PORTFOLIO POINT: Sirius has kick-started the small-end of the mining sector with its Nova nickel and copper discovery in WA.
Outback WA is littered with over-promoted mineral “discoveries” that fade as fast as they blossom. But, when Sirius Resources (SIR) delivered a 1000% gain in less than 48-hours a few seasoned observers were heard to say, “this one is different”.
Speculators with a sharp eye agreed, snapping up a number of stocks with exposure to the discovery area, a patch of semi-desert close to the south-coast port of Esperance.
As well as lifting Sirius from the ranks of “penny dreadfuls” at its pre-discovery price of 5.7c, to a closing price yesterday of 73.5c, traders have been snapping up shares in Matsa Resources (MAT), Sheffield Resources (SFX), and Buxton Resources (BUX).
None of those companies, each of which is a micro-cap explorer with the risks associated with that designation, is yet to report drilling results of the same calibre as Sirius, but when it comes to an exploration rush, near enough can be good enough, a factor known as “near-ology” – and generally not worth the paper it’s written on.
Matsa, however, has made some of its followers richer by effectively doubling over the past two weeks from 12c to 23.5c, thanks to having mineral claims two kilometres to the south of the Nova tenement.
Sheffield is up from 30.5c to 38.5c because of interest in its Red Bull prospect some 20km distant, and Buxton is up from 9.5c to 14c because it has the Dempster project near Esperance, which is on the same broad geological trend as Nova that extends north to the new Tropicana goldmine of AngloGold and Independence Group.
More names will surface as companies flock to enjoy some rub-off benefit, fairly and unfairly, though the closest attention will be paid to Sirius, which has the advantage of being first mover, has cash in the bank, a rich cornerstone shareholder, and a highly-qualified technical team to manage its exploration program.
What makes Sirius significant is that it is a discovery based on the careful application of science as well as a dash of the luck often needed to turn a bright idea into a possible mine – and a mine into an entirely new mineralised province, which is why Nova is being taken so seriously.
It is the combination of science and luck which led to the discovery hole, which revealed a four-metre section assaying 3.8% nickel and 1.42% copper (both considered ore-grade) with the potential to also contain platinum group metals when assays for those elements are conducted.
As a cocktail of minerals, nickel, copper and platinum are associated with some of the world’s biggest ore bodies created by major geological intrusions. The giant Bushveld complex in South Africa is the mother-of-all “intrusives”, producing most of the world’s platinum and a fair proportion of its chromium.
Much more work is required at Nova, but the discovery news has come at a perfect time to add a spark to an otherwise lacklustre junior-end of the mining market in the days before next week’s annual Diggers & Dealers forum in Kalgoorlie. And it has made the man behind the discovery at least $50 million richer.
Mark Creasy, the major shareholder in Sirius and co-owner of the Nova discovery, first hit the headlines in 1994 when he pocketed a tax-free $130 million from the sale of his Bronzewing gold discovery.
He has been a total believer in the potential of the Fraser Range to deliver another big strike since first walking across the area in 1979 – not in search of minerals, but hunting bits of the US satellite, Skylab, which had crashed to earth in the area.
As with his conventional prospecting, the British-educated mining engineer struck in lucky, finding several bits of space junk, only to discover there was no market for burned-out oxygen bottles – one of which became a talking point in his home office.
Ever since that walk across the Fraser Range almost 33 years ago, Creasy has been telling anyone who would listen that it will one day be the centre of a world-class mining industry – once the science is developed to look beneath a thick surface covering of sand which has deterred most other explorers.
The required science is slowly arriving, with electro-magnetic tools used to “read” deeply-buried rocks, and help chose the location for the drill rigs. Similar geophysical tool have proved valuable in extending the life of nickel mines at Kambalda because of their ability to “see” rock structures well ahead of the underground mining crews.
What Creasy theorised the best part of 30 years ago, that the Fraser Range would prove to be richly-mineralised because it has been created by a clash of geological structures which can provide the conditions to form orebodies, is now being proved by electro-magnetics, surface chemical sampling and the ultimate explorer’s tool, drilling.
Nova is the first step in proving Creasy’s theory, and in adding to his fortune via a direct 30% stake he kept in the tenements being explored and through his 25.7% stake in Sirius.
The shareholding in Sirius, which is currently capitalised at $110 million, is worth $27.5 million to Creasy, with at least that much again attached to his direct 30% stake in the Nova tenements.
Handy as the extra $50 million, or so, will be for Creasy, who already runs Australia’s biggest private exploration business, his real interest will be in the way a personal theory is being translated into fact by the work under way at Nova.
The man in charge of proving the theory on a day-to-day basis for Sirius is Dr Mark Bennett, a geologist as highly qualified as Creasy, and with as many discoveries to his name, including the Thunderbox gold deposit in WA and the Banfora gold discovery in the African country of Burkina Faso.
At Nova, a prospector’s 30-year old theory, modern science, skilled technical management, and cash, has led to a significant discovery which could turn the Fraser Range into Australia’s next major mineral province.