Research Note th 9 April 2015 Suite 5, Level 8, 99 York Street, Sydney NSW 2000 P: +61 2 9299 5001 I F: +61 2 9299 8001 [email protected] www.proactiveinvestors.com.au Northern Mining L imi ted
Recommendation: Speculative Buy Northern Mining eyes mid-term gold production
Sector: Materials o Northern Mining Ltd (ASX: NMI) is a Western Australian resource explorer that holds prime gold prospecting acreage located around Recommendation : Speculative Buy Kalgoorlie Boulder, on one of the world’s most productive gold belts. ASX Ticker Code: NMI o The acreage is known as the East Kalgoorlie Project and includes
Share Price: $0.027 prospects at Blair North, Kanowna Lights and Snake Hill.
52 Week: - o Early stage exploration at Blair North has identified a structural High: $0.057 corridor that is 2 kilometres long that links the Company owned George’s Reward gold resource to an additional 1 kilometre of identified gold Low: $0.018 mineralisation at the northern end of the project area known as the Current Ordinary Northern Zone Deeps. Shares: 938.4M o Blair North forms the northern extension of the Cannon Gold Milestone shares (max): NIL Project mineralisation that is being jointly developed by Southern Gold (ASX:SAU) and Metals X (ASX:MLX), with Blair North constituting around Options: NIL 80% of the known gold strike line. Cash: $5.5M o The Cannon Gold Project currently includes shallow JORC gold Market Cap: $25.3M resources of 100,400 ounces that are contained within the southerly 20% Enterprise Value: $19.8M of the overall strike line, with the northern end of the Cannon open pit contiguous with gold resources owned by Northern Mining at the George’s
Reward gold prospect. Major Shareholders: o George’s Reward currently hosts a shallow defined JORC resource Provenance Finance Ltd 224.6M of 22,850 ounces of gold that may form part of the northern extension of the Cannon open pit, and serve as a low cost “entry point” for the Top 20 91.06% development of the entire Blair North strike line.
Melvin Boon Kher Poh 50.0M o Conceptual potential along the entire strike line and at depth is Daso Investments 24.4M very significant, and may be many multiples of the currently defined and combined 123,250 ounces of gold owned by Northern Mining and Southern Gold. Directors:- o This potential is highlighted by recent drilling programs instituted Tony Ong Non-Executive Chairman by Southern Gold that show open lodes at depth and by an Induced Danette Cheung Non-Executive Director Polarisation Study and limited drilling completed by Northern Mining. Andrew Nai Non-Executive Director o Similar potential exists at Kanowna Lights which abuts the Kanowna Belle Gold Mine with 6 million ounces of gold. Patrick Tan Chief Financial Officer o Northern Mining is a very tightly held company that is managed by Tony Ong, and he has the backing of his Hong Kong based private equity fund known as Provenance Finance Ltd. Provenance Finance has completed more than one billion dollars in funding for Asian entities, and Tony is seeking additional deals for Northern Mining that may significantly increase the value of the Company. o Proactive Investors has initiated coverage on Northern Mining with a Speculative Buy.
BACKGROUND - HIGHLY PROSPECTIVE GOLD GROUND AND DEALMAKING ABILITY TO DRIVE VALUE
Northern Mining Limited (ASX: NMI) is an emerging resources, exploration and development Company that is headquartered in Western Australia. The current portfolio contains exploration and development potential at the East Kalgoorlie Project in Western Australia. Other Western Australian projects include the Kanowna Lights Prospect and Snake Hill Prospect.
In August of 2013 Northern Mining placed 87.3 million shares to Provenance Finance Ltd, and restructured the Board with the appointment of 3 new directors and resignation of 2 existing directors. In November of 2013 the Company raised $5.2 million through a one for one pro-rata non-renounceable right issue to shareholders, and raised an additional $0.8 million from Singaporean investors.
Northern Mining is controlled by Tony Ong who is Non-Executive Chairman, and is currently Chairman of Cogent Financial Group (Hong Kong), which is an investment company with controlling interests in property development, hotel management, media publishing and commodities trading.
