Barry FitzGerald: Magmatic adding serious value with WA gold deal
'Garimpeiro' columnist Barry FitzGerald has covered the resources industry for 35 years. Now he's sharing the benefits of his experience with Stockhead readers.
One of Garimpeiro's pet peeves is coming across a junior explorer banging away at a single project rather than leveraging off their standing costs as an ASX-listed company by adding a second project to the portfolio.
That is particularly so when there has been a tectonic shift in markets like there is now, with gold racing to more than $5200 an ounce in Aussie dollars – up a staggering 44% on 2024's average.
So keep the flagship project bubbling along but use the downtime between drilling campaigns to add a gold project to the company's story because the reality is that there has never been a better time to be looking for the yellow stuff.
That's just what a well-known explorer for potential tier-1 epithermal/porphyry style deposits in NSW's prolific East Lachlan region, Magmatic Resources (ASX:MAG), has done via the acquisition of the Weebo project on the Yandal greenstone belt in Western Australia.
The East Lachlan hunt continues, including a joint venture at the Myall copper/gold project with Andrew Forrest's Fortescue (ASX:FMG), also the company's biggest shareholder. Myall and other prospects in the East Lachlan could well deliver a big discovery in time, and there has been plenty of encouragement on that front.
But for pure gold exposure at a time when the market is in a mood to reward gold discoveries handsomely, Magmatic has rolled up its sleeves and added WA gold to its story, powering up its newsflow in the process.
Magmatic was trading mid-week at 4.2c a share for a market cap of $18.1 million on issued capital, increased by the share consideration component of the Weebo acquisition. It was a 3.9c stock before the Weebo pick up, so it can be said that the added element of WA gold has attracted the market's interest.
But remembering the market cap is still not challenging. Given the quality of the East Lachan interests, it could be suggested that at Wednesday's share price of 4.2c, Weebo comes at this stage comes for free.
Value added
That's despite Weebo having all the hallmarks of becoming a quick value-add for Magmatic.
Located 30km southeast of Leinster, the Weebo ground covers about 50km of the southern Yandal greenstone belt.
The ground includes two near surface prospects – Ockerburry and Scone Stone – where previous drilling has yielded some nice hits by a previous owner. They stand as advanced drill prospects and there are a bunch of less advanced prospects.
Magmatic has put a local exploration team in place and expects that its maiden drilling program at Weebo will kick off in the September quarter. It is exciting stuff for a company with an $18.1m market cap.
What makes Weebo particularly exciting is its location, smack bang in the middle of five gold mines with treatment plants – Vault Minerals' (ASX:VAU) Darlot, Gold Fields' Agnew-Lawlers, Bellevue Gold's (ASX:BGL) namesake operation, Northern Star Resources' (ASX:NST) Bronzewing and Northern Star's Thunderbox.
While the hope would be that exploration success at Weebo delivers a standalone operation, the proximity of the regional treatment capacity lends itself to toll treatment opportunities, joint venture development and/or outright sale of ounces that Magmatic pulls together in a mineral resource estimate.
Ounces in the ground
In a $5200/oz environment ounces-in-the-ground are commanding a high value when there is a clear pathway to the ounces being whacked through a standalone treatment plant or one owned by a third party.
By way of example only, Northern Star last year paid $12.5 million for the 177,000 inferred resource ($70 an ounce) at the Hobbes gold project – owned 80% by Solstice Minerals (ASX:SLS) and 20% by a private minority – to feed through its Carosue Dam operation.
The year before NST paid Strickland Metals (ASX:STK) $61m in cash and shares for the 346,000oz Millrose deposit near the Jundee gold mine ($176/oz).
Gold prices have moved substantially higher still, so smallish deposits have become even more valuable.
Where Weebo ends up in terms of its scale remains to be seen. But it certainly delivers exploration excitement when the gold market is running hot. And who knows? That hunt for a tier-1 discovery in NSW could well come up trumps.
That's particularly so when Mt York gets juiced up by the additional ounces expected to come from the big exploration push now underway.
The views, information, or opinions expressed in this article are solely those of the columnist and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.
At Stockhead, we tell it like it is. While Magmatic Resources is a Stockhead advertiser, it did not sponsor this article.
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