Barton feature Gawler Craton

Barton Gold: a prescient gold play in South Australia

This is the first in a two-part feature series.

This article is a sponsored feature from Mining.com.au partner Barton Gold Holdings Ltd. It is not financial advice. Talk to a registered financial expert before making investment decisions.

In late 2016 Alexander Scanlon, Managing Director of Barton Gold (ASX:BGD), started looking at significant gold resources, mill infrastructure, and exploration assets in Australia.

At the time, the world was a very different place than we find it today. COVID was still three years away, but key global events signalled coming troubles and new global challenges. Britain had ‘Brexited’ and Donald Trump had won the US presidential election – both geopolitical earthquakes overtly rooted in cultural ‘otherism’ and national separatism.

Scanlon also saw a confluence of other factors likely to fuel a new global trend towards hyper-nationalism, political factionalism, and a destabilisation of the post-WWII economic and social order which has underpinned several decades of relative stability and growth. Rising political tensions in Asia and recent ‘test skirmishes’ in Europe (read: Georgia and Crimea) were already forming cracks predictive of larger future ruptures, and global social, economic trends, and credit trends pointed to previously unparalleled asset bubbles and inflation risks.

With a view toward a darkening horizon, Scanlon began moving the chess pieces around and quietly consolidated a portfolio in South Australia under the newly formed Barton Gold.

While Scanlon forecast that inflation would rear its head within a matter of years, there was no way to predict sheer scale of monetary issuances core to Central Banks’ COVID response efforts – or the extent to which they would fuel aging bull markets and credit bubbles.

Barton Sputh Aust assets

A long-overlooked gold jurisdiction

Reflecting on current global circumstances, Scanlon noted: “Sadly, we foresaw much of this – record corporate and personal credit of declining quality, already troubling levels of constant Western monetary issuance, and rapidly devolving global and domestic geopolitical frameworks.

On this basis I decided to position heavily in physical gold, targeting existing proven geology in a very safe jurisdiction, and with ownership of, or access to, existing infrastructure.

The next few years were spent evaluating a number of assets throughout Australia, and we finally settled on Barton’s current assets in South Australia due to its incredible geology and the fact that it was a surprisingly overlooked investment jurisdiction where we could acquire substantially the majority of all historically significant production and exploration assets across an entire region – along with that region’s only gold mill.

However, we could not have foreseen the unique once in a lifetime factor of a global pandemic. This made everything 100 times worse. My prediction is that COVID, and the truly insane amount of monetary issuance which followed, has merely forestalled and amplified the likely magnitude of multiple pending crises.

“We feel very positive about sitting on a major exploration and growth package with an existing 1.1-million-ounce JORC (2012) Mineral Resource endowment”

We feel very positive about sitting on a major exploration and growth package with an existing 1.1-million-ounce JORC (2012) Mineral Resource endowment.”

As Scanlon explains, in Australia it is difficult to find opportunities for large-scale, still-untouched gold regions. With many companies tending to scour for assets in Western Australia, the opportunity he saw in South Australia “was very surprising”. Due diligence strongly indicated that despite multiple periods of heightened interest over the past 130 years, and proof of a rich mineral endowment via multiple historical high-grade operations, systematic exploration of the Central Gawler Craton’s gold potential had not materialised.

Everyone has been so focused on Western Australia that the market has basically overlooked South Australia for the last 30-plus years. There are very few places left that are so well-known in terms of their geological endowment that you can go in and essentially consolidate the substantial majority of key historical ground.

I suspect that in time we will all sit back and see the wisdom in this, but also recognise the spectacular value in that that was left on the table. We’re talking about ground that should have been systematically explored and developed 30 years ago.”

The MD adds: “Everything we touch, we find more structure and more gold.”

For Barton, it is now a case of simply getting on with the business of finding economic gold deposits. The company’s objective is to develop a new gold district as South Australia’s leading independent primary gold producer.

Barton validating its investment thesis

Over the past 4 years, Barton has selectively amassed a nearly 5,000km-square position in the Central Gawler Craton, including the Challenger underground and the Perseverance open pit (Tarcoola Project) gold mines. Both are significant historical producers, with Tarcoola yielding some ~77,000 ounces gold at a stunning grade of 37.5 g/t gold during the first half of the 20th century, and Challenger producing some 1.2Moz gold from 2002-2018.