He is also Chairman of Hoverwing Industrial Corp, a Chinese manufacturer of aerospace components and is the founder and largest shareholder of Provenance Finance Ltd, a private equity fund based in Hong Kong, which is the largest shareholder in Northern Mining.
Tony was also the founder and largest shareholder of Provenance Capital, a corporate finance firm that is licensed by the Monetary Authority of Singapore and admitted onto the list of Initial Public Offer managers by the Singapore Stock Exchange.
Provenance Capital’s senior management has cumulatively completed more than 150 corporate finance transactions including IPO, secondary fund raising, advisory, take-over and merger and acquisition. They have also cumulatively risen over A$0.94 / S$1.0 billion by way of IPOs and secondary fundraising.
Most recently, Provenance Capital has advised Goodpack, the world’s largest maker of intermediate bulk containers, in their S$1.4 billion acquisition by KKR & Co.
EAST KALGOORLIE PROJECT
The East Kalgoorlie Project includes a number of separate project areas that include Kanowna Lights Prospect located about 30 kilometres north east of Kalgoorlie Boulder, and is adjacent to the Kanowna Belle Mine containing a total resource of 6 million ounces of gold.
The Blair North and Snake Hill Prospects are located 23 kilometres east and northeast of Kalgoorlie- Boulder and the Kalgoorlie Super Pit.
The Super Pit has produced a total of 50 million ounces of gold, and continues to operate at an annualised production rate of 850,000 ounces of gold from a pit that currently extends over a length of 3.6 kilometres, width of 1.6 kilometres and depth of 600 metres.
Northern Mining owns 79% of Blair North with its joint venture partner Balagundi Mining owning the remaining 21%.
MAP ONE: EAST KALGOORLIE GOLD PROJECT
The Blair, Blair North and Snake Hill prospects cover an area that is approximately 8 kilometres in width, 14 kilometres in length, and is interrupted by an 8 kilometre section owned by Southern Gold.
Local infrastructure includes gold mills, rail and road links that cross the property and provide direct access to a local skilled workforce and all utilities and technical services required for mining gold ores.
The Project area includes the Northern Zone which contains a large, high grade quartz vein gold system containing four distinct zones of bedrock gold anomalism that is surrounded by a broad, low grade mineralised halo.
It is situated within a 2 kilometre long and 400 metre wide structural corridor that has been poorly tested and links to the George’s Reward Gold Deposit in the Southern Zone of the Blair North Prospect.
GEORGE’S REWARD GOLD RESOURCE – SOUTHERN ZONE AT BLAIR’S NORTH
George’s Reward hosts a JORC Compliant initial Inferred Resource of 375,000 tonnes at 1.89 g/t for 22,850 ounces of gold, and forms a contiguous mineral deposit with the Cannon Deposit owned by Southern Gold (ASX: SAU).
Hellman and Schofield of Sydney prepared the resource estimate in accordance with the 2004 JORC code, which was based on 18 rotary core and diamond drill holes for an Inferred Resource containing: o 18,000 tonnes of oxide resources at 1.69 g/t gold for 1,000 ounces of gold. o 134,000 tonnes of partial oxide resources at 1.74 g/t gold for 7,500 ounces of gold. o 223,000 tonnes of fresh rock at 2.00 g/t gold for 14,350 ounces of gold (Cut-off grade of 0.5 g/t gold and density of 2.65 tonnes per cubic metre).
Drilling highlights at George’s Reward include 66 metres at 2.9 g/t gold commencing at a depth of 36 metres.
Mineralisation has been identified and logged at a shallow depth of 7 metres, remains open at depth and displays very significant potential along strike.
Gold values are widespread throughout granitic bedrock, overburden, and basalt. Shallow auger sampling has also identified additional gold anomalism west of George’s Reward.
SOUTHERN ZONE – ADDITIONAL GOLD POTENTIAL
Additional drilling to the north of George’s Reward confirmed that that the same host stratigraphy continues in that direction, and provides viable exploration targets for definition of additional gold resources.
SOUTHERN ZONE – NICKEL POTENTIAL
Confirmation of the presence of nickel sulphides of up to 4.4% indicates potential for the metal along strike.
