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St George Mining Ltd: THE INVESTMENT CASE

St George poised to establish resource at Mt Alexander high-grade nickel-copper project

Prineas flagged the potential development of a high margin low-cost mining operation.
Picture of nickel symbol on periodic table
INVESTMENT OVERVIEW: SGQ The Big Picture
Exploration at proven targets has the potential to again be a share price catalyst in 2018

St George Mining Ltd (ASX:SGQ) rose to prominence in November 2017 when the diversified miner struck a 17 metre interval of high grade nickel-copper sulphide mineralisation from 37.5 metres at its Mt Alexander project in Western Australia.

This resulted in its shares surging from the previous day’s close of $0.13 to $0.225, a gain of more than 70%.

READ: St George Mining’s shares surge after drilling high-grade nickel, copper at Mt Alexander

There was more to come as further results saw the company’s share price more than double to $0.475 on December 1, 2017.

Other projects provide exploration upside

Ongoing results from Mt Alexander have confirmed its promise, but the company also has two other projects in Western Australia in East Laverton (gold and nickel sulphide) and the Hawaii project which is at an early stage.

In December, drilling at the Windsor prospect which is part of the East Laverton project intersected prospective nickel sulphide.

READ: St George Mining drilling confirms Windsor is prospective for nickel sulphide

The company's primary focus has been on the Mt Alexander project over the last three months and this is likely to continue into the first half of 2018.

Mt Alexander remains the main game 

Mt Alexander remains the company’s key asset, particularly given drilling results from the Stricklands prospect and evidence that the Cathedrals Prospect also contains cobalt and platinum group elements (PGE).

The commodity price environment is also working in St George’s favour with the spot nickel price hovering close to its 12 month high of circa US$12,800 per tonne, levels which haven’t been seen since 2015.

John Prineas, executive chairman, believes this momentum can be sustained.

He said: “The demand for battery grade nickel will surge in coming years with a deficit of several hundred thousand tonnes forecast.

"Growth in electric vehicle battery manufacturing alone is predicted to increase annual nickel sulphide demand from 300,000 tonnes to 900,000 tonnes.”

Copper is also on a winning streak, having recently surpassed US$7,200 per tonne, a near four-year high.

Add cobalt into the mix, which has more than doubled in price in the last 12 months to circa US$75,000 per tonne and you have the perfect trifecta.

READ: St George Mining’s shares rise after high-grade nickel-copper-cobalt hits

What the grades tell us

Prineas recently borrowed the ‘cash is king’ cliche when referring to the Mt Alexander exploration results as ‘’grade is king”’, and well he might.

The results also have brokers excited with Bell Potter analyst, Peter Arden particularly focusing on the 10 cumulative metres of massive nickel-copper sulphides in five zones that returned XRF readings averaging 5.5% nickel and 2.1% copper.

Arden is bullish on the company, reaffirming his buy recommendation on the back of exploration results.

Mineralisation is shallow

The other reason why the drilling results were so favourably received was the fact that the mineralisation was intersected at a depth of only 37.5 metres.

While Mt Alexander is at a very early stage, high grade shallow mineralisation normally equates to an economical low-cost project if it can be commercialised.

The delineation of robust grades at shallow depths has continued with the latest round of assay results featuring 3.3 metres at 5.8% nickel, 2.4% copper and 0.18% cobalt.

Prineas said: “St George is ideally positioned to develop a high margin low-cost mining operation in Western Australia as the nickel market recovers from multi-year lows.”

For the chairman’s comments on significance of shallow mineralisation:

WATCH: Breaking…exciting times for St George Mining

The latest intersections were at a depth of 52.7 metres and this data has resulted in the strike length being extended a further 400 metres.

Preliminary metallurgical testing also points to the economics of the project being promising as test work produced separate nickel and copper concentrates with grades of 18% nickel and 32% copper respectively.

The nickel concentrate included cobalt at 0.55% cobalt, as well as 13.5 g/t of PGE, both of which would deliver smelter credits.

Momentum likely to be driven by drilling

The next six months is fairly clear-cut with Prineas saying that the focus is on drilling at Mt Alexander with a view to establishing a resource mid-year.

The company currently has $2.7 million in cash which leaves it well-placed to fund upcoming drilling.

 

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