Kristie Batten: Koonenberry Gold sees shades of De Grey success story at Sunnyside

Koonenberry Gold boss Dan Power thinks its Sunnyside gold prospect in New South Wales has shades of De Grey’s landmark Hemi discovery.

Koonenberry is bullish on the scale of its Sunnyside gold prospect at Enmore in NSW. Pic: Supplied/Stockhead

One of Australia’s top mining journalists, Kristie Batten, writes for Stockhead every week in her regular column placing a watchful eye on the movers and shakers of the small cap resources scene.

It’s still early days for Koonenberry Gold's (ASX:KNB) Sunnyside gold discovery but the company believes there is plenty of value to be created.

Koonenberry shares exploded back in April when the company reported a hit of 170m at 1.75g/t gold from 77m, including 18m at 9.95g/t gold, from the first hole at Sunnyside, part of the Enmore project in New South Wales.

Since then, the company has followed that up with 172.9m at 2.07g/t gold in the second hole, 102m at 1.10g/t gold in the third hole, 149.5m at 0.94g/t gold in the fourth hole and 150m at 0.71g/t gold in the fifth hole.

Last week, Koonenberry reported that the sixth diamond drill hole had returned 107m at 1.14g/t gold from 189m, including 80.5m at 1.45g/t gold, including 35.5m at 1.94g/t gold, including 9.7m at 3.18g/t gold.

“We're hitting plus-100m at plus-1g, which is pretty exceptional and pretty hard to find another company on the ASX that's having those types of drill hits,” Koonenberry managing director Dan Power told a webinar last week.

The company has drilled 3000m, with the first seven holes all returning visible gold. The results for holes 7-10 are expected in the next month or so.

Power said every hole reported to date had returned impressive grades and widths, with the potential for both bulk tonnage and high-grade gold.

“In the early stages of exploration, you're going to have great holes, and you're going to have holes that aren't so great, and that's normal for exploration and people need to expect that,” he said.

“But it really is about determining the continuity and the size and the scale of mineralisation and obviously, the grade is important.”

Power said mineralisation started at surface and extended down to 300m depth. It’s still open across 75m of true width and 200m of strike.

He added that the deposit had “a very nice shape for an open pit operation”.

“Sometimes the early discovery stages of projects don't actually look like a massive discovery until you're looking in the rear vision mirror, when everything's a lot easier and a lot clearer,” Power said.

The Hemi comparison

De Grey Mining discovered the Hemi gold deposit in late 2019, but it wasn’t until 2020 when the stock really started to run. That provides some inspiration for juniors like KNB.

“It turned out to be an 11 million ounce deposit,” Power said.

He pointed out that the 2.5Moz Diucon deposit returned 72m at 0.8g/t gold and 121m at 1.1g/t gold in early holes, while the 1.5Moz Crow deposit returned 20m at less than 1g/t gold in the first hole.

“When you go back and you compare that with some of the intercepts that we've been reporting to the market, I'm genuinely excited by what we're seeing at Sunnyside,” Power said.

“I'm not saying that we've got another Hemi discovery, but I would take 20% of that. De Grey was bought out for $5 billion and we're a $35 million market cap company, so I think you're seeing really great value with how we're being valued in the market at the moment.

“It’s also very interesting that Hemi is a granite-hosted system on the margin of what they call an intrusion, but that's another name for a granite and sediments, so it's a similar geological setting – another shear zone-hosted gold deposit.”

Having a crack

Shares in Koonenberry surged as high as 9.5c in May but have pulled back to 3.2c.

“Obviously, we've had quite a good run in our share price, followed by a bit of a correction which I think is normal for any company that's at the discovery phase of their life cycle,” Power said.

“We're back at 3-3.5c, which is where we were before we started this journey, before we started releasing all these incredible intercepts, so I think that represents tremendous value.”

Melbourne’s Datt Capital amassed a substantial stake in the company but then called for board and governance changes.

The issue was resolved and Koonenberry appointed Datt appointee Tony Gu to the board.

However, Gu resigned only three weeks later and Datt sold the bulk of its shares, with director Anthony McIntosh buying $340,000 worth of the stake.

Power said he was unsure as to why Datt sold, but welcomed the ongoing support of Koonenberry’s other institutional shareholders, Lowell Resources Fund (ASX:LRT) and Lion Selection Group (ASX:LSX), the latter of which tipped $1 million into the company’s $5 million capital raising last month.

The raising leaves the company with $10.35 million cash, which will fund the next 10,000m of drilling at Enmore.

“We're planning to really give it a crack,” Power said.

“We're going to do infill and extensional drilling where we want to determine the continuity of mineralisation and then we also want to determine the scale, so we know that it's open along strike, both to the southwest and to the northeast.

“And we also have to figure out if there's a plunge component, which there may well be, which can only be done with more drilling.

“We are targeting a big system here. In my mind, we're targeting a plus 1Moz system at Sunnyside.”

The company also has other prospects at Enmore and surface geochemical sampling results released last week extended the potential strike length by 1.6km to 2km.

High-grade rock chip results of 17.55g/t gold and 11.85g/t gold were returned from historical workings at the Hand in Hand prospect.

“Hand in Hand is a soil anomaly which looks like it's equal to, if not twice the size of, Sunnyside,” Power said.

Newmont funding drilling elsewhere

Outside of Enmore, Koonenberry also has two joint ventures with the world’s biggest gold miner, Newmont Corporation (ASX:NEM) .

Newmont has acquired 80% of the Junee project, with Koonenberry free carried to commercial production, while Newmont can earn up to 80% of the Fairholme project by spending $5 million on exploration.

On Friday, Koonenberry reported results from generative aircore drilling completed by Newmont at both projects.

Fairholme returned no notable results, though work will continue.

At Junee, the highlight of 94 holes was 33m at 0.11g/t gold from 3m and 2m at 0.11% copper from 33m, expanding the prospective area of the Carters prospect to around 1.6km strike and 300m width.

“I think the takeaway here is that Newmont really like this project,” Power said.

“They see strong potential for porphyry systems. They're chasing Cadia Ridgeway systems, so very, very, very similar rock types, similar alteration, veining, sulphide types.

“Not quite economic, but not too far away from economic in terms of the drill hits that are being intercepted.”

At Stockhead, we tell it like it is. While Koonenberry Gold is a Stockhead advertiser, it did not sponsor this article.