By Rubio Toro
In March this year, I wrote about what I saw as IronRidge Resources’ (LSE:IRR) main projects in Chad, Ghana and the Ivory Coast. Recent news from the company has highlighted further potential in Chad, and I’d like to expand on its flagship project, Dorothe, and why I see substantial value in this particular asset.
Dorothe is an early exploration stage gold licence in south-eastern Chad, a country with minimal mineral exploration history – there are no large-scale mines currently operating – and 60% of Chad’s export revenues are from oil. IronRidge acquired the Chad licences through its investment and subsequent buyout of Tekton Minerals, which has been looking for gold in the country since 2014. The link to Tekton is through IronRidge’s chief geologist, Len Kolff, who previously worked at Rio Tinto’s massive Simandou discovery with Tekton’s managing director Dr Alain Pillevuit, chief financial officer Gary Vallerius, and chief operating officer Paul Reed.
After taking an initial 58% stake in Tekton for $3.5m back in 2016, IronRidge then followed up with a complete buyout in 2017. The Tekton team remain in place and continue to lead exploration activities in Chad. They know the area (and geology) better than anyone and have good contacts in the local townships, local and national government. Although the deal was originally a cash buyout, Tekton opted to take 100% in IronRidge shares at 35p and agreed to a lock-in period. This in itself is a huge show of confidence that Dorothe and IronRidge’s broader portfolio offers good upside potential over the mid-to-long-term.
It was in 2015 that the scale of Dorothe’s gold mineralisation first became apparent. Tekton announced “samples returning up to 103g/t over an area of 2km by 2km” and “Channel samples from the trenches dug in November have demonstrated continuous mineralisation over a strike length of 1km grading up to 63g/t”. In April this year, IronRidge once again verified the high grade with a rock chip result at 39g/t. The average grade at Dorothe is around 3.7g/t from rock chips and trenching.
A recently released graphic (below) demonstrates just how prospective this area is. The grey areas show the extensive artisanal pitting – locals have been digging for gold at Dorothe for many years and it is a vast area. Artisanal miners are a better base exploration tool than any fancy radiometric or aerial magnetic surveys as they are literally not digging if there is nothing to find.
Now, it’s ok having found gold over a massive area (and in gold mining terms, this is a massive area) but it’s another thing to turn that into a world-class discovery (at depth). With their primitive hand tools, artisanal miners can only dig so deep before they hit harder rock – it’s about 20m at Dorothe. However, Tekton has suggested that mineralisation stretches to 200m deep which is more than enough to put Dorothe (and Chad) on the world gold map. The IronRidge geologists have made several comparisons to the geology within the Tintina Gold Belt (one of the world’s richest gold provinces with total deposits over 150MOz) – these are Intrusion Related Gold Systems (IRGS) where magma once flowed from several kilometres down and deposited minerals (gold, silver, copper) in pockets on the way up. Therefore, the geology suggests that depth is not going to be a problem.
As a nice little bonus, almost 3 years ago, the artisanal miners had amassed a tailings dump worth around $5m in today’s prices – these are the rocks that their basic tools cannot break open, but still contain gold (14.6g/t) and silver (12.5g/t) with an 85% recovery potential. The tailings dump can be seen on the above map, the lighter area just above the top infill trench line (grey dotted line). There’s also a strong possibility that there have been a few more rocks thrown on the pile since 2015!
After buying Tekton, IronRidge stepped up the sampling efforts and have since taken tens of thousands of soil and trench samples. The main trench is so long, it can be seen on Google Earth! Sampling is on a huge scale. More recent infill trenching samples have been submitted for analysis and we await results. These will determine the drill matrix and I’m expecting drilling to both focus on the quartz veins (yellow lines) and to follow some of the trenching over the overall artisanal pitting area. Just like the sampling so far, drilling will likely be extensive. We should expect results from recent trenching over the next few months and will hopefully see the drill turning later this year.
On top of all this, as per the April 2018 announcement, IronRidge have managed to secure two other exploration licences adjacent to Dorothe. Not far from the Dorothe Main Vein Zone on the bordering licence, the Guerere target also has a large area of artisanal workings. Slightly further North, Kalaka artisanal workings are documented in detail. Adjoining licence Nabagay has indications of gold mineralisation in rock chip samples – IronRidge is describing the area from Dorothe to Nabagay as “40km strike of prospective gold corridor” which is significant terminology
IronRidge regularly talk about ‘Province Scale’ when referring to exploration. They are not interested in small licences scattered across various continents. To reach their current portfolio of 40 licences, they have relinquished nearly the same amount. It’s likely that the total licences will be reduced further over time. Not having that ruthlessness can suffocate junior exploration companies whilst they spend millions developing or holding onto an average asset and then selling it years later for a fraction of their actual spend.
The recent move to aggressively secure adjoining licences in Chad (and potentially joining resources/mineralisation), in my opinion, shows a strategy, outlook and ambition far beyond that of your average AIM explorer and I believe that continued progress across their portfolio will eventually be recognised in the market cap.
A major gold discovery is defined as one million ounces in reserves or at least two million ounces in resources. Major discoveries have been rapidly declining over the past 10 years – a fall of over 85%. About 69% of all the discoveries ever made are less than 5 million ounces but finds around 5 million ounces are becoming very rare. Mine supply is predicted to peak in 2019 and continue to fall to at least 2025 which will almost certainly put pressure on the gold price.
Toro (Twitter: @Toro_AIM)
Disclosure: Toro holds shares in IronRidge Resources but was not remunerated to write the article