Sovereign Gold Company Limited (ASX:SOC): Site Visit
I attended an interesting site visit to Mt Adrah last week in the company of a number of brokers and investors. The project is located in the Riverina region of NSW; prime agricultural land and an idyllic location for an exploration program. Read more about Sovereign Gold Company here and here.
Geology Lessons at the Drill Rig
According to a local I spoke with, gold was first discovered at Mt Adrah in the 1880’s. The NSW Resources and Energy Division has a record of gold production from 1900.
Historic Gold Workings at Mt Adrah
The current target of SOC’s exploration is an intrusive “pipe-like” body known as Hobbs Pipe 1. This body forms the low rise the drill rig is sitting on in the image below, Mt Adrah is on the skyline. There are several other low rises in the immediate vicinity that are thought to be comparable to Hobbs Pipe 1.
On the Road to Mt Adrah
There are at least two stages of gold mineralisation at Mt Adrah: an earlier stage where the gold is intimately mixed with pyrite and arsenopyrite; and a later stage where the gold is visible and associated with quartz. It is this latter type that was mined historically.
Last week the Company announced an updated JORC resource of 16.3 million tonnes at a grade of 1.23g/t gold. This compares with the first resource (Non-JORC) on the project of 12.8 million tonnes at 1.32g/t, release by Getty Oil Development Company Limited in the early 1980’s.
This grade and style of gold mineralisation could be economic, if there is enough of it to justify development. I suspect that a resource of at least several hundred million tonnes will be required for economic viability. This is where the other potentially mineralised pipes are so important.
The Company has planned a 3D Induced Polarisation survey for September. This is a geophysical technique that induces an electric current in the earth and assists with the definition of different rock types at depth. Because Hobbs Pipe 1 is high in sulphides (and thus responds to the electric current) and the surround sediments are not, there is a good chance that the other pipes will be sufficiently well defined for drill targeting.
There is no technical reason why gold cannot economically be extracted from Hobbs Pipe 1 at or around the current gold price. The big question is size, the resource needs to be big, and with sufficient tonnes per vertical metre, to justify the capital expenditure that would be required for development.
One interesting aspect is that there is every chance that the later gold mineralising event has formed a higher grade zone in one or more of the pipes. It would be unlikely to be of large tonnage but could well be sufficient to significantly improve project economics.