Egan Street Resources

Single asset WA gold explorer looks to form the basis for growth

 


 

Egan Street Resources is a young ASX-listed precious metals exploration company backed by a seasoned board of directors and strong management team which is focused on realising the near term potential of the high grade, low cost Rothsay Gold Project in Western Australia. Rothsay has previously been subject to historical mineral extraction via shallow open pit and underground mining scenarios up until the 1990s, and was purchased by EganStreet in July 2011 when it operated under a previous name Auricup Resources. Since then, EganStreet has used historical data to define a mineral resource at Rothsay and recently commenced a drilling programme, the results of which will be compiled into a definitive feasibility study (DFS) and a maiden reserve due in Q2 of 2018.   

 

EganStreet’s activity on the Rothsay project has been directed by successful metallurgist Marc Ducler since his appointment as managing director in July 2016 just after the company rebranded. 

 

Ducler brings well over 20 years of experience in the mining industry to the project, having assumed senior on-site management positions at mines such as GoldFields’ Agnew Mine, BHP’s Mt Whaleback Mine and FMG’s Cloudbreak Mine. 

 

At the time EganStreet felt like a perfect fit for Ducler, who possesses all the skills required to take a project like Rothsay through the development stages and into production. 

 

Ducler was attracted to Rothsay for myriad reasons, including the high grade gold mineralisation present at the resource, the low cost entry into production, the well-established infrastructural ingredients and crucially the strong shareholder support EganStreet receives. 

 

“These high grade golds present low capital entry opportunities to becoming a material single asset gold producer which then forms the basis for growth. Rothsay ticked that box beautifully,” says Ducler. 

 

A board of mining professionals 

 

However, progressing any gold project necessitates a strong team of mining professionals driving forward the development stages, and EganStreet is no different in this respect.  

 

The board is dominated by industry experts such as experienced mining engineers Barry Sullivan (chairman) and Lindsay Franker, geologist and non executive director Hedley Widdup and Simon Eley, a commercial solicitor with vast experience in the resources sector.  

 

The management team is comprised of geology manager Julie Reid, who counts over 30 years of experience in exploration and mine geology in Australia, Indonesia and Vietnam, and chief financial officer (CFO) Richard Hill with over two decades of know-how in the gold industry. 

 

Increasing the mineral resource 

 

Since the company first floated on ASX in September 2016, the board and management team have implemented a development programme based on increasing the mineral resource estimate at Rothsay, which stood at 226,000oz @ 11.3g/t Au. 

 

During the last 12 months the company has progressed an aggressive drilling campaign at Rothsay which has seen the completion of 28 diamond drill holes for 9.5km and 57 RC holes for 5.1km, allowing for the upgrading of the mineral resource estimate to 262,000oz @ 11.6g/t. 

 

What’s more is another update to the mineral resource estimate is due in the early weeks of December as further RC and diamond drill results are announced, with Ducler fully expectant of another significant increase to the figure. 

 

“From a project development front we have also been extremely busy,” Ducler reports. “A scoping study was released within three months of listing, six months later we released a pre-feasibility study (PFS) that doubled the production target and tripled the free cash flow generated to 200,000oz of gold production and US$82 million in free cash flow. 

 

“A DFS is currently being completed which is due in Q2 2018 and our expectation is to further increase the production target and free cashflow with the DFS release.” 

 

Shareholder support 

 

EganStreet will continue its current drilling programme to March 2018 safe in the knowledge that its activity is supported strongly by its shareholders, who have supplied ample funding thus far. 

 

“In September 2017 we completed a $4 million placement at 25 cents per share, a 25% premium to our initial list price,” Ducler reveals. 

 

“This was also strongly supported with the book closing 60% oversubscribed. We currently have $4 million in the bank and are well placed to drill strongly through to March 2018.  

 

“There are 48 million in the money options expiring in March next year and this has the potential to provide the majority if not all of the equity portion of the funding required for the development of the Rothsay Project.” 

 

Further drilling 

 

This shareholder backing is contributing to EganStreet’s diamond and RC rigs drilling programme, which is both infill, near mine extensional and regional in nature and designed to move inferred ounces over to indicated in the lead up to a maiden resource declaration. 

 

Simultaneously, the company is aiming to test the prospectivity of the adjacent ultramafic rock units that are showing significant historical workings in the shape of multiple 30 metre mine shafts, following the strike of the mineralisation along the footwall and hanging wall contact of the ultramafic unit. 

 

Consequently, EganStreet will also be targeting these prospective ultramafic units along with the drilling programme, as part of its regional exploration work that will commence at the end of 2017 and into early 2018. 

 

While the DFS and maiden reserve declaration is not due until Q2 2018, Ducler and his team have complete confidence in Rothsay’s ability to deliver profitable returns to its loyal shareholders. 

 

Healthy profit margins 

 

Financial modelling completed at the PFS stage calculated All-In Sustaining Costs (AISC) of $765 per oz against a gold price of $1,200 per oz, which represents a healthy profit margin of 57%. Furthermore, at the current gold price of around $1,300 per oz, this margin looks even better.  

 

Rothsay’s low AISC margin is shaped by the ‘fantastic’ infrastructure already in place at the project, where the portal and decline is already developed down to 142 metres below surface, there is tailings storage facility, gazetted access roads, bore fields and airstrip. 

 

In fact, the only significant infrastructural development needed at Rothsay is a new processing plant, with the finance team currently working through a DFS for the facility, which will be reported in Q2 2018. 

 

However, there are still a number of boxes that need to be ticked prior to EganStreet throwing all of its weight behind the development of the Rothsay project, according to Ducler. 

 

Investment decision 

 

“That investment decision will be made in Q2 immediately after completion of the DFS and securing committed debt financing. We are currently working through the DFS and we will finalise this after we update the mineral resource estimate at the end of Q1.” 

 

In the interim, the board and management team will work with regulators to ensure the mining proposal, works approvals and the project management plan are prepared for submission.  

 

In addition, as the timing draws closer EganStreet will look to fill a number of key management roles for the project, and has already begun this process with the recent appointment of Richard Hill as CFO. 

 

With a DFS and maiden reserve to come in mid-2018, EganStreet is within touching distance of taking its Rothsay Gold project off the ground. Once these crucial milestones have been passed the company can cast its eyes towards first gold pour and the return of capital to shareholders that will follow. 

 

“Longer term the Rothsay project will be our platform for growth,” Ducler declares. “If the opportunity presents we will certainly look to grow EganStreet by greenfields exploration and smart acquisitions where we can see that value accretion for EganStreet shareholders.