Talisman Mining Ltd (ASX:TLM) has come out of FY20 in a strong financial position as a cash-backed exploration company with a strong potential royalty portfolio after divesting its Sinclair Nickel Project in Western Australia to Saracen Nickel Pty Ltd, a subsidiary of Saracen Mineral Holdings Limited (ASX:SAR).
The transaction was implemented by way of a sale of all of the shares in Talisman Nickel Pty Ltd on October 11, 2019, with Talisman receiving the consideration of:
- $10 million cash (plus an additional $0.4 million in post-completion adjustments); and
- A 2% Net Smelter Return (NSR) royalty for any future metal production from the Sinclair tenements and any future non-precious metal production from Saracen’s Waterloo Nickel Project which is currently on care and maintenance.
Recently appointed chairman Kerry Harmanis said: “Talisman has undergone a significant transformation, initially with the $72.3 million cash sale of the company’s interest in the Monty copper-gold project in Western Australia and, during the past financial year, the sale of our interest in the Sinclair nickel project for $10 million, plus associated trailing royalties.
“These transactions allowed the company to return a total of $40.9 million in cash or 22 cents per share to shareholders through a $29 million capital return, together with a special fully-franked dividend of $11.8 million.”
Importantly, the Sinclair divestment has provided the funds to support continued exploration at the Lachlan Copper-Gold Project and the Lucknow Gold Project, both in New South Wales.
Harmanis said: “This allowed Talisman to be repositioned as a strongly cash-backed exploration company with a potentially valuable royalty portfolio.
“As such, I believe Talisman is well placed to participate in what is currently a buoyant market for junior exploration companies, especially in the gold sector.
“During the past financial year, the company has been pursuing exploration within its Lachlan Copper-Gold Project in NSW and, more recently, the Lucknow Gold Project in NSW, where we recently completed a diamond drilling program.”
Additionally, the Sinclair divestment has strengthened the company’s royalty portfolio and makes it well placed to benefit from any potential future production from Sinclair and any potential future non-precious metal production from Waterloo through the 2% NSR royalties.
These royalties complement the existing iron ore and copper-gold royalties held as a result of previous asset transactions.
Blind Calf-Dunbars long section showing interpreted copper lode system and previously reported Talisman and historic drill holes.
Exploration activities have continued at the Lachlan Project in NSW where the company controls over 2,700 square kilometres of exploration tenure through 100%-owned ground, farm-in arrangements and joint ventures.
During the financial year, several drill programs were undertaken targeting gold-in-soil anomalies with reverse circulation (RC) drilling as well as a diamond drill program at the high-grade copper Blind Calf Prospect.
The best result from RC drilling completed at Blind Calf at the beginning of the financial year was 10 metres at 4.32% from 176 metres including 4 metres at 7.68% from 180 metres.
Talisman also identified five new downhole electromagnetic conductive anomalies across the Blind Calf region as a result of DHEM surveys.
Looking forwards, spectral alteration mapping will be reviewed in conjunction with the new anomalies.
In August 2019, the company announced that it had entered into a farm-in for the Lucknow Project in NSW.
The Lucknow Goldfield was discovered in 1851 and while historic production records are incomplete, in excess of 400,000 ounces of gold was reportedly produced at grades of 100 to 200 g/t gold.
Talisman’s wholly-owned subsidiary, Talisman B Pty Ltd, is the manager of exploration programs throughout the earn-in period.
Talisman B has the right to earn up to a 70% interest in the Lucknow Project, by spending a minimum of $1.5 million on exploration over four years and issuing $250,000 worth of Talisman shares (under certain conditions) to Lucknow Gold.
Notably, very little modern exploration has been completed outside of the existing mine workings and in late June 2020 Talisman commenced its maiden drilling program to test for potential down plunge extensions of the high-grade gold ore shoots and repeat structures in proximity to the historic Wentworth and Darcy shafts.
Gold and base metals focus
Harmanis said that, while both of Lachlan and Lucknow projects had merit and presented opportunities to discover high-grade copper and gold mineralisation, they were assets that would require a longer time horizon in terms of value realisation and generating shareholder returns.
He said: “In light of this, Talisman has embarked on a search for new growth opportunities in the gold and base metals sector.
“Australia remains hugely prospective from a geological perspective and is one of the best places in the world to find, develop and operate high-quality resource assets.
“Since joining the board in July and, with the support of a very capable technical and financial advisory team, we have already made strong progress in identifying and reviewing a number of potentially exciting new growth opportunities.
“I would like to assure shareholders that we will adopt a patient, systematic and judicious approach in our search for new projects or in our pursuit of value accretive corporate transactions to ensure we find the best assets with the potential to create long-term shareholder value – both at the exploration stage and more advanced projects with near-term development and production potential.”
The company also recently appointed a new interim CEO in Shaun Vokes to oversee the transition phase and due diligence on new project opportunities.