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Nexus Minerals Ltd: THE INVESTMENT CASE

Nexus Minerals searches for the next Karari at Pinnacles Gold Project

Nexus has only scratched the surface in seeking out a Karari-style deep plunging ore body.
An aircore drill rig at the GT6 prospect of the Pinnacles Gold Project
INVESTMENT OVERVIEW: NXM The Big Picture
Pinnacles is all but throwing distance to Saracen’s Karari mine

Nexus Minerals Ltd (ASX:NXM) is actively exploring for gold deposits on its highly prospective tenement package in the Eastern Goldfields of Western Australia.

The recent addition of the Wallbrook tenement package will further advance these gold exploration efforts.

Nexus Minerals’ flagship Pinnacles Gold Project is largely unexplored and commences less than 5 kilometres to the south of, and along strike from Carosue Dam.

This 4-million ounce plus Carosue Dam operation is owned and operated by Saracen Mineral Holdings Limited (ASX:SAR).

Nexus has more than just a neighbourly association with Saracen

Nexus acquired the Wallbrook tenement package from Saracen in a transaction completed at the start of April.

The upfront consideration of 1.5 million Nexus shares, as well as an agreement to subscribe for 3.8 million shares at a price of 8.4 cents per share with attaching options will see Saracen take a sizeable stake in the group.

This has also helped Nexus to maintain its robust cash position of about $4.5 million, suggesting its market capitalisation of $7 million is shy of fair value.

Wallbrook highly prospective

The Wallbrook region has historical production of more than 350,000 ounces but none of this was from the tenements now owned by Nexus.

Consequently, while considered highly prospective, it is currently an unknown quantity.

Ore mined from the Wallbrook tenement may be purchased by Saracen for processing through its Carosue Dam operations.

However, as mentioned, Nexus’ relationship with Saracen extends beyond its financial stake in the company with its Pinnacles project adjoining Saracen’s tenements.

Pinnacles is all but throwing distance to Saracen’s Karari mine and from an exploration perspective Nexus has only scratched the surface in seeking out a Karari-style deep plunging ore body.

About Karari

Karari was one of the original deposits that constituted justifying the construction of the Carosue processing facility in 1999.

The pit lies about 500 metres to the south of the Carosue Dam processing plant, with all ore trucked to the mill.

Historically, this was a high tonnage deposit which lent itself to additional cutbacks and potentially a bulk mining method for an underground operation.

Average grade of 1.8 g/t gold

Over its four-year life, 4.7 million tonnes of ore averaging 1.8 g/t for 278,000 ounces were mined from the Karari deposit.

From a geological perspective, mineralisation is dominated by silica-sericite-pyrite alteration hosted in a broad hematite altered sandstone unit.

The Karari underground mine in 2017.

A series of north plunging high-grade ore shoots are developed at the intersection of key mineralised structures.

Identifying similar geological features, particularly deep plunging shoots, at Pinnacles would be an early indication that Nexus is on the right track.

Possibility of a Karari-type strike

Nexus holds a 125 square kilometre land package of highly prospective terrain within a major regional structural corridor, giving itself a fair chance of a Karari-type strike.

The company also has a joint venture over the Pinnacles JV Gold Project with Saracen.

This joint venture is consistent with the company’s strategy of investing in advanced gold exploration assets.

Regional geological, geophysical and structural interpretation has enabled early stage targeted and focused auger surface geochemical sampling and reverse circulation drilling.

Similar exploration approach to Karari in the 1990s

This was the strategy employed during the developmental stages of Karari in the 1990s.

Aircore results shaped a targeted reverse circulation drilling program which eventually delineated deeper high-grade mineralisation.

Consequently, recent drilling which only covered a portion of the Pinnacles territory could be viewed as the start of something bigger.

Two holes with widths of about 20 metres at Pinnacles graded 0.9 g/t and 0.8 g/t gold at depths of 10 metres and 14 metres respectively.

Interestingly, relatively wide intersections of 10 metres and 14 metres respectively were delineated in both holes which graded 1.6 g/t and 1 g/t.

The price is right

In fiscal 2013, the mid-range gold price was US$1,525.

Saracen saw the benefits in developing Karari at the prevailing gold price despite having an average grade of about 1.5 g/t gold.

During that period the mid-range AUD:USD exchange rate was US$0.97.

This equates to an Australian dollar gold price of US$1,570.

The gold price is currently about US$1,345 an ounce and the exchange rate is around US$0.78.

This translates to an Australian dollar gold price of about $1,725.

Determining economic viability

It could be argued that if Karari was worth developing then, a similar deposit at Pinnacles would be deemed as economically viable today.

Under Saracen’s ownership, Karari delivered 1.3 million tonnes of ore at a grade of 1.48 g/t for 60,740 ounces in fiscal 2013.

Karari was worth progressing in 2013 with the gold price hovering some $150 per ounce lower than it is now, and Saracen’s investment in the project has delivered strong returns.

The deeper you go the better it gets at Karari

Karari has now been developed to a depth of 230 metres below the open pit and Saracen has invested in dual declines to efficiently extract multiple ore loads.

Remember, Nexus’ drill results were from a mid-range level of 12 metres.

Is also worth noting that what was deemed as the Karari ‘discovery hole’ drilled in 1997 returned 12 metres at 2.05 g/t gold from 38 metres.

This was at a time when the gold price was hovering in the vicinity of US$300 per ounce.

Karari production up 66% and grades of 9.3 g/t identified at depth

Total ore production from Karari in fiscal 2017 was 866,000 tonnes at 2.8 g/t for 77,000 ounces, a 66% increase on the previous year's tonnage.

Underground drilling at Karari has continued through the year from two additional drill platforms, resulting in the ore body being extended a further 100 metres down dip.

However, its best days may be ahead with outstanding results released in February, demonstrating wide high-grade intersections.

These included 17.3 metres at 8.3 g/t, 44.7 metres at 4.4 g/t and 12.2 metres at 9.3 g/t.

The average depth of Karari and Saracen’s other underground mines in that region are 350 metres

However, it was a discovery at 38 metres and ongoing success over time, that has enticed Saracen to dig another 300 metres.

Can Nexus come up with that discovery hole?

investors will be watching Nexus as it undertakes further drilling at Pinnacles.

Drill results from the recent 8-hole program at Pinnacles provided the company with encouragement to test the full 3-kilometre by 600-metre extent of the anomalous gold zone referred to as the GT6 anomaly.

The geological and mineralisation features exhibited to date are consistent with results returned from initial exploration programs at the Karari gold mine in the mid-1990s.

The Karari-style gold mineralisation is known to be confined to volcaniclastic sediments and is associated with quartz-hematite alterations.

These features were observed in recent drilling and prospects with these characteristics will be subject to targeted exploration programs in 2018.

Could 6000-metres of drilling at GT6 be a defining moment?

The recently commenced 6000-metre/75-hole aircore drill program at the GT6 anomaly will be crucial in terms of providing evidence as to the existence of a major gold mineralised system.

The anomaly is on a north-south offset of the Yilgangi Fault, a structural setting synonymous with all Carosue Dam deposits.

In addition to this, the anomaly is situated over Carosue Dam Basin sediments and is proximal to a 1.7-kilometre gravity low corridor.

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