NORTHERN ZONE – GOLD POTENTIAL
The highly prospective Northern Zone contains high grade and thick zones of gold mineralisation that have been identified within four zones that are contained within an area that extends for 2 kilometres and over a width of 400 metres.
These zones carry bedrock values that exceed 0.5 g/t gold that were identified in early stage rotary air blast drilling.
Early stage and deeper and rotary core drilling identified a mineralised trend of 600 metres that is open to the northeast and is essentially unconstrained in other directions.
Highlights include 16 metres at 1.6 g/t gold, 25 metres at 1.11 g/t gold, and 20 metres at 1.67 g/t gold. Gold values are hosted in a variety of rock types that include granite, basalt, and ultramafics.
Follow up drilling of 18 reverse circulation drill holes for 2,833 metres identified mineralisation in three distinct environments that included:
o Mineralisation lying towards the base of a clay filled palaeochannel; o Mineralisation lying directly on, or within weathered bedrock; and o In fresh bedrock that is predominantly altered granite that is sometimes associated with pyrite.
This mineralisation dips steeply to the east and strikes within a north to north east trend, and gold is contained within well defined, steeply dipping, high grade lodes that are surrounded by a halo of lower grade mineralisation hosted in altered granite that is often associated with disseminated sulphides.
Highlights include 46 metres at 1.95 g/t gold, 5 metres at 2.03 g/t gold, and 2 metres at 28.7 g/t gold.
The four zones are identified as: o Zone One is 700 metres in length that has been tested with rotary core drilling in the north, and remains untested in the south; o Zone Two is defined by a single rotary air blast hole that is 200 metres along strike to the southeast of Zone One; o Zone Three is a very strong bedrock anomaly with four holes returning greater than 1 g/t gold that are all located in the middle of the entire 2 kilometre trend; and o Zone Four is a discrete anomaly that is located at the northerly end of the trend and has only been tested by two rotary core holes.
The alteration characteristics observed in drilling within the Northern Zone are similar to other granite hosted deposits in the Eastern Goldfields that include the Majestic and Federal Deposits.
The Federal Deposit was mined as an open pit in 1998 to 1999 and produced 467,485 tonnes at 2.8 g/t for 41,388 ounces of gold. Majestic is owned by Silver Lake Resources and is an open pit resource that extends over a strike of 400 metres for a JORC Resource of 2.5 million tonnes at 2.1 g/t gold for 166,600 ounces of gold and a JORC Reserve of 0.69 million tonnes at 2.3 g/t gold for 52,400 ounces of gold.
An Induced Polarisation “IP” Study at Blair North has identified several very large untested anomalies at Blair North that extend for over 1,000 metres (at depth), and confirm potential to significantly extend currently drilled gold zones.
In December of 2010 Diamond Hole BNDH066 drilled to a depth of 265 metres into the IP anomaly A reported high grade gold values that included 0.47 metres at 30.98 g/t gold, 1.04 metres at 9.01 g/t gold, and 0.33 metres at 6.99 g/t gold from 235 to 265 metres in depth, with an intersection from 143.00 to 264.57 metres for 121.57 metres at 0.98 g/t gold.
DIAGRAM ONE: GOLD MINERALISED TARGET AT BLAIR NORTH ANOMALY A
Drilling into Anomaly B did not intersect any significant gold values. By contrast Anomaly A is now known to carry significant gold values that commence at a depth of 40 to 400 metres and are located within a paleo- channel.
DIAGRAM TWO: ANOMALY A 600 METRES IN LENGTH AND 150 METRES WIDE
DIAGRAM THREE: 3D REPRESENTATION OF ANOMALY A
In March of 2014 the Company completed one rotary core hole BNRC095 at Blair North and established continuity of mineralisation between BNRC066 and BNRC085 within Anomaly A that contained two thick zones that included 28 metres at 0.84 g/t gold from 92 meters and 48 metres at 1.65 g/t gold from 144 metres.
MAP TWO: BLAIR NORTH CONTAINS THREE KILOMETRES OF POTENTIAL GOLD BEARING STRUCTURES
KANOWNA LIGHTS GOLD PROJECT
Northern Mining owns a 79% interest with Balagundi Gold holding the remaining 21%.
