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Emmerson Resources has compelling targets ready for testing in NSW: Hartleys

Hartleys has maintained its speculative buy recommendation for Emmerson, with a price target of 14 cents per share (current share price:7.4 cents).

Emmerson Resources Ltd - Emmerson Resources has compelling targets ready for testing in NSW: Hartleys
Emmerson has a sensible self-funding exploration model

Emmerson Resources Limited (ASX:ERM) recently secured a drilling co-funding grant from the NSW Government for its Kiola and Kadungle projects.

The NSW Government will provide up to 50% of direct drilling costs for individual projects as part of the initiative, capped at $200,000.

Kiola lies within the highly ranked Molong Belt which hosts Alkane Resources’ (ASX:ALK) Boda copper-gold discovery and Newcrest’s (ASX:NCM) world-class Cadia-Ridgeway copper-gold deposit.

Kadungle lies within the Narromine Belt where previous drilling has intersected high-grade gold and copper.

Hartleys has maintained its speculative buy recommendation for Emmerson, with a price target of 14 cents per share (current share price:7.4 cents).

Following is an extract from Hartleys’ research update:

Compelling targets in NSW ready for testing

Emmerson Resources (ERM) plans to commence high-impact drilling at two of its key project areas (Kiola and Kadungle) within the Macquarie Arc of NSW, during the course of CY20. To assist in the funding of these drill programs, the Company has successfully secured two co-operative drilling grants from the NSW government, which will see some 50% of direct drilling costs covered under this exploration incentive scheme.

As well as being a good outcome for ERM, it is also a strong endorsement for the quality of the projects and the targets generated for testing. Timing of the drilling programs are however, now dependent on health and travel restrictions relating to the Covid-19 pandemic. It is unlikely that drilling will commence in April’20 as previously proposed, and we would assume the start of drilling in the next few months (though subject to change).

Kiola: porphyry potential, good setting with elevated Cu-Au

Kiola contains favourable Ordovician-age intrusions (porphyry potential) within the highly-prized Molong Belt, which hosts NCM’s Cadia-Ridgeway mine and ALK’s recent Boda discovery. The prospects to be drilled display elevated gold-copper geochemistry, contain historical copper workings, along with mineralised skarns, and the identified geophysical (IP) anomalies to be drill-tested are highly chargeable, and potentially sulphide related.

The vast majority of the targets to be tested in the upcoming program are within 400m of surface. In the Northern Area the Nasdaq Skarn will be drilled where historical drilling results of 8m @ 2.5g/t Au and 0.19% Cu from 32m have been reported. Whereas, in the Southern Area, three key prospects (South Pole, Kiola and Right-Hand Creek) are planned to be investigated. Strong geochemical results of up to 19% Cu and 4.5g/t Au have been collected in rock chip samples from the Southern Area in and around some historical workings. ERM are planning on a +2,000m diamond program (~5 holes), with an estimated budget of ~A$350k, with 50% of direct drilling costs covered by the NSW government grant (or ~A$83k).

Kadungle: epithermal Au and porphyry Cu-Au encouragement

Kadungle lies within the Narromine Belt of NSW, ~25kms north-west of North Parkes (2.9Moz Au and 2.8Mt Cu) and ~50kms south-west of ALK’s Tomingley gold mine (0.7Moz Au). Some of the better results from historical drilling include: 12m @ 7.7g/t Au and 0.12% Cu from 62m. ERM is planning on drilling two deep holes (RC/Diamond) with +1,700m in total proposed, but with the ability to extend, if encouraging visuals are received. Estimated budget of ~A$430k, with ~A$101k provided by the government grant.

Self-funding exploration model: Maintain Speculative Buy

We estimate ERM’s current cash to be ~A$1.5M (MarQ end), and due to the current economic climate, ERM Directors and Management have reduced fees and salaries by 50% to conserve cash. ERM has a sensible self-funding exploration model, whereby its portfolio of small mining opportunities within Tennant Creek, NT can be commercialised under a profit share/gold royalty stream. Further gold royalties are anticipated from Edna Beryl, with other small mines to be commercialised in the near-term. We look forward to the start of drilling in NSW and we maintain our Speculative Buy recommendation, with our latest price target of 14cps.

Quick facts: Emmerson Resources Ltd

Price: 0.076 AUD

ASX:ERM
Market: ASX
Market Cap: $36.7 m
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