Great Boulder Resources: on the cusp of becoming a developer

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

Great Boulder Resources (ASX:GBR) is a gold mining company that’s simply getting on with the job and is on the cusp of becoming a developer.

What makes the company stand out amongst its gold peers is the ‘once-in-a-lifetime’ belter of a project that arose at a time when the company needed it most. However, it’s what Great Boulder has done with its portfolio over the past 2 years that’s delivering a true company-making opportunity.

The West Perth-headquartered explorer has 3 ‘high-quality’ exploration assets in Western Australia — 2 advanced gold projects at Side Well and Whiteheads within the ‘world-class’ Yilgarn Province and the Wellington zinc-lead project in the Earaheedy Basin. 

Great Boulder’s primary focus is the definition and evaluation of ‘high-grade’ gold at the Mulga Bill prospect at Side Well, which it has been progressing amid consolidation in the gold sector.

Speaking to Mining.com.au on the company’s pathway through to feasibility studies and possibly development, Managing Director Andrew Paterson says the company views Side Well as being a ‘unicorn project’. 

“It’s one of those once-in-a-lifetime things where a belter of a project comes along at a time when the company really needs it. And we’ve used that to grow substantially in the last two years, and it’s a true company-making opportunity. 

“But it is a unicorn — so it’s not the sort of thing you’re going to find very often”

So that’s why, on the one hand, we’re really excited as geologists and company management to have this opportunity, but at the same time, cognisant of the responsibility to make the best of it. We want to obviously bring our shareholders along for the ride and grow this thing as quickly as we can. 

But it is a unicorn — so it’s not the sort of thing you’re going to find very often. That’s what we’re trying to illustrate to shareholders is that in terms of an investment proposition, if you’re looking for cheap companies with a pathway to growth, then arguably go no further than Great Boulder. It’s pretty well positioned, I think.”

Understanding unicorns

Paterson notes much like understanding the mythical creature that’s been described since antiquity as a beast with a single large, pointed, spiralling horn projecting from its forehead, there are aspects to Great Boulder’s growth strategy that aren’t well understood by the wider market.

Sure, the company has been releasing ongoing positive drill results and news flow to the market. Just last week, Great Boulder reported the results of a sub-audio magnetics (SAM) survey at the Ironbark deposit. The company plans to undertake further aircore drilling and auger geochemistry to test targets north and northeast of the project.

However, Paterson says: “Weirdly, one of the most difficult things to illustrate to investors, short of taking them up to Meekatharra, is just how close Side Well is to Meekatharra. As Hedley Widdup (Lion Selection Group fund manager) recently noted, you can grab a cup of coffee in town and it will still be hot when you get to the rig. It’s less than 10 minutes from town. Both Mulga Bill and Ironbark are less than 25km from the closest gold mill.

“Weirdly, one of the most difficult things to illustrate to investors, short of taking them up to Meekatharra, is just how close Side Well is to Meekatharra”

We took a plane load of investors and analysts to site last year and they were all amazed at how close to town the project is. People don’t expect a junior explorer to have a quality project like Side Well in the shadow of a historic gold field. 

Side Well is a real company-making opportunity. The fact that it’s been sitting there under (and in many areas un)explored for over 100 years is bizarre and extremely fortunate for GBR.

Another aspect which has been difficult to explain in layman’s terms is the size of the potential there, because it involves some unusual geochemical associations that make Side Well fairly unique in West Australia. 

Investors, not unreasonably, like to have an example they can compare things to so they have an expectation of size. To date, we haven’t found a decent analogue to compare Side Well to, but the geochem signature alone tells us that it’s a really big system. We’re working on some ideas to communicate a clear analogy shortly — something Scott Halley is chipping away at in his spare time.”

Million-ounce milestone

As mentioned, Great Boulder is hoping to get rigs out on the Ironbark corridor in the current quarter and hit those targets hard. AC drilling at Ironbark South remains ongoing, after which the rig will be moved to Mulga Bill North.

The MD says ultimately, he and the team at Great Boulder want to have a 1-million-ounce resource within the next 18 months.

“We have soil geochem there outlining a hydrothermal gold camp over 14km of strike; it’s an area that could easily eclipse Mulga Bill, and we’re itching to get stuck in. Initially, we’ll mainly be drilling 20km-plus of AC doing a first-pass test of the highest priorities, with RC afterwards running through into 2024.

“My aim is to have 1Moz in resources by the end of next year”

At Wellington, we should have soil sampling done on a 1x1km grid across the whole project, which is a big program in itself, and then we’ll start infilling anomalous areas in subsequent rounds of soil work. In the second stage of reconnaissance, there will be gravity surveys on priority areas. We’re working towards having drill targets next year, so we don’t anticipate drilling anything at Wellington in 2023. That could easily change if we see something extraordinary in the initial testing, but 2024 is our internal target.”