Kanowna Lights covers an area of 565 hectares that are located approximately 3 kilometres northwest of the Kanowna Belle gold deposit that host approximately 6 million ounces of gold, with both areas hosting similar geological and structural settings.
Kanowna Lights contains a northerly trending paleo-channel that is approximately 800 metres in length, along with a Western lead that was traced over a distance of 1,500 metres, with historic rotary air blast drilling producing 6 metres at 3.28 g/t gold and 2 metres at 10.53 g/t gold.
Later reverse core drilling confirmed the presence of auriferous clays within the paleo-channels along with a thick zone of deeper supergene gold enrichment. Highlights include 8 metres at 2.39g/t gold from 54 metres, 13 metres at 2.4 g/t gold from 70 metres, and 14 metres at 2.1 g/t gold from 74 metres.
Potential targets include deep lead gold mineralisation, where historic drilling reported 21 metres at 1.59 g/t gold, 9 metres at 1.01 g/t gold and 11 metres at 0.99 g/t gold, all values reported at the bottom of each hole.
Northern Mining management notes that only a small part of the entire tenement package has been geologically reviewed.
MAP THREE: POTENTIAL GOLD TARGETS THAT ARE LOCATED ALONG STRIKE FROM KANOWNA BELL
SNAKE HILL – EAST KALGOORLIE PROJECT
Northern Mining holds a 79% interest and Balagundi Gold with remaining 21% interest.
Early stage auger drilling identified a 3 kilometre long and 1.5 kilometre wide geochemical anomaly (with values above 20 parts per billion) that straddles the Mount Monger Fault and runs along the entirety of the project area.
Follow up shallow rotary air blast drilling over 1.5 kilometres of strike confirmed the presence of gold values that included 44 metres at 0.39 g/t gold from 76 metres, 28 metres at 0.83 g/t gold from 52 metres, and 4 metres at 2.65 g/t gold from 48 metres.
A drilling highlight along the same Mount Monger Fault included 8 metres at 1.0 g/t gold from 48 metres.
Drilling also identified a parallel structure to the Mount Monger Fault that has a 300 metre strike length with a drilling highlight of 4 metres at 1.52 g/t gold from 36 metres.
MAP FOUR: MINERALISED ZONE LOCATED ALONG FAULT LINE AND NEXT TO GOLDEN RIDGE OPEN PIT GOLD MINE
POSITIVE INDEPENDENT REVIEW OF KALGOORLIE EAST GOLD PROJECT
In May of 2013 the Company retained Ravensgate Mining Industry Consultants to complete an independent review of Blair North, Kanowna Lights and Snake Hill Prospects within the East Kalgoorlie Project.
Ravensgate concluded that the three prospects are highly prospective for structurally controlled orogenic lode gold deposits that are prolific in the surrounding greenstone belt.
The Northern Zone at Blair North has significant exploration potential to the south and east of currently defined gold lodes, with the highest priority directed to the margins of granitic bodies.
Drilling along the entire length of the Northern and Southern Zones of 3 kilometres illustrates that a large volume of rock mass has been mineralised, and opportunity is available for definition of additional gold resources.
DIAGRAM FOUR: LAYOUT OF NORTHERN GOLD LODES
George’s Reward has exploration potential for an additional 25,000 to 30,000 tonnes at a grade of 1.4 to 1.9 g/t gold, in addition to the currently defined Inferred Resource. That equates to potential for 1,129 to 1,839 ounces of gold.
Kanowna Lights hosts a large magnetic anomaly in the middle of tenement that has realistic potential for hosting magnetite alteration that is associated with a gold mineralised system. Newexco Services provided a depth target of 245 metres via 3D modelling.
Two additional targets have also been identified that are located next to several oxide zone gold anomalies in the southern part of the tenement.
Snake Hill needs further interpretation of existing geophysical and geochemical data sets, along with the undertaking of an Induced Polarisation Survey, which was very successful at Blair North. This should be followed by deep drilling across the Mount Monger Fault.
