Ausmex Mining Group Ltd (ASX:AMG) has had a lot of attention lately with announcements that they are possibly sitting on top of an IOCG (Iron Ore Copper Gold) source. Recent drilling results have been encouraging, and they are in elephant country in terms of talking about IOCGs.
When I think of IOCG, I think Olympic Dam, and if what Ausmex has is anything like that, it is going to be a fantastic story for shareholders.
I am a shareholder of the company and have been for almost two years. A long-suffering shareholder until the recent rise in share price.
I became a shareholder of Ausmex nearly two years ago when they listed on the ASX in May 2017. It was a rebadging of a company called Eumeralla Resources Limited at a price of 8 cents. It has been a long ride, and the share price has gone as far down as 3.2 cents.
The original concept was to explore and add value to the Mt Freda group of tenements. They have some ore stockpiled that they were going to commercialise, but I was intrigued by the package of projects and the historical drilling results.
One of the things I have learned about the Cloncurry area is that it is a very mineralised corridor, but it is not very big in terms of strike length (length of the region). There have been some big mines and the potential of developing a project to get some of the cream will be good.
Market capitalisation: $63.8 million (04/2019).
Outstanding shares: Approximately 470.7 million (04/2019), including 58.3 million placed on April 2, 2019 (not including 89.25 million unlisted options).
Top 20 shareholding: Approximately. 70.4% (2019) – before placement.
Ausmex Mining Group (ASX: AMG) 3-year share price chart. (source: Commsec)
What is an IOCG?
(Source: Geoscience Australia)
Iron oxide copper-gold (IOCG) deposits are a diverse family of mineral deposits characterised by the following features:
- Copper with or without gold, as economic metals;
- Hydrothermal ore styles and strong structural controls;
- Abundant magnetite and/or hematite;
- Iron oxides with iron/titanium greater than those in most igneous rocks; and
- No clear spatial associations with igneous intrusions as, for example, displayed by porphyry and skarn ore deposits.
Uranium-rich IOCG deposits in which uranium is an economic metal are an important yet uncommon subset of the IOCG family.
Currently, the Olympic Dam deposit is the only IOCG deposit in which uranium is extracted as a significant economic commodity. This deposit is the world’s largest single resource of uranium (BHP Billiton, 2010 Annual Report, www.bhpb.com).
In a global context, most of the other IOCG deposits containing higher grades of uranium are found in the Gawler Craton and Curnamona Province of southern Australia
Based on current knowledge of IOCG deposits globally, it would appear that the IOCG deposits with the highest grades of REE are also confined to southern Australia.
Diagrammatic sketch of the iron oxide-copper-gold mineral system illustrating the relative location of deposits types within the overall setting and the likely distribution of critical and other commodities within and around these deposit types. In the commodity lists, blue indicates essential commodities, underlined bold indicates major products, bold indicates commonly recovered by-products, underlined standard font indicates commodities with limited recovery as a by-product (usually during downstream processing), and the normal text indicates commodities that are geochemically anomalous, but not recovered. (source: Geoscience Australia)
(Source: Geoscience Australia)
High to extreme paleo-geothermal gradients is the critical driver. What that means to the average person is that it was damn hot at the time of mineralisation.
To achieve this extreme gradient, it has to be of a crustal-scale hydrothermal system to accomplish the massive scale of alteration systems and the masses of hydrothermal precipitates (mineralisation) in individual IOCG deposits.
When we geologists talk about crustal scale, what we mean is that it is a big system. It’s like comparing the Grand Canyon to the trench you would dig in your backyard for your garden reticulation pipes.
There is the presence of two distinct fluids during deposit formation:
- A highly oxidised fluid (eg, meteoric/ground waters); and
- Deep-sourced high-temperature brines (magmatic-hydrothermal fluids and/or fluids reacted with metamorphic rocks).
In many IOCG systems there is also evidence of volatile-rich fluids during ore formation (eg CO2-bearing; see review by Williams et al., 2005, and references therein).
To collect so much 'mineralisation', you need to have a topographic depression such as calderas, grabens, maar complexes … etc. They are conducive to mixing of shallow-crustal and deep-sourced fluids.
IOCG deposits are characteristically diverse in their minor element compositions and contain elevated concentrations of many critical commodities.
Recently published data for the Olympic Dam deposit revealed the presence of an extensive range of minerals and corresponding geochemical variation. More than 90 minerals have been identified, and in addition to Cu, U, Au and light REEs the deposit is enriched to strongly enriched in As, Ba, Bi, C, Cd, Co, Cr, F, Fe, In, Mo, Nb, Ni, P, Pb, S, Sb, Se, Sn, Sr, Te, V, W, Y, and Zn (Ehrig et al., 2013).
It is interesting to note that almost all of these elements are included in the current study of critical commodities.
Australian IOCG provinces
There are two major IOCG provinces in Australia of global significance:
- The Olympic IOCG Province along the eastern margin of the Gawler Craton in South Australia; and
- The Cloncurry district in the eastern Mount Isa Inlier of northwest Queensland.
In addition, there are several other metallogenic provinces that contain or may contain medium-sized or small IOCG deposits, including:
- The Tennant Creek district (Northern Territory);
- Curnamona Province (South Australia and New South Wales); and
- The Aileron province, Northern Territory (Schofield, 2012).
Mt Freda story
(Source: Ausmex Mining Group)
The project area is about 38 kilometres from the township of Cloncurry. The famous Ernest Henry Mine, which is an IOCG deposit, lies in the same area (35 kilometres NE of Cloncurry). As of 2017, the mine had the following resources:
Measured, indicated and inferred resources for Ernest Henry Mine (source: Evolution Mining)
- 95.30 million tonnes at 0.63 g/t gold for 1.92 million ounces; and
- 28.59 million tonnes at 1.17% copper for 334,000 tonnes.