To achieve that million-ounce milestone over the next 12-18 months, the company has plenty of objectives it hopes to achieve.

Paterson is not understating that the “million-ounce target is the big one”. 

“Flowing on from that will be decisions around when to start economic studies — Scoping and Prefeasibility Studies — which are the next step towards development. In conjunction with that, we’ll be converting areas of the project to mining leases, negotiating a mining agreement with our traditional owner and pastoral lease stakeholders, and working through all the other groundwork required prior to starting a mine.”

While Great Boulder has much work to do over the next 18 months to achieve unicorn status, the MD notes that it was 18 months ago that he and the team articulated to the market they thought there were a million ounces there. 

Therefore, he says, at a time when there are gold miners being targeted by larger suitors, his company is well-positioned to fend off unwanted offers.

‘We don’t want to be prey’ 

Should the company reach 1Moz, it will come at a time the gold sector needs more ounces coming into the market — and at a time M&A deals are coming to the fore amid consolidation. It could also be the catalyst for a rerating of the company. 

According to the Sprott Gold Report released on 12 July 2023, following gold’s peak in August 2011, gold mining equities have “significantly underperformed the metal’s price”.

The gold report, which is produced by Sprott Asset Management, says the spread of resource nationalism to many developing countries, which host otherwise attractive gold deposits, has escalated the risk premium for large new capital projects. 

Sprott notes that through its ongoing internal assessment of geopolitical risk, it has seen a significant contraction in the map of favourable jurisdictions over the past decade. 

“We perceive the rule of law to be compromised in many jurisdictions across Latin American, Asian, and African nations. Political risk has resulted in a difficult-to-overcome valuation discount for companies with production weighted to certain regions. To address this jurisdictional valuation handicap, many companies are acquiring assets in politically ‘safe’ locales, mainly in North America and Australia. As a result, we’re seeing a rise in M&A activity driven by a desire to alter the geographical footprint.”

According to publicly available Dealogic data, Australia’s deal volume in the Q1 2023 was 3.5% higher than the same period last year. In comparison, the US fell 44%, while global dealmaking was down 48%. It appears gold is quite the favoured commodity in that respect.

Paterson tends to agree, adding that when you look at recent M&A activity with the likes of Newmont and Newcrest, St Barbara’s Gwalia gold mine, and the tug-of-war between Genesis and Silver Lake — as well as Westgold and Musgrave — there are deals aplenty.

What are the MD’s general thoughts on deal activity in the sector and what that means for Great Boulder?

“It’s definitely getting busier in the M&A space, reflecting the current stage of the resources cycle. Westgold’s bid for Musgrave has put more eyes on us as another potential takeover prey. Northern Star’s project-level deal with Strickland Metals has also set a very positive benchmark for gold juniors.

“We don’t want to be prey. We’re looking to grow”

Westgold has been busy with cost control and internal process improvement, which I thought would keep them busy for a while yet, so it’s interesting to see them active in the M&A space faster than I expected. I think Wayne Bramwell is doing a fantastic job there. Westgold is a complex machine with a lot of moving parts and it’s good for everyone to see them performing well. As an old mine geologist, I know how difficult it is to achieve what they’re doing.

Having said that, I’ve always said we don’t want to get gobbled up by anyone because we have an awesome project and we’ve a lot of gold to find. I may be biased, but I think our small company is bloody good at finding gold, and I want to keep adding ounces to the resource as quickly as we can.

We don’t want to be prey. We’re looking to grow.”

While Paterson didn’t have an answer (yet) as to how the company would avoid being preyed upon, he says all Great Boulder can do is “push ahead as quickly as we can” with the assets it has.

According to the MD, the main catalysts for M&A activity in the gold space so far have basically been the logical progression of the investment cycle. There are a lot of junior explorers making discoveries and a lot of producers with old mines that need replacing. He says, also the junior companies are cheap at the moment. 

“Positive sentiment for gold hasn’t filtered down through the mid-caps to the exploration sector yet. I’m hoping that happens soon.

I think we’ll see this M&A stage continuity play out for a while yet. One change we’re likely to see happening is that there are arguably too many micro-caps and not enough capital, so we’ll see companies with quality assets survive while others struggle. You’ll know that stage of the cycle is reaching its zenith when companies start reinventing themselves as tech stocks or some other change of direction.”

The MD adds that both project and corporate deals are likely to continue.

“Nobody wants to commit capex to new mills and tailings dams in goldfields where there are already a lot of plants in operation, like Kalgoorlie and the Murchison, so in those areas I expect M&A will be a combination of corporate and project-level deals.”

