Black Cat Syndicate (BC8) rating it as a SPEC BUY at 20c with a target of >30c (Note 1 : Our/ERA report contains a large number of figures. When reports are posted on our website : www.eagleres.com.au, then the figures are also attached separately and can be viewed in an enlarged often better / higher resolution format. All the figures and the report can be downloaded separately once they are on the website). Note 2 : This is a Visit-style report which has a different format to ERA’s main reports, ie less corporate detail or formal layout, but still containing reasonably extensive site visit info.
Note 3: There have been questions as to how ERA’s price targets are determined. They are what is considered to be reasonably capable of achievement within the coming year. If there is production, then an NPV at 5% with constant money gold prices may be the guideline. Charts are observed as at least 50% of the market uses them and then there’s concept: After all, a mine producing >100kozpa for say ~5 years at an AISC of ~A$1000/oz to A$1100/oz and owning its own plant, could theoretically currently have a market cap of >A$200m. Black Cat at 20c is only a ~$11m market cap (with ~$3.9m in net cash) based on its 57m shares in issue (including the 24m escrowed), and there are another ~18m options mostly escrowed extending out to 2023. A 50% increase to 30c (when BC8 traded at 38c and initially remained above 35c from January 2018), could in ERAs opinion be achievable, based on the progress being achieved and upside potential contained in this report, together with an anticipated newsflow of exploration results. Hence ERA’s target of >30c for BC8. Occasionally ERA’s target prices are realised in much less than a year, on some occasions even less than 1 or 2 months.
This is the first time ERA has visited the old Queen Margaret or Bulong Goldfield and although ERA wrote the IPO summary and compiled its own historical understanding and background, we were surprised by the continuous strip of old workings at least ~6km long – highlighting that despite its closeness (~25km east) to Kalgoorlie it has been forgotten by many and remained essentially dormant (apart from exploration by various companies including Anglo, and various prospectors) for over 100 years.
Also that its geology appears to have been mostly misunderstood or misinterpreted (see ERA’s IPO summary available on ERAs website (www.eagleres.com.au) or BC8s website (under media) (www.blackcatsyndicate.com.au)).
The Bulong goldfield consists of a ~18km long package of tenements that are ~6km wide in the north and narrow down to ~1.7km in the south and can be broadly split into a north and south area at the approximate half-way location of Virgin Dam, with the current main focus being on the southern area, that includes most of the old workings.
Black Cat has significantly simplified the old workings shown in Figure 1b into three almost parallel NS striking mineralised corridorsin Figure 2a, called Queen Margaret, Boundary and Trump. The corridors are open on strike and extend beyond the light yellow corridor areas of the plan, being further north in the case of Queen Margaret as ERA saw of the Wakeful mine in Figure 3, which although present on Geoview, seems to have become overlooked at some stage – based on the size of the trees growing amongst the old workings. While the Boundary corridor appears capable of extending ~1.4km further south parallel to the old Queen Margaret Mine line/corridor of old workings, and the Trump corridor is still being delineated.
Each of these corridors are characterised by a porphyry dyke in a package of undifferentiated sediments and ultramafics with the stoped high grade (such as the historical Queen Margaret Mine) mostly on the hangingwall contact of the porphyry, leaving lower grade on the footwall contact and stockwork mineralisation in the porphyry.
Modelling the porphyry has established a logical interpretation for the area north of Queen Margaret (QM) through White Horse (WH) to Melbourne United (MU) and provides an explanation for the fairly extensive apparently barren (ie without stoping) strike development between QM and MU - because the porphyry was offset east as shown in 3D in Figure 6 on page 3 of this report.
BC8sunravelling of the geology has identified the gaps in most of the historical shallow drilling, which could have upside potential.
Drillhole intersections have been mostly as expected, often with gaps in the hangingwall contact due to stoping and lower grades on the footwall contact, while the relatively thick intercepts at Boundary that were recently reported on 28 August 2018 continued to be encouraging with 12m @ 4.2g/t from 67m incl 4m @ 9.8g/t in BORC015 following up previous intersections such as 6m @7.5g/t, 21m @ 2.7g/t and 6m @ 11.1g/t as shown in Figure 13a on page 5 of the report.
While further drilling was planned at Boundary in SQ 2018, followed perhaps by Trump, the focus has to be on the EIS (50% Govt funded) diamond drillholes that were scheduled to commence by the end of September 2018 with results to be received in DQ 2018targeting deeper extensions of the possible higher grade ore shoots in the Queen Margaret mineralisation as shown in Figure 9 on page 4 of the report, and possibly Strathfield (further north in the Queen Margaret corridor). The diamond drill rig may be utilised to drill some holes at Boundary too.
Black Cat has stated that they expect to report some resources in DQ2018 (probably from Queen Margaret, but possibly also from Boundary).
As can be seen by the visible gold examples of Figure 14b and in the attachment, and that near surface intercept at Queen Margaret of 3m @ 116.3g/t, the prize appears to be there, and the production figures for the individual historical mines and the goldfield itself appear to have been understated, based on the old workings and extensive prospecting.
Black Cat has a programme of working through its various prospects while focusing on the southern area of its tenements, and ERA visited most of the prospect areas in the tenements after Diggers, including the prospective palaoechannel areas that extend over the tenements, plus the visible gold in quartz at Galore, the location of the historical Fenceline / Woodline goldrush, and A38.
Black Cat are making extensive use of drones to map the old workings and geology of their tenements together with a go-pro prototype to also examine the old shafts.
BC8 has stated in presentations that there could be an early stage open-cut over the Queen Margaret area, however, in ERAs opinion it may be more logical to initially have a trial pit as ERA has seen being used by other companies to verify their geological interpretation.Theoretically the strip ratio should be lower in the south as shown by the open workings of Figures 5b and 7a, even further north at Wakeful in Figure 3b, the cover appears to be fairly shallow. The thickness of the cover does increase going north.
The Black Cat board has sufficient experience and knowledge to undertake any form of mining in the Bulong goldfield.
The key points from the visit and recent announcements are :
BC8 has identified the controls behind the gold mineralisation which explains why so much development was off reef between Queen Margaret and Melbourne United and this has indicated areas of upside potential, amongst the three broad N/S mineralised corridors (of Figure 2a).
The three mineralised corridors as identified by old workings etc, are open on strike showing extensions to: the Queen Margaret Corridor Nth through Wakeful to Federation, Boundary Corridor possibly ~1.4km Sth past the Queen Margaret mines, and then there is the open Trump Corridor.
For most of the goldfield where there is stoping, there appears to be porphyry, with most of the historical stoping on the hangingwall contact of the porphyry, whereas there appears to be (mostly) unmined stockwork gold mineralisation within the porphyry and also on its footwall contact.
The planned (with 50% funding [~$138k] already approved) 4-drillhole EIS programme mostly in the Queen Margaret area (see Figure 9) was expected to start by the end of September with results expected to be reported in DQ2018.
BC8 has been concentrating on the southern half of its tenements that have an ~6km to 7km strike length of continuous old workings from Queen Margaret to Federation (north of Strathfield).
Some resources (Queen Margaret, and possibly Boundary) were expected to be reported in DQ2018, probably after some confirmatory diamond drilling.
Follow-up drilling has been planned for the areas of : Queen Margaret, Melbourne United, White Horse, Strathfield/Myhree, Boundary, Galore and A38 during DH2018, with the palaeos much later.
Hence Black Cat Syndicate (BC8) is rated as a SPEC BUY at 20c with a target of >30c
Regards
Keith
BC8 Price at posting:
19.0¢ Sentiment: Buy Disclosure: Held
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