The next junior to make a move in the hot Murchison gold fields has emerged
Odyssey Gold could be screaming value as it kicks off technical studies on its 407,000oz Tuckanarra gold project in WA’s Murchison.
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Odyssey Gold is emerging as one of the deepest value gold plays in the Murchison gold fields
Technical studies kicking off on ODY's 80% owned, 407,000oz Tuckanarra gold project
Drilling under way after $4m raise backed by quality institutions
With over 30 million ounces of historic production and two competing multi-billion dollar fiefdoms, few gold territories in the world have become as coveted as WA's Murchison.
On one end, building its empire around the towns of Meekatharra and Cue, is Westgold Resources (ASX:WGX).
To the south at Mt Magnet is Ramelius Resources (ASX:RMS). Between them, the mid-tier miners are among the most closely watched in the ASX gold space.
But they don't have the ore to support the continued expansion and even filling of their milling capacity, a fertile environment that has enabled small gold miners and explorers in the region to thrive.
The latest to really plant its flag is Odyssey Gold (ASX:ODY).
Part of the Apollo Group of companies led by former Normandy Mining executive Ian Middlemas, ODY has been a sleeper in the heart of the Murchison for years.
It acquired the 80%-owned Tuckanarra gold project for a song in 2020, when gold was floating around A$2500/oz.
The boom of the past two years has doubled that price to over A$5000/oz, while Tuckanarra has grown into a 407,000oz open pittable project at 2.5g/t, 311,000oz of those found on existing mining leases.
It even has a processing solution set up, with material likely to be trucked and milled through 20% minority JV owner Monument Mining's mothballed 260,000tpa mill at Burnakura, where plans are being drawn up to reopen and expand the plant to 750,000tpa.
"At the moment there's about 7.5Mtpa of capacity within 120km of it and there's every chance that will go to 10Mtpa with some of the mill upgrades that are being planned in the area," Odyssey Gold managing director Matthew Syme said.
"Most of those are literally on the highway."
Where would you rather be?
Value gap
Or maybe it should be where the bloody hell are ya?
Odyssey Gold has a substantial resource in the bank with 5000m of drilling on the way.
Its mining plans at the moment are likely to involve cutbacks of oxide-rich pits, material highly desirable to plant operators because of its smooth, free-milling nature.
Close to 100,000oz was mined by Metana Minerals in the late 80s and early 1990s, and processed at its nearby Reedy gold mine, now part of the Westgold empire.
Technical studies are under way, with work ongoing to extend the share of indicated ounces in the Tuckanarra resource so a JORC-compliant scoping study can eventually be delivered.
At a market cap of just $22 million, there's plenty of upside not yet included in the company's valuation, especially with gold sitting at over US$3400/oz (A$5200/oz).
While gold juniors have historically been valued in the order of 10% of the in situ value of their resources, today juniors like ODY are trading at closer to 1%.
"Normally speaking we're not gold bulls per se because we just take the gold price that's in front of us, but it's been fascinating to watch the increasing levels of excitement in the space," Syme said.
"It really hasn't yet flowed right through to the junior explorer end in any meaningful way like it did in the 1980s and other bull runs.
"I think there are signs that's just starting to happen. Junior gold mining companies like us have resources in the ground trading at 1-1.5% of the value of the mineral they own. It's easily the best exposure to gold in the world and gold is a pretty important investment category in the current environment.
"You can make a compelling case for the gold price and especially the junior gold equities market to keep on going a lot stronger than what it even is so far."
Big backers
There are certainly institutions though who can see the forest for the trees.
One of them, Melbourne's Collins St Asset Management, is heavily invested in WA's junior gold space and recently upped its stake in Odyssey on market from 8.14% to 9.15%.
That came despite dilution from a $4m placement which will fund the current RC drill campaign and the technical study, looking at mining high-grade open pit resources at Tuckanarra through Burnakura.
"Collins Street are very active in the area and they've expressed a view about the potential in the Murchison area and the potential for consolidation given the alignment of resources and milling capacity," Syme said.
"It's interesting that as well as increasing their investment in their current round, we also started to see some other smaller institutional investors come onto the register.
"I think we're just at that cusp of being appealing to institutions given the potential for a significant re-rate now that we're fully funded, actively exploring and presenting as a very compelling near-term development."
The value proposition can be seen in full view down the road at New Murchison Gold (ASX:NMG).
Its shares have lifted 70% to a market cap of $150m after that company began mining at the Crown Prince South gold project, which will be processed via a deal with Westgold.
"That's a really interesting comparison. Obviously they've got a cracking deposit up there at Crown Prince, essentially 4g/t open pittable," Syme said.
"But there are some good indicators there for what we are looking at with Tuckanarra.
"For example, they converted more than 50% of their resources to reserves, that's a pretty good benchmark for us with the 407,000oz resource.
"The other compelling thing there is the metrics for the market rating. They're trading north of $500 per resource ounce, we're at a tenth of that."
Long-term potential
While there is a keen focus is on the known resources at Tuckanarra, which will factor into the mining studies, the potential to find additions at targets outside the existing Bollard, Cable, Highway Zone, Kohinoor, Bottle Dump, Lucknow and Maybelle deposits remains significant.
"We did an aerial EM survey of the Tuckanarra area back in March and it highlighted a lot of the conductor targets there," Syme said.
"The mineralisation at Tuckanarra is generally associated with pyrrhotite – sulphide replacement mineralisation.
"Pyrrhotite of course is magnetic and conductive and so we get a pretty good signature from EM surveys.
"Southern Geoscience highlighted 32 geophysical anomalies that we're now starting to work our way through and drilling those as we speak.
"We've got a pretty high level of confidence about the EM as a targeting mechanism."
There could be the potential to find ore sources at depth below the existing open pit resources as well.
"Of course you never know, particularly in that Murchison environment, a lot of these deposits go hundreds of metres and even kilometres deep," Syme said.
"Westgold and Co. have been mining for years there now.
"Generally speaking the deposits we have are just the weathered, surface expression of primary fresh rock ore shoorts coming up from deeper.
"Historically, the miners wanted to mine the high-grade quartz veins or the weathered material.
"We know on all of those deposits ... there are very strong indications that those high-grade fresh rock leads keep going at depth."
Between Tuckanarra and the separate Stakewell project, ODY controls roughly 30km of fertile BIF and greenstone belt between Meekatharra and Cue.
At Stockhead, we tell it like it is. While Odyssey Gold is a Stockhead advertiser, it did not sponsor this article.
Originally published as The next junior to make a move in the hot Murchison gold fields has emerged
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