One of the best things about gold is that there is never any need for a marketing department.
Once a miner has dug up the ore, processed it and poured it into bars, there is no problem selling off the end result, partly due to gold’s premier position as a portable store of wealth and a physical world currency.
Indeed, should the world economy hit a sour patch the price of gold often goes up, making gold mining a nicely counter-cyclical business.
At the moment, gold is trading around US$1284 an ounce (A$1654) but it obviously fluctuates over time and even when it stays stable in US dollar terms it can still fluctuate in Australian dollar terms as the US dollar strengthens or falls.
There are many actual non-currency uses for gold apart from storing it in vaults such as a conductor in electronics, in dentistry and of course in the jewellery market, which has been expanding as wealth increases in India and China.
All of which goes some way to explaining the rush and rocketing share prices of a host of gold explorers searching for the precious metal in the Pilbara region of northern West Australia and have postulated that there is plenty more gold to come – turning this area into one of the world’s premier gold fields.
It is similarities between the current finds of many small, watermelon seed sized gold nuggets and the fabulously rich Witwatersrand gold deposit in South Africa that is driving share prices higher and seeing a rush to peg ground and consolidate tenements in all of the areas around the discoveries of nugget fields.
In this report, we look at the ASX and offshore listed companies playing in the Pilbara gold space, some of the history of the Pilbara and the similarities to Witwatersrand and why that is such a big deal.
History of the Pilbara
In mining terms, the Pilbara is synonymous with iron ore.
It is one of the world’s biggest suppliers of seaborne ore and has played a large part in establishing the fortunes of the big miners BHP and Rio Tinto and in more recent times Andrew “Twiggy” Forrest’s Fortescue.
Famously, Lang Hancock and his partner Peter Wright discovered the massive iron ore deposits later called Hope Downs in 1952, although government geologist Harry Page Woodward wrote a widely ignored report in 1890 saying “this is essentially an iron ore country. There is enough iron ore to supply the whole world.’’ He turned out to be spot on but it was Lang Hancock and his royalty deal with Rio Tinto to develop Hope Downs that really established the Pilbara as a major iron ore province that would supply the world with ore for potentially hundreds of years.
Lang Hancock was also associated with one of the most controversial Pilbara mines – the blue asbestos mine at Wittenoom Gorge – which of course provided products that were found to cause cancer and other serious diseases such as asbestosis.
It is one of the few towns to have literally been forced off the map because so much asbestos is blowing around that it is even dangerous to visit.
Gold is not unknown in the Pilbara, which hosts the Telfer, Nullagine and Paulsen’s mines but gold is much more heavily associated with WA’s goldfields area much further south around Kalgoorlie and Coolgardie.
However, there were historic gold rushes in the Pilbara in the 1880s.
Why the current gold rush?
All of which begs the question, what has caused the current gold rush in the Pilbara, given that the area is virtually synonymous with iron ore?
While gold itself does not need any marketing, gold miners surely do and the Canadian listed company Novo Resources (TSXV: NVO) and partner Artemis Resources, particularly the marketing buzz generated by Novo’s managing director, Quinton Hennigh, has really alerted the world to what is happening in the Pilbara.
During the highly influential recent Denver Gold Forum in Colorado, Mr Hennigh successfully live streamed gold nugget discoveries at its Purdy’s Reward project, about 45km south of Karratha.
Novo’s theory – and it remains just that before more exploration can be undertaken – is that the watermelon pip shaped nuggets are part of a much larger conglomerate-hosted gold mineralisation that extends much further.
Novo has been aggressively staking the area around Comet Well and Purdy’s Reward and now has a 100% interest in about 6000 square km of mineral rights around Karratha.
Novo has described the find as a major new discovery and compared the style of mineralisation with South Africa’s fabulous Witwatersrand gold reef in South Africa, although the company does caution that a lot more exploration is required.
It is Novo’s new conception of the gold as being hosted in conglomerates that has really sparked this latest gold rush.
Similarities to Witwatersrand
The similarities to the rich Witwatersrand gold reef in South Africa are also a vital part of this story.
Like Witwatersrand, Purdy’s Reward is part of a very large and very old conglomerate of sand and rocks which produces the characteristic watermelon pip style of gold mineralisation – flattened nuggets with rounded edges that are not attached to quartz.
Like Witwatersrand, the nuggets are coarse and of high purity and have a sandy texture on them which is thought to have come about from pressure from the sandy conglomerate when they were buried.
Witwatersrand holds the world’s largest known gold reserves and has already produced more than 1.5 billion ounces of the yellow metal – which is about half of all the gold that has been mined on the earth.
John Kaiser, founder of Kaiser Research Online, overviews the gold market, Novo Resources and the potential for the Pilbara to become Witwatersrand 2.0:
While there is no guarantee that the Purdy’s Reward will be of a similar scale or even type of deposit as that, just the comparison is enough to get the gold bugs biting very hard indeed.
Prospectors with metal detectors have been active along an 8km long corridor which is on top of a large conglomerate horizon so there is certainly scope for this to be a large discovery, should the nuggets that have been found so far turn out to be widely distributed.
ASX listed gold companies in the Pilbara
Let’s take a closer look at the ASX-listed gold stocks operating in the Pilbara region.
Artemis Resources (ASX: ARV)
As mentioned earlier, Novo Resources and its partner Artemis Resources deserve a lot of the credit for starting the Pilbara gold rush and they are in a good position to finish it. With plenty of ground to cover and lots of fresh exploration funding in the bank, it is now really a case of doing the exploration and letting the nuggets tell the story.