NEAR TERM DEVELOPMENT OPPORTUNITY
Southern Gold (ASX: SAU) is currently in a Joint Venture to develop the Cannon Gold Project with Metals X (ASX: MLX).
The CAPEX at Cannon is a low $13.3 million, and will produce 68,200 ounces of gold at an OPEX of $964 per ounce from shallow resources.
This first stage of operations will segue into mining of deeper and open gold lodes, and extend several hundred metres to the north that are contiguous with the mineralised strike line controlled by Northern Mining.
Gold production will commence within the next few months.
DIAGRAM FIVE: CANNON GOLD PROJECT MINERALLISATION CONTINUES INTO THE BLAIR NORTH PROJECT AREA TO THE NORTH AT GEORGE’S REWARD
NEW ASIAN OPPORTUNITIES UNDER REVIEW
In February of 2014 Northern Mining established a Seychelles incorporated wholly-owned subsidiary, NMI Limited, to acquire Asian projects where the growth potential is continuously expanding. Opportunities under review have included a potential (suspended) acquisition of Indonesian resource and energy interests.
CATALYSTS NEXT 12 MONTHS
o Development of the Cannon Gold Project, commencement of gold production, and deeper development work will place a premium upon Blair North as a natural extension of the same gold system. o Further development work at Kanowna Lights has significant upside potential. o Further development work at Snake Hill has siginicant upside potential. o Potential for injection of a new project or projects into Northern Mining over the next 12 months is very significant.
GOLD PRICES
The Australian dollar gold price is currently around A$1,560 per ounce, and is priced at over a 30% premium to its 5 year low price.
Most Australian gold producers are reporting an “All In Sustaining Price” or AISC of A$800 to A$1,200 per ounce that currently provides very significant free cash flow of A$360 to A$720 per ounce.
The fall in the Australian dollar has triggered a revival within the Australian gold sector which includes a significant number of Western Australian projects that have recently receiving funding to develop both open pit and underground resources.
The Cannon Gold Project that abuts the Blair North strike line has been recently funded, and is reporting an estimated AISC of $1,159 per ounce for the first 68,200 ounces of production, for a free cash flow of $401 per ounce. AISC will drop dramatically for additional ounces produced.
ANALYSIS AND VALUATION
Northern Mining carries a market capitalisation of $25.3 million, of which $5.5 million is cash for an Enterprise Valuation of $19.8 million. The Enterprise Valuation is a reflection of three factors:
o Chairman Tony Ong controls 24% of the issued shares of the Company. The top 20 shareholders hold 91.06%. o Tony Ong has very significant financial heft through operatorship of Hong Kong based Provenance Finance. o Nothern Mining controls a very attractive portfolio of advanced stage gold projects that are located at premium locations, close to major global gold mining operations, and infrastructure that allows for a fast and low cost track to production. o Since 2013 the Australian dollar has depreciated against the U.S. dollar by approximately 30% and the Singapore dollar by 16%, and making Australian gold operations quite profitable in local dollars. o Proactive Investors has initiated coverage on Northern Mining with a Speculative Buy.
Proactive Investors Australia is a market leader in producing news, articles and research reports on ASX emerging companies with distribution in Australia, UK, North America and Hong Kong / China.
Disclaimer
You understand and agree that no content published constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter.
You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made.
However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate.
From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.
The contributors make every effort to ensure that the information and material contained in this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of the information and material and it should not be relied upon as a substitute for the exercise of independent judgment. Proactive Investors does not accept any liability, including negligence, for any loss or damage arising from the use of, or reliance on, the material contained in this report. There are general risks associated with any investment in securities. Investors should be aware that these risks might result in loss of income and capital invested.
WARNING: No recipients should rely on any recommendation (whether express or implied) contained in this document without obtaining specific advice from their advisers. All investors should therefore consider the appropriateness, in light of their own objectives, financial situation and/or needs, before acting on the advice.
DISCLOSURE: Proactive Investors, its directors, associates, employees or representatives may not effect a transaction upon its or their own account in the investments referred to in this report or any related investment until the expiry of 24 hours after the report has been published.