Why A-list gold investors think Arika has major discovery potential
That has worked in Arika Resources' favour with drilling about to get underway
We chat to Lowell Resources Fund CIO John Forwood about why he likes the stock
Market volatility has propelled gold to historic highs in both US and Australian currencies, bringing renewed interest to junior explorers.
We're ~22% higher since the beginning of the year, and although the excitement hasn't been reflected in the share prices of all small-cap explorers, it has shone a light on those increasing investment in new projects via exploration and drilling programs.
Arika Resources (ASX:ARI) is one example, having recently secured $5 million in funding to scale up drilling efforts from 6000m to 10,000m across its Kookynie and Yundamindra assets in the heart of WA's Goldfields, covering aircore, reverse circulation and diamond drilling.
The combined program, set to begin in early June, will largely focus on Yundamindra – a promising area that has flown under the radar of major companies.
Around 45,000oz was mined at Yundamindra at grades of over 19g/t up to 1970, but it remains under-explored, with 97% of the drilling in the 1980s and 1990s only targeting shallow oxide resources less than 80m from surface.
The upcoming campaign will test around high-grade intercepts at multiple targets including Pennyweight Point in the project's eastern corridor.
Shares in the company surged 50% after diamond drill results at Pennyweight Point were reported in April, which included 35.76m at 2.14g/t gold from 104.27m as well as 13.46m at 5.28g/t gold from 111.40m.
Yundamindra is within a stone's throw of AngloGold Ashanti's Sunrise Dam and Gold Fields' Wallaby, two huge multimillion-ounce gold mines that have been in production for ~30 years, as well as major players like Genesis Minerals (ASX:GMD) and Northern Star Resources (ASX:NST).
The project is also along strike to the south of the $44m Guyer JV between Iceni Gold (ASX:ICL) and Gold Road Resources (ASX:GOR), part of the 15km-long Guyer gold trend that hosts ICL's 14 Mile Well gold asset.
At last month's Resources Rising Stars Gather Round conference, Arika outlined its pursuit of a multimillion-ounce discovery, a goal that caught the attention of Lowell Resources Fund (ASX:LRT).
Lowell chief investment officer John Forwood, the expert behind our Ten Bagger column, told Stockhead what particularly piqued his interest in Arika Resources was the prospective geology of both projects.
'We're pretty familiar with the areas that the assets are in, we have an investment in Carnavale Resources (ASX:CAV), which is Arika's immediate neighbour at Kookynie, so we know and like the geology,' he said.
'I've also been following Wade Johnson at Iceni Gold, which is immediately north of Arika's Yundamindra asset and really, really like the geology there – in fact, it looks like the Guyer trend, which Iceni has, trends straight down into Yundamindra.'
Forwood said another interesting aspect of the project was the geology in the southern part of the asset, which represents a high-priority, complex structural target that has never been effectively sampled by historical surveys.
'We're very interested in new areas, and I the think bigger picture with both Arika's assets being in the heart of the Goldfields (is) if you find something in that region there is going to be a lot of interest,' Forwood added.
'Arika have had some really good hits already from the diamond drilling at Pennyweight Point so I think they are well on their way,' he said.
'Both projects are big enough to be standalone projects and hold the potential to be toll treated.'
Solid backing and well-funded
Leading the Arika team is managing director Justin Barton, who brings over a decade of experience at the Big Four accounting firms across Australia and Europe, where he advised top-tier mining, energy, and financial institutions globally.
'Arika's current exploration manager, Steve Vallance, is an impressive guy and has the right approach,' Forwood noted.
'We really like to see Roger Steinepreis as the chairman there; he has done well with companies in the past including Apollo Consolidated Limited – which was the subject to a takeover by Ramelius in 2021 – and he's putting his money where his mouth is there with Arika.
Forwood also likes the fact Arika's tenure sits on granted mining leases. While it doesn't mean permitting is done and dusted, it significantly shortens any production timelines should a major, or even modest, gold discovery be uncovered.
'The high gold prices, which are currently sitting around Aussie $5000 an ounce or thereabouts, provides explorers with the potential to monetise, smaller and lower grade deposits," Forwood said.
'It really incentivises explorers to go out there and have a look and they don't necessarily have to find a million ounces, they might only find 100,000oz or 10,000oz and if it's of a reasonable grade then it's something that they can make money from.
'Now that Arika are well-funded and raised five million during the last placement that we participated in, I think they've got all the elements there.'
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