Resource definition drilling by Peel Mining (PEX) at last year’s Southern Nights discovery south of Cobar in NSW – named in honour of the late country singer- has just yielded one of the best-ever intersections of zinc-lead-silver-gold-copper mineralisation.
The 18.2m intersection from a relatively shallow depth of 182m assayed 40.3% zinc, 15.7% lead, 0.97% copper, 356g/t silver and 2.77g/t gold.
It shouldn’t be done, but we’re going to do it anyway – on a gold equivalent basis, you’re looking at 43g/t.
So it is a special intersection. A ring around to some oldtimers with experience at high-grade polymetallic operations like Rosebery and the defunct Hellyer mine in Tasmania reckon the Southern Nights hit is in its own league.
It was little wonder then that Peel shares went for a trot in Thursday’s market, rising some 11c or 36% to 42c to recover some of the ground lost since the start of the year because of the retreat in base metal prices, and some indifferent exploration results reported around mid-year.
The question now is what does it mean? Southern Nights was discovered in August 2017 and it sits 1km south of the known mid-1970s Wagga Tank discovery. All up, there is a 2km mineralised corridor between Wagga Tank/Southern Nights which already had the makings of supporting a mine development, subject to all the usual caveats.
Prime amongst those is success in the fully funded resource drill out which will lead to a maiden inferred resource estimate before June next year.
That drilling is on a typical 40m x 40m spacing but will be pulled in to 20m x 20m spacings in the super-high grade lens or pod which produced the stunning assay results to allow an indicated resource estimate there to be made.
As a very rough guide, the lens looks to be good for say 500,000t to 750,000t of mineralisation after taking in to account high-grade hits encountered in half a dozen or so nearby holes.
Apply a possibly conservative 25% zinc equivalent grade, and the lens would be very meaningful in terms of contained metal value.
Confirmation of all that would bring in to the play the potential for the lens to become the focus of a strong cash-flow producing “starter’’ project, possibly as a dig and truck operation as Peel’s peers in the region have spare milling capacity.
Alternatively, it could become the focal point of a larger operation which justifies Peel building its own mill.
Wagga Tank/Southern Nights was already shaping up as a large system and remains to be fully tested. The latest drill results point to any development having at least one sweet spot. Previous drilling has indicated there could be more, maybe not at such stunning grades. So the story is not over.
The plan now is to keep drilling up to Christmas, take a short break, and then come back and drill to the end of March/April. Peel should have enough data then to make the resource estimate, and then move in to a scoping study in to a development.
Meanwhile at the copper-rich Mallee Bull deposit, 50kms from Wagga Tank/Southern Nights, the Peel joint venture with CBH Resources/Toho Zinc is currently studying a “dig and truck’’ operation which would involve processing at CBH’s Endeavour operation. Some news on that is expected by the end of the year.
One of Australia’s leading business journalists, Barry FitzGerald, highlights the issues, opportunities and challenges for small and mid-cap resources stocks, and most recently penned his column for The Australian newspaper.
PEX Price at posting:
43.0¢ Sentiment: Hold Disclosure: Held
(20min delay)
