This article is a sponsored feature from Mining.com.au partner Sentinel Exploration. It is not financial advice. Talk to a registered financial expert before making investment decisions.
It’s not often that a company makes a new discovery in heavily explored regions like Western Australia’s Goldfields, but that’s exactly what Sentinel Exploration (NSX:SOX) has done at its Marda East Project in the Southern Cross region.
The area is chock-a-block full of explorers and miners, including Forrestania Resources’ (ASX:FRS) Southern Cross Project and Leeuwin Metals’ (ASX:LM1) Marda Gold Project.
But where Sentinel stands apart is its focus on grassroots exploration and an incremental, scientific approach to soil sampling before committing money on drilling, Managing Director Simon Adams says.
“The project was generated from real grassroots exploration where we looked through Western Australian Mineral Exploration [WAMEX] and its databases for historical information that might have been missed,” he says.
“At Marda East we identified some soil samples that had been carried out about 10 or 15 years ago with some anomalies but they had used a fairly old assay technique, so, we thought it would be interesting to peg the small tenement and do some soil sampling ourselves with some slightly more modern assay techniques.
“That highlighted quite an interesting gold soil anomaly that aligned with the open-source data which gave us the confidence to do three lots of soil sampling before we tackled drilling.”
The company completed a maiden round of drilling last year and wrapped up its second round in May, with results last week highlighting a very solid 30m at 1.12 grams per tonne gold.
“That’s as good as, if not better, than some of the results Leeuwin has from its Marda Project, which is a remnant of an existing mine it is expanding on,” Adams says.
“Marda East, our project, is virgin drilling. There’s been no drilling there before.”
While Adams notes that Marda East has a different geological setting from its neighbour, the company believes the results indicate shallow gold mineralisation that warrants further drilling to better understand its geometry, continuity, and geological controls.
“We’ve still got a lot of work to do in terms of understanding what the structure is in this area which will require at least one more RC [reverse circulation drilling] program,” he says.
“But before we do that, we’re going to drill a couple of diamond holes to twin the RC holes from the previous program that had the highest gold values.
“We take an incremental approach, using each stage of exploration and its results to progressively refine our understanding of the geology.”
National Stock Exchange of Australia listing
Sentinel’s methodical approach to exploration and spending is one of the key reasons Adams cites for the decision to list on the National Stock Exchange of Australia, as opposed to the Australian Securities Exchange.
The company spent the better part of three years as a public unlisted company, and as such, takes a careful and considerate approach to spending money.
“We don’t have a very big corporate overhead and so we’ve always been very careful about how we spend,” Adams says.
“And we make sure that when we do spend the money, it’s based on science and it’s really geared towards getting results.
“One of the advantages of listing on the NSX was that Sentinel could tailor the size of its capital raising to its immediate exploration needs. The NSX does not prescribe a minimum capital raising, whereas companies seeking admission to the ASX under the assets test must satisfy significantly higher financial thresholds. Sentinel was therefore able to list after raising $1.5 million, avoiding the larger capital raising and greater shareholder dilution that an ASX listing would likely have required.”
“Our share register is tightly held, and we did not want to raise more capital than was required at this stage,” he says.
“At listing, we had about $600,000 in the bank, we raised an additional $1.5 million, and we have another $1 million of listed shares that can be liquidated for future working capital.
“The second reason was that the ASX requires a spread of 300 shareholders, which generally means attracting 350 to 400 investors. Many come in because their brokers suggest it’s a good idea, but they have little intention of staying.”
That often leads to a flight of investors shortly after an IPO, which can negatively impact a company’s share price if it doesn’t have broker support.
“The trade-off is that liquidity on the NSX is generally lower, which can make it more difficult to assess the company’s market value at any given point in time. However, we have not experienced the level of shareholder turnover that can sometimes follow a larger listing,” Adams says.
He also notes that the NSX is expecting to have the likes of CommSec and nabtrade on its platform within the next 18 months, which would hopefully attract more retail investors.
“The register is tight, we’ve got 29 million shares out on issue and we’ve got a means now where we can raise additional capital if we need to,” Adams says.
A potential takeover target in the works
The company is confident that its approach to exploration and tight capital structure will create high leverage on any strong gold results from the Marda East Project.
“We have a number of small but targeted prospects that we’re prioritising and investing in carefully,” Adams says.
“We’re taking a staggered approach, making sure that we spend enough money but not too much money in the early stages to understand where we go next.
“We probably won’t be the company that goes and mines any of the resources that we identify, but we become either a very good takeover target or those projects become very valuable on a per share basis.
“We’re working on projects that we believe are prospective and while Marda is obviously the primary project at this stage, there are others and we’ll continue to make sure that the money that we invest in the ground yields results and hopefully that attracts the attention of other suitors around that Southern Cross Forrestania belt.
“The area is quite active — there are a number of players out there and we have been approached by several already.”
In the meantime, Sentinel currently has 1m split samples in the lab from its last drilling round, and Adams expects to see much higher grades as the assays roll in.
“There’s potential for thicker zones at depth, but we want to complete more aeromagnetic work before drilling deeper holes,” he says.
Write to Emma Davies at Mining.com.au
Images: Sentinel Exploration
