A Golden Eclipse for the Empire
“…With results from its latest work programme due in the next month or so the Empire Metals share price may be set to break out…”
For exploration and resource development company Empire Metals (AIM:EEE) 2020 was a challenging, though potentially transformative year, with some key acquisitions and sales enabling the company to move into 2021 in robust form.
Until August Empire’s primary focus was its 50pc interest in the Bolnisi Copper and Gold Project in the country of Georgia. The Bolnisi concession, covering an area of more than 860km2, is situated on the Tethyan Belt, a well-known geological region in the Caucasus hosting a number of high-grade copper-gold deposits and producing mines. Empire has tenure over two deposits in the project licence area, Kvemo Bolnisi East and Dambludi.
But the project has been dogged by a dispute with the Georgian National Agency of Mines over rights to the rest of the Bolnisi Project licence area, which includes three other significant deposits. Empire is appealing against the Agency’s position.
Last April, seeking to diversify its interests beyond Georgia, the company entered into a Binding Heads of Agreement with Australian-listed Artemis Resources Limited (ASX:ARV) to acquire a 41pc interest in the Munni Munni Palladium Project in West Pilbara, Western Australia, a 64km2 exploration licence with a JORC-compliant Resource of 24Mt @ 2.9 g/t Platinum Group Element (PGE) and gold (12.4Mt Measured, 9.8Mt Indicated, and 1.4Mt Inferred). A drilling programme got underway in June, with 12 holes being drilled at the location to a depth of nearly 2,000 metres and the samples sent for analysis.
But this project too has been troubled by ownership issues. In July Artemis was served a