX debutant Corona Resources (ASX: CNA) may be a newcomer to the ASX, but its management isn’t – with the executive team boasting a proven record in developing and operating numerous successful gold mines beginning in the mid 1980’s.
The team is poised to further develop Corona’s Spargos Reward project in Western Australia and advance the Queenstown gold and copper project in Tasmania.
Corona executive chairman Michael Wright and director Terry Allen both have more than 25 years experience in the resources sector. They were the major part of the executive team at of Herald Resources before it was taken over for almost A$600 million ten years ago.
Together they steered Herald from a small cap through to a sought after mid-tier gold producer and base metals developer. Mr Brian Hurley, formerly a senior executive at Western Mining Corporation, rounds out a highly experienced Corona board.
Speaking with Small Caps, Mr Wright said this success was achieved by finding mines, building them, then using the cash flow to find the next mine.
After a bidding war between Chinese-Indonesian consortium Antam-Zhongjin and PT Bumi, PT Bumi won and eventually swallowed up the majority of Herald at a record price of A$2.85 per share during 2008. The company secured its final slice 12 months later.
As a result of Herald’s success, Mr Allen and Mr Wright teamed up a number of years ago to try and build a new mid-tier miner.
“What we decided to do was try and repeat the formula that had been so successful for Herald. We started Corona and we’ve been slowly getting it to the point it is today – where it has a couple of really good projects,” Mr Wright said.
“We’ve spent about A$4 million on the properties.”
He said funds were secured via unlisted capital raisings with nearly all the money put back into the ground. “Directors have worked for gratis since the beginning” he said.
“The projects are now at the stage where we’ve added value to them sufficiently to be able to float them on the ASX,” Mr Wright noted.
Corona’s primary assets are the Spargos Reward gold project in Western Australia and the Queenstown copper and gold project near Queenstown in Tasmania.
Corona owns 65% of Spargos Reward, which will increase to 85% upon completion of a positive scoping study on a JORC resource, which is underway.
The project hosts an historical mine that produced around 30,000 ounces of gold at an average grade of 8g/t. The mine was shut down in WW2 due to labour shortages.
Four separate shear zones together comprise about 15km of strike within Corona’s tenements and Corona claims the project is under-explored. Of note is that one of those shears extends to the south into the ground held by Ramelius Resources, where that company made super-normal returns out of their high-grade Wattle Dam deposit several years ago.
The company has already developed an initial resource for Spargos Reward of 177,000oz of gold at 3.1 g/t, which Corona hopes to boost with further exploration. “Like everyone else, we would like to find 1m ozs”, he said.
The above resource includes a high-grade, open pit component of 4 g/t, upon which the above scoping study will be done.
“What we’ve got is a property with a number of shear zones on it, which contain the 177,000oz gold resource resource.However t’s just an initial resource over a small fraction of the total strike length of these shears so we’ve go a lot more exploring to do, which is what the IPO funds are for,” Mr Wright said.
Upon a successful ASX listing, Corona plans to carry out further drilling across the project – both deep and shallow.
If the scoping study is successfully completed, Corona’s stake in the asset will increase to 85%.
Looking ahead, Corona hopes to bring the shallow deposit at Spargos Reward into production within 18 months to two years, subject to permitting. The company would look at initially toll treating its ore at a nearby processing plant, with several within a 50km radius to pick from.
Mr Wright said Corona had already held discussions regarding toll treating ore. However if significant new major gold resources were delineated, then the company would look at acquiring or developing its own mill to further boost profits as well as giving it independent infrastructure in the region.
Queenstown copper and gold project
Over at the company’s Queenstown copper and gold project, Corona is looking for a “very large tonnage” copper and gold deposit.
The project is situated in Tasmania’s north-west near many well-known mines such as Mt Lyell, Roseberry, Hellyer and Henty.
“We’ve got 30km of strike directly south of Mount Lyell in the Mt Read Volcanics, which is the main host type in the area. Mt Lyell in particular is an enormous deposit that has produced over 300 Mt of copper-gold ore. We would like to find another one of those if possible”
“Our very first drill hole at the Queenstown project intersected 124m of 0.4% copper and 0.2% gold. That’s a big hit to get in your first drill hole,” Mr Wright noted.
Despite the region’s high prospectivity for numerous minerals including zinc, at this stage, Mr Wright said Corona was initially focusing on unlocking the project’s copper and gold potential.
“We also have a gold prospect there that we would like to drill as soon as possible after listing on the ASX, called the King River Gold prospect.”
The prospect is a few kilometres from Queenstown and is situated on the northern part of the project.
“There are a number of old workings there that have not been investigated in modern times – our first priority at Queenstown is to get in there see what’s going on.”
Throughout the Queenstown project there are more than 130 historical workings, with “parts of the project also close to power, sealed roads and a nearby town.
IPO funding to fast-track to production
In the upcoming IPO, Corona hopes to raise between A$4.6 million and A$6 million.
Around 60% of the IPO funds after costs will be directed towards Spargos Reward, finishing the scoping study and further exploration, as well as hopefully advancing the project through to cash flow generation.
Similar to the previous strategy with Herald, the plan is to get a cash flow coming in by the time the IPO funds have been spent.
The cash flow would then be used to fund further exploration and development.
The remaining 40% of the funds will go towards exploration at Queenstown, with the priorities being drilling at the King River gold prospect and along strike at South Darwin where the initial success was obtained at the project.
At the time of writing the gold price was commanding around A$1,725 per ounce, after almost hitting A$1,760/oz last month.
This is a 12% rise on July last year when the gold price was A$1,560/oz, and almost 4% higher than the late December/early January price of A$1,660/oz.
When speaking about the company’s decision to focus on gold, Mr Wright said the team had a lot of experience in the metal
“The present management team have built five gold mines over several decades. It’s an usually an easy metal to extract, and It sells itself. You don’t need a team of marketing reps to sell your gold,” Mr Wright said.
Whilst not being in the metals prediction business, he added that were good reasons for the the gold price to continue its upward trajectory, especially with analysts predicting a peak gold situation due to minimal exploration investment during the global financial crisis, diminishing resources and a tighter supply situation.
Similar to the gold situation, a shortage or tight supply of copper is forecast in the coming years.
“It is also a relatively easy metal like gold,” Mr Wright commented. “It is one of the 6 major non-ferrous major metals traded on the London Metals Exchange.”
Depending on the metallurgy of the deposit, copper is often easy to extract via conventional processes, and it never goes out of fashion like some of the more exotic commodities – it is always needed to a greater or lesser extent.
He noted that the current copper price was currently quite high, seemingly supported by good supply and demand fundamentals going ahead.
With positive outlooks for both gold and copper and an experienced management team at the helm, Corona Resources will be one small cap to watch in the coming years.
For more information visit Corona Resources’ website.