Ore reserves for the Ernest Henry Mine:
- 51.40 million tonnes at 0.55 g/t gold for 902,000 ounces; and
- 15.42 million tonnes at 1.07% copper for 165,000 tonnes.
The main component of the whole story is that you have this massive IOCG target that is being worked by Newcrest Mining Limited (ASX:NCM) within a stone’s throw from the tenement boundary. I have been a fan of the whole Olympic Dam story, and hence I am excited to be associated with a story such as this in Ausmex.
SAM could make all the difference
Why do I keep bringing up Olympic Dam? When you read about the extent to which they went about chasing the concept, you realise that it could have been a non-event.
Looking at the image below, the SAM (Sub Audio Magnetic) conductor could be more than impressive. Remember my article about Carlow Castle, the only geophysical method that picked up the mineralisation was SAM.
In the world of exploration, no one way works 100% of the time, and it is this kind of logical optimism that drives discovery. If SAM is picking up something real, then this could be the game changer that will work in this instance.
The great thing about an IOCG target is that it is big and as mother nature intended, completely random where it put or shares its mother lode.
Looking at the location of that blue speck for the next phase of drilling, one has got to be quietly excited.
As in Olympic Dam, it was not the area of the high that drove the discovery. It was the periphery of the high, and even the participants admitted that it was a stroke of random genius that decided on that area.
The conductive structure that has been defined is an easy target, and if the drilling comes up with good results, this will be a sitting target to drill out. Imagine what Newcrest would think if a minnow like Ausmex makes such a discovery. Imagine what the Ausmex share price would do with discovery.
Why do I believe?
I do get some of my “confidence” from the fact that you are not dealing with hundreds of meters of cover and being in the middle of the desert. The intercept at Little Duke when they got 59 metres at 1.25 g/t gold, and 0.43% of copper is very significant in my books.
The first two significant drill holes at Olympic Dam were RD1, which came back with 38 metres at 1.05% copper, and RD5 with 92 metres at 1.01% copper. Although the copper values are more significant, one has to be encouraged with the length of 59 metres from a depth of 73 metres.
In my book (and it’s not a very detailed book), I think if management can zero in on the source, I am going to be holding onto my shares.
There is a diagram (see below) that was released in an announcement that gives a cross-section view of the whole concept.
I am a big believer of a schematic diagram as it simplifies the technical into a cartoon view. This view was something that sold me on the story, and the funny part is that I think the story got better over time. As I have said, it has taken a long time, and I hope this comes good.
You can interpret the diagram below in any level of technical confidence, but we all know that a missed drill hole could mean a lot, but a persistent team will most likely make up for that missed hole. Just like the story of Sirus Resources Limited using the last remaining budget to drill holes which led to the discovery of the Nova-Bollinger nickel sulphide mine.
The flip side of a schematic diagram is that it is a cartoon and one has to become aware that it does not become a real cartoon. Schematic diagrams are made to simplify a complicated view.
What does this all mean?
The big prize is the potential of tapping an IOCG source, and the reward can be astronomical.
The issue with chasing IOCG style mineralisation and chasing this big pie in the sky is that you will (not potentially) be spending a lot of money.
Western Mining Corporation which is now part of BHP started searching for a copper deposit in 1953 and only found Olympic Dam in 1976. They spent in today’s terms around $45 million to discover that copper mine.
Fortunately for WMC, they not only found a copper mine, but they also found the mother of all mines in copper and uranium and to a lesser amount, gold. I think they commercialise a few other commodities.
It is good to see that Ausmex raised the $7 million as they will need that to keep the momentum going. There is no doubt that there is a lot of noise around and management will have to be very scientific on where to drill.
I don’t think there are too many people out in the geoscientific world today that will doubt the way WMC went about exploring. When you read the book 'The Olympic Dam Story' by David Upton, you will see the long and meticulous way the people went about looking for Olympic Dam.
It took them years of postulating and finally 10 holes to get the discovery. Only three of those holes were not barren. It was almost a three-year journey, and it took another 13 years to get to production (mostly due to the anti-uranium program).
RD1 was a start, and RD5 was a teaser and RD10 was the discovery. The time from RD1 and RD10 was over 12 months.
Hence, the point is that it is going to take even more patience and even more efficiency on the part of Ausmex management to create even more value for shareholders.
To close on this article, the storyline that the management of Ausmex is telling people is the potential of a significant find. As a shareholder, I hope they are correct, and they spend the $7 million wisely and manage their salaries like how a chinaman would (if they want advice on how to do that, they know where to contact me) do if they were running the company.
I don’t doubt the storyline, but as many 'investors' will attest, there have been many great stories that have become lemons. In my experience, I always say that the proof of concept is the numerous smoke that is in the area and that Newcrest is spending money on the same idea. It is not a lone ranger concept and that gives me some confidence.
The conductive structure is the other piece of confidence. Technology such as SAM was not around in the 1970s, so the comparison I have made with the discovery of Olympic Dam may not be so pertinent. However, as a shareholder, I bloody hope it is the holy grail.
At the end of the day, Olympic Dam is a big deposit. It had 10 billion tonnes of ore. Something close to that would be punching above Ausmex weight and all shareholders will be happy.
NOTE: I am a shareholder of Ausmex and I do want to highlight that this insight is not meant to give advice and not to influence anyone to buy or sell the shares of the company. This is my research and my thoughts on the activities of the company. I have not been paid by the company to write this insight.
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