Nusantara targets deep gold zones in Indonesia
ASX listed and Indonesia focussed gold developer Nusantara Resources has kicked off a program of deep diamond drilling at the Puncak Selatan prospect adjacent to its flagship Awak Mas mineral resource, following the receipt of some very encouraging surface trenching results reported in December.
The company unearthed a number of wide intersections of gold mineralisation from the trenching program that was aimed at verifying historical exploration results in regions located within 2km of the proposed processing plant location.
At Puncak Selatan a 35m wide zone returned 1.2g/t gold at surface, which included 7m @ 2.5g/t gold and 3m @ 2g/t gold.
Other results included 5m @ 2.8g/t gold and 12m @ 1.7g/t gold, that also included 8m grading 2.3g/t gold.
The drilling campaign is targeting stacked lodes of gold mineralisation down dip from the surface trenching assays and the work is squarely geared towards expanding the current optimised limits of the Awak Mas open pit, potentially increasing project mine life and economics.
The program is expected to take about 3 months, with first assays anticipated during March.
Nusantara has largely slipped under the radar with its surprising armoury of boxes that have already been ticked at Awak Mas.
The Perth based junior has quietly gone about building up an impressive gold ore reserve of 1.1 million ounces at the project on the island of Sulawesi, about an hour’s flight northeast of Bali.
The company listed 18 months ago raising AUD$16.2m via an IPO, which was the largest new gold float on the ASX since Dacian Gold listed back in late 2012.
Punters were looking to get access to Nusantara’s Indonesian gold assets where the company inherited an extensive database of high-quality technical work completed over a 25-year period that was undertaken by a succession of international exploration and development companies.
Nusantara began drilling at Awak Mas on listing and released an updated mineral resource estimate for the project in May last year, racking up 45.3 million tonnes grading 1.4g/t gold for 2 million ounces.
Importantly, 89% of the mineral resource is classified in the more confident indicated category, from which the company was able to define its present ore reserve.
That work provided the springboard for Nusantara’s DFS released in October 2018 that confirmed a robust, 11-year, 2.5 million tonne per annum, open pit mining operation with a very low AISC of production calculated to be USD$758 per ounce.
The life of mine strip ratio is a very respectable 3.4 to 1 and the average gold recoveries exceed 90% via conventional CIL ore processing, although half of the gold can be recovered via simple gravity separation techniques.
The operation is expected to pump out just under 100,000 gold ounces per annum and generate an impressive after-tax cash flow of about AUD$55m, or about AUD$1m a week, with payback in 4 years.
Upfront CAPEX is USD$146m and the post-tax NPV of USD$152m and IRR of 20.3% are expected to potentially get a shot in the arm from higher projected gold prices and significant blue-sky exploration upside that has the potential to grow the near surface mineral resource and ore reserve position quickly. A USD$50/ounce increase in gold price above the USD$1250/ounce price used in the DFS, adds USD$26m to the NPV.
All project construction approvals for the mining infrastructure are already in place and the company signed a new Contract of Work or “CoW” with the Indonesian Government last March, providing security of title out to at least 2050.
With respect to last year’s reporting of the DFS, Nusantara MD Mike Spreadborough said: “The Awak Mas gold project DFS has confirmed that the project is technically feasible, financially robust, with significant opportunities to increase project value through optimising the current mineral resources and through further exploration.”
“The completion of the DFS is a significant milestone for the company, with work now progressing on securing financing for project development …”.
“The … project … has the potential to be developed into Indonesia’s and Asia-Pacific’s next gold mine, providing benefits to shareholders, the community and other stakeholders.”
Whilst other juniors trudge off to Africa and South America to seek their fortunes, Nusantara has derisked its own position moving forward and chosen a much more desirable and stable democratic jurisdiction in fast-developing South East Asia.
According to the company, Indonesia has a low-cost base, excellent infrastructure, access to a skilled workforce and contractors, a long history of mining and the kicker is its exceptional geology and mineral potential in vastly underexplored swathes of the country.
Nusantara’s share register is pretty impressive with the USD$1.1b market cap, Jakarta-based Indika Energy coming on board as a strategic partner with a 19.9% stake in December.
Indika brings with it considerable financial clout and operating and business experience working in Indonesia, which is likely to prove invaluable to Nusantara as it moves its own development and exploration efforts forward on Sulawesi.
A placement undertaken by the company last December put AUD$10.25m in the coffers and was strongly supported by Indika and Nusantara’s other impressive cornerstone investor, Australian Super, who now holds a 14% shareholding.
The company’s largest shareholder, prolific mining investment fund, the Lion Selection Group, currently holds a 23.26% stake in Nusantara.
The flagship Awak Mas gold deposit contains the bulk of the project’s ounces and has two phases of gold mineralisation of epithermal-style quartz veining.
A primary flat-lying set of quartz veins is overprinted by a secondary subvertical set of veins on structures that hold the more lucrative gold grades.
The near-mine exploration drilling has now commenced in earnest, initially targeting Puncak Selatan, but potentially also the Puncak Utara prospect, based off its historical data, recent exploratory results and proximity to Awak Mas.
Last year’s trenching program at Puncak Utara returned an 11m zone grading 2.6g/t gold, whilst the satellite Tarra prospect located just to the northwest was even better with a wide zone of 37m @ 2.3g/t gold, also incorporating an 8m section at 4.1g/t gold.
The “brownfields” Tarra resource contains an inferred resource of 100,000 ounces grading 1.3g/t gold and is also fair game to expand the global inventory in the region, with some higher grades recorded from historical drilling programs.
The company believes it could potentially more than double the current mineral resources in the district, given the lack of modern exploration gold targeting outside the known Awak Mas deposits.
The trenching results emphasise the gold prospectivity of the broader Awak Mas goldfield and tenement holdings on Sulawesi that cover nearly 144 square kilometres of ground on unreserved non-forestry land, which is a big bonus for Nusantara.
Mr Spreadborough added: “These new exploration results continue to demonstrate the potential of the Awak Mas gold project to grow organically and provide potential high-grade satellite operations to augment production from the existing deposits.”
“The (close) proximity of the Puncak Selatan mineralisation to the Awak Mas deposit has the potential to alter the planned pit and significantly increase the value of the project … and together with geophysics analysis, increases the possibility of further substantial discoveries.”
The gold project is located only 45km from the coast, with excellent road infrastructure, telecommunications, low cost power and it is just 8 hours drive or 45 minutes flight north of South Sulawesi’s main town, Makassar, which has a regional population of close to 2.4 million people.
The cashed-up company has a very tight register with just under 168m shares on issue and with a share price hovering around 23c, its market capitalisation is close to a pretty modest AUD$40m.
Regarding this week’s announcement of deep drilling at Puncak Selatan, Mr Spreadborough said: “The commencement of near mine exploration is the first step in identifying additional resources that have the potential to be processed at the proposed processing plant and add further value to the long life, low cost Awak Mas Gold Project.
“The identification of significant mineralisation at the Puncak Selatan prospect and the near-mine area potential to extend the Awak Mas open pit, has made this a high priority drill target.”
With all the traditional boxes ticked including an initial reserve of over 1m ounces, a projected 100,000 ounce a year production profile, a low stripping ratio, at least 10 years of initial mine life and the opportunity to churn out around a million dollars a week after tax, Nusantara’s Awak Mas gold project looks on the face of it, to be the real deal.
Nusantara Resources (NUS)
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