Importantly, Barton has also acquired the Central Gawler Mill, the only such processing infrastructure in the region. The mill is rated to 650,000tpa processing capacity and can be expanded efficiently, utilising a standard carbon in pulp (CIP) process for production of gold doré.

Having access to such a collection of assets in the current economic climate has a range of strategic benefits.

Having access to such a collection of assets in the current economic climate has a range of strategic benefits

In the first instance, the international and domestic political instability we are witnessing poses a major risk to investment in low quality / high risk jurisdictions. Fear, populism, and desperation drive extraordinary outcomes, usually negative, and the word ‘nationalisation’ is one you hear more and more frequently these days.

Having assets in Australia means that if we are successful today, tomorrow we will still own our assets. The opposite is increasingly true in many places.

In the second instance, since acquiring these assets we have demonstrated and validated substantially more interesting regional geological models at our main projects, identified multiple new gold zones with a total ~2km of new gold mineralised strike, and we are positioning the assets for significant growth in Mineral Resources from the current 1.1-million-ounce gold endowment.

As we continue down the current global geopolitical path, and Barton continues to grow its Resources and enhance its large-scale development options, we are positioning Barton to benefit substantially from what we expect to be a protracted gold bull market over the coming 10-plus years.”

A concern of growing nationalism

Scanlon sees increasing global instability as a clear result of the rising ‘anti-globalist movement’ in many parts of the world, a function of nationalist populist rhetoric which has resulted in several nations destabilising traditional political and economic relationships. He notes in particular the sudden regression toward leftist populism in South America, particularly in Chile, Peru, and Colombia.

One investment generation ago, about 5-10 years ago, these were priority desirable investment jurisdictions for metals and mining and gold in particular, and they’re all of a sudden very, very dangerous.

There is a good chance, in the context and evolution of the current social dialogue, that the more successful you are, the less likely you are to actually keep ownership of those assets.

“There is a good chance, in the context and evolution of the current social dialogue, that the more successful you are, the less likely you are to actually keep ownership of those assets”

This has always been true in places like Russia and in Third World nations and it’s getting much closer to happening in borderline Second / First World nations.”

Scanlon’s concern is that everything happening on the world stage points to increasing risk of hot conflict (or a very ‘hot’ new cold war), severe global inflation, the failure of multiple governments, economic contraction and crises, and the failure of several ‘non-core’ fiat currencies.

The latter is well underway in countries like Sri Lanka, Argentina, Turkey, and Zimbabwe on a whole new level. These are regionally, politically, and culturally distinct nations, and the risk is that fear and a crisis of confidence in these countries can and will spread into neighbouring countries.

When people finally and fully lose faith in their currency they abandon it wholesale for gold, and this can have profound effects on the gold market.

This has happened in recent history – for example in 1795 during the French Revolution – and interestingly Zimbabwe is now issuing 22 carat gold coinage with the explicit goal of providing an inflation hedge to its population. Today’s world’s markets are much more intertwined and correlated than they were in the late 18th century, and the potential for contagious regional currency crises, particularly in the face of the increasing risk of regional conflict, is significantly higher.”

Standing firm

Although Australia has been somewhat insulated by all the volatility, rising interest rates, inflation, and a range of other challenging factors has affected the economy.

The term is almost overused but gold is considered to be a “safe haven” in times of economic and political turmoil as, over the long term, it has proven to preserve its relative purchasing power. During times like these investors tend to sell shares and shift their attention to gold as a safe investment.

As an investment, the yellow metal offers diversification to one’s portfolio, helping to withstand volatility, as well as short-term swings in the prices of assets more vulnerable to market whims.

And importantly, the price of gold has generally risen over the long-term.

In December 2016, when Scanlon’s strategy to allocate heavily to gold and consolidate in South Australia was in its infancy, the AUD price of the yellow metal was about $1,600 an ounce. A decade earlier, in 2006, the price was around $800/oz. Today, the gold price is hovering around $2600/oz.

With global uncertainty and inflation running rampant, it certainly appears as though a major play on gold and South Australia was a prescient strategic move.

Write to Adam Orlando at Mining.com.au

Images: iStock
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Written By Adam Orlando
Mining.com.au Editor-in-Chief Adam Orlando has more than 20 years’ experience in the media having held senior roles at various publications, including as Asia-Pacific Sector Head (Mining) at global newswire Acuris (formerly Mergermarket). Orlando has worked in newsrooms around the world including Hong Kong, Singapore, London, and Sydney.