Amid persistently high inflation and an abundance of geopolitical tensions ramping up market volatility, commodity companies are deservedly in the spotlight.
The benefits they can bring to a portfolio — stability, uncorrelated returns, a hedge on the rising cost of living — are tailored to the present moment, and the foreseeable future, with astute investors keen on identifying quality issuers before they become household names.
In the precious metals space, Aurumin (AUN), a Western Australian gold explorer and developer, is making a compelling case for long-term shareholder value creation through its projects’ significant upside potential.
The company
The company’s Sandstone gold operations boast a JORC-compliant, 849,000-ounce gold resource with ample past production history, no current producers in the region, and developed infrastructure including camps, bore fields, airstrip access, and a 500 kiloton per annum (ktpa) processing plant (refurbishment required) with a known upgrade path to 750 ktpa.
The plant’s last operator, Troy Resources, processed 4.4 million tonnes (Mt) of ore at 3.6 grams per tonne (g/t) to extract just over 500,000 ounces of gold between 1999-2010, selling its project, plant, and all, for $5 million to Southern Cross Resources, the deal having included Sandstone.
Sandstone’s cornerstone property, the 100-per-cent owned Central Sandstone Gold Project, includes a mineral resource of 22.1 million tonnes at 1.1 grams per tonne for 784,300 ounces of gold with 11 existing deposits, which the company intends to develop into a gold mining operation in the near future.
Aurumin’s heavy-hitting program
Aurumin’s development plans have recently been enhanced by new assays from a now-completed reverse circulation (RC) and diamond drilling program at Central Sandstone.
The program aimed to extend and better define Two Mile Hill’s inferred underground mineral resource estimate (MRE) of 14.2 Mt at 1.1 g/t for 500,000 ounces of gold, which represents Central Sandstone’s largest resource with the greatest potential to underpin a standalone operation.
The third hole of the drill campaign returned 352.8 metres at 1.5 g/t gold from 267.2 metres downhole. This included higher-grade intervals of 12.8 metres at 2.9 g/t gold from 298.2 metres, 8.4 metres at 9.3 g/t gold from 392.2 metres, and 25 metres at 5.4 g/t gold from 531.2 metres, offering significant visibility into Two Mile Hill’s primarily tonalite-based ore body.
The first two holes returned over 200 metres at 1.5 g/t gold and over 300 metres at 1.3 g/t, and the fourth and last hole has now returned over 200 metres at 1.2 g/t gold from Two Mile Hill, strengthening the understanding of local geology, grade distribution, and targeting leads for future definition drilling.
These results — coupled with recent drilling linking the Shillington ore body to the Two Mile Hill ore body — are building undeniable momentum toward the economics needed to support a producing mine.
When considered as a whole, the Shillington and Two Mile Hill open pit resources, and the Two Mile Hill underground resource, currently represent over 650,000 ounces of gold, including a key 157,000-ounce open pit MRE. This does not account for the over 120,000 ounces of the Central Sandstone gold resources available for subsequent assessment.
The company, now with this enhanced geological understanding, is planning on releasing an updated resource model uniting Shillington and Two Mile Hill based on the current round of drilling.
“Along with the recently completed RC drilling at Shillington this sets us up to now model the Shillington and Two Mile Hill deposits as a single geological complex, with known grade in the banded iron formation, mafic and tonalite,” Brad Valiukas, Aurumin’s Managing Director, said.
“We expect to release the updated resource model with our next set of drilling plans not too long from now.”
Everywhere Aurumin
Gold production centred on a Shillington/Two Mile Hill complex could fund the development of additional Aurumin properties in the future, further substantiating the company’s long-term objective to be a multi-asset producer.
Its Johnson Range project, included with the Sandstone Operations, houses an inferred MRE of 64,700 ounces of gold at a grade of 2.51 g/t with past small-scale open pit mining.
Aurumin also owns a sizeable land position at its Southern Cross Operations, including the Mt. Dimer and Mt. Palmer projects.
Mt. Dimer achieved historical production of 125,000 ounces of gold from 600,000 tonnes grading 6.4 g/t and is home to multiple high-grade, unmined deposits. Exploration is ongoing with a pipeline of prospects being tested and existing deposits to be progressed. The project also holds multiple iron ore targets that the company plans to test.
Mt. Palmer, for its part, yielded historical production of 158,000 ounces of gold from 300,000 tonnes averaging 15.9 g/t but has not been in commercial production since the 1940s. This means the company is well-positioned to apply modern exploration techniques to develop its prospective lithologies, which include lithium potential identified from soil sampling that merits follow-up work.
Why invest?
Supported by a team with extensive development and operational expertise, Aurumin presents all the elements of a long-term investment, one where historical production profiles lead to enhanced geological interpretations that underpin considerable upside potential.
With a market cap of only $16.3 million and an undervalued share price, given its prospective assets, investors should keep a close eye on this gold explorer, especially as it nears its end goal of becoming a West Australian gold producer, throwing in with some of the Goldfield’s most notable players.
In considering the wider picture of Aurumin, its project base, geographic legacy and recent drilling results, there is one leering question left for investors to ask – are they ready for a potential Auru-win?
*Resource figures refer to indicated + inferred MREs unless stated otherwise.