WA’s the best (gold mining) place in Australia

Paterson explains that geologically, Western Australia is the best place in Australia to look for gold — “so that won’t change”. He says it will be interesting to see whether the administrative burden of WA’s new Aboriginal Cultural Heritage Act 2021 slows things down enough to impact WA’s sovereign risk ranking.

When asked if the consolidation in Australia’s gold sector is being driven by the fact that it is increasingly hard to find, and if grade is definitely king when it comes to having a deposit, Paterson has a different take.

“So, I would normally have said yeah, grade is always king. But talking to people from Silver Lake, their view is very much, margin is king, and they don’t really give two shits about what the grade is as long as they can make money on it. And that’s a pretty strong argument as well. 

They’re just as happy to do a bulk low-grade thing as a narrow high-grade thing as long as the margins are there. And from a business perspective that’s probably more sensible. It’s easy. Well, not easy, but people do fall in love with high grades and if something’s high cost then you can easily break even on something just because it’s got a sexy grade. And selling gold for $3,000 Australian dollars an ounce if it costs you $3,000 an ounce to produce, that’s just the mug’s game. So Silver Lake are probably the smart guys in the room in that argument.”

Off to a flying start 

While consolidation in the sector is out of Great Boulder’s hands, Paterson reaffirms that the company is getting on with the job — and is close to becoming a developer.

Looking at progress for the half-year to date, to what extent has the company met or exceeded expectations? For the MD, it’s simple.

“The year got off to a flying start with our maiden mineral resource at the start of Feb, which exceeded our internal expectations. Since then, we’ve been concentrating on infill and extensional drilling at about the same rate as last year, and simultaneously catching up on base metal assays — using samples from holes drilled previously — to quantify the copper zones at Mulga Bill.

“One thing which really exceeded everyone’s expectations was our 6th RC hole this year, which hit 2 zones of coarse nuggets visible gold”

One thing which really exceeded everyone’s expectations was our 6th RC hole this year, which hit 2 zones of coarse nuggets visible gold. The upper intersection (6m @ 589g/t Au) was the highest-grade mineral drilling result in the world for a few months, since March, and possibly still is. That result got a huge amount of attention right across the country.”

Paterson tells this news service that the standout for the company so far in terms of achieving its objectives includes at Side Well, where the company has been doing a lot of work behind the scenes to negotiate a new Aboriginal Heritage Agreement with the traditional owners of that area, the Yugunga Nya group. 

During that process, Great Boulder set out to achieve an outcome that would benefit the local community directly “and not just pay for a bunch of admin and overheads”

“We’re in the final stages of that process now, but I’m confident it will be a good result for everyone.”

The MD notes that that agreement will be of pivotal importance for Great Boulder as it broadens its exploration areas in H2 2023. He anticipates those targets are going to be where the company finds the bulk of the next half-million ounces at Side Well.

Looking for more in 2024

Another “good milestone” achieved was getting the Wellington project granted. Great Boulder did the first heritage survey there at the end of May, and the company hopes to start some ‘large-scale’ soil sampling work in the next couple of months.

“To be honest we’re not pushing Wellington too hard at present. I think we’ll get the best reward from making progress on the gold resources, and I suspect shareholders aren’t too excited about the zinc-lead potential at Wellington. That’s based on the observation that Rumble has seen their share price drop away over the past few months despite publishing a massive maiden resource.”

Rounding out this year into 2024, when asked for his outlook on the gold market, Paterson says the pause in inflation is a good start.

“We need to get on top of inflation for people to get confidence more broadly in the macro space. The US getting on top of their inflation will signal, we think, a resurgence in the US dollar gold price that everybody measures themselves against. And I think almost certainly that will happen sometime between now and Christmas. But I’ve been saying that since the start of this year, so it’s taken a bit longer than we thought.

“I think we’re pretty well positioned. I’m really bullish on the gold price and on the company…”

All the other kind of chaos in the global economy only adds to that view. And that has been reflected in some of the producers already, and their share price is starting to bounce back. I’ve seen pretty strong growth from Westgold and bigger companies like Northern Star. So once people get confident that this is going to stick around for the longer term, then that will filter down into the next tier, which will be the developers and then the explorers, and Great Boulder’s kind of at the cusp of moving from explorer to developer. 

I think we’re pretty well positioned. I’m really bullish on the gold price and on the company, and at the same time being a bit cautious with things like cash flow just to make sure that we’re going to be ready and ready to pounce once things pick up.”

Write to Adam Orlando at Mining.com.au

Images: Great Boulder Resources Ltd
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Written By Adam Orlando
Mining.com.au Managing Editor 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). Adam has worked in newsrooms around the world including Hong Kong, Singapore, London, and Sydney.