In addition to Purdy’s Reward, Artemis Resources owns several other gold projects in the region including Silica Hills, which is only 12km away from the famous prospect.
The company has been exploring at Silica Hills for seven months and recently reported sizeable gold conglomerate discoveries across the project.
Artemis Resources is poised for production after acquiring its Fox Radio Hill 425,000tpa processing plant at the beginning of the year. Artemis Resources also has a variety of requisite approvals in place and other infrastructure to advance its development time-line.
De Grey Mining (ASX: DEG)
Edging in on Artemis and Novo gold luck, is De Grey Mining with multiple success stories so far and a rapid share price rise prompted by the discovery of 91 impressive nuggets at its Pilbara project. A prospector discovered one gold nugget on the landholding that was 15 cm long and weighed 1.3kgs!
Canadian mid-tier gold miner Kirkland Gold has backed De Grey with a $5 million investment and now it is just a case of getting on with the exploration.
De Grey Mining already has more than 1 million ounces in defined resources in the region so these latest discoveries merely add to the company’s success.
Kirkland Gold also backed Novo to the tune of $58 million so it is a strong believer in the Pilbara gold story.
Kalamazoo Resources (ASX: KZR)
Kalamazoo Resources enjoyed a significant price rise when it announced an option to buy stakes in three Pilbara projects and showed a picture of small nuggets found on one of the properties.
All three projects – DOM’s Hill, The Sisters and Marble Bar – have the same basal sedimentary units of the Fortescue formation that have hosted the other conglomerate nugget finds.
Calidus Resources (ASX: CAI)
Calidus Resources has an exploration joint venture with Novo and is hoping to repeat the fortunes of Novo’s other JV partner Artemis Resources.
Chalice Gold Mines (ASX: CHN)
Chalice Gold Mines is benefitting from nearology, with its West Pilbara project not far from the operating Paulsen’s mine.
Like many other explorers with leases in the Pilbara, it is busily checking its ground for basal conglomeratic sedimentary units of the Fortescue formation to see if they contain nuggets.
Coziron Resources (ASX: CZR)
Traditionally focussed on furnishing the steel sector with feedstock, Coziron Resources undertook a review of its available soil samples from its Pilbara tenements, which revealed gold grading up to 737 parts per billion.
With Novo Resources, Artemis Resources and De Grey Mining’s recent discoveries in the area, Coziron plans to continue investigating the potential for conglomerate gold across its Pilbara landholding which totals more than 1,500 square kilometres.
DGO Gold (ASX: DGO)
DGO Gold has been a very strong performer since it reported in August that its Mallina ground in the Pilbara has “sediments analogous in age with the Witwatersrand gold province in South Africa”.
DGO notes the 245 square kilometres of ground at Mallina is 75km east of Purdy’s Reward — and adjacent to and surrounded by Novo’s exploration licences.
Three high priority targets have been identified for a 5000m drilling program to begin shortly.
Haoma Mining (ASX: HAO)
Run by prominent Melbourne pollster Gary Morgan, Haoma Mining has very extensive leases in the Pilbara so it has been swept up in the euphoria as well.
Mr Morgan pointed out that it was well-known that there had been conglomerate gold finds in the area and is now arranging bulk sampling of its conglomerate rocks from Bamboo Creek and the Marble Bar comet mine in the coming quarter.
Kairos Minerals (ASX: KAI)
Kairos Minerals is speeding along attempting to find gold samples on its land.
The explorer’s put some quad bikes and other vehicles to work to take soil and stream sediment samples from its landholding near Artemis, Novo and De Grey’s ground.
Marindi Metals (ASX: MZN)
Getting in on the act this month was Marindi Metals, which announced it was testing its Newman project for potential conglomerate-style gold.
Originally explored for base metals, the Newman project is 60km southwest of Newman. Preliminary exploration across the project area has identified the conglomerate-style mineralisation may well extend into its project area.
Marindi Metals is undertaking initial reconnaissance and sampling at the site to confirm this theory.
Rumble Resources (ASX: RTR)
Not one to be left behind is Rumble Resources, which is reviewing its Braeside project for conglomerate hosted gold.
Braeside encompasses 1,000 square kilometres near land already pegged by Novo Resources.
Southern Hemisphere Mining (ASX: SUH)
Southern Hemisphere Mining has just put its foot on two exploration licenses covering 782 square kilometres of land in the West Pilbara near Paraburdoo.
Combined with the company’s existing 722 square kilometres of landholding in the region, Southern Hemisphere Mining’s total tenement area is boosted to 1,504 square kilometres.
The licence applications cover land believed prospective for conglomerate gold.
Venturex Resources (ASX: VXR)
Venturex Resources has been enjoying the gold rush with its Whim Creek project abuts De Grey Mining’s landholding which hosts the recent gold discoveries.
Traditionally focussed on exploring for zinc and copper, Venturex Resources has sent a geologist team to search for gold across its Pilbara projects.
Millennium Minerals (ASX: MOY)
Until now, Millennium Minerals has been exploring for gold shear-hosted gold deposits, which have returned high grade intercepts.
But, in light of the recent gold rush, Millennium Minerals has kick-started a review of its landholding for conglomerate-style mineralisation.
With this frenzy of activity in the Pilbara, the world’s eyes are trained on the region to see what eventuates – possibly the world’s biggest gold discovery ever.
Impact Minerals (ASX: IPT)
Junior explorer Impact Minerals has applied for nine new Pilbara exploration licences over 1,300 sq km of ground which is close to Novo’s ground and prospective for conglomerate-hosted gold.
Impact will begin a review of previous exploration and on-ground activities in early November and is looking at funding options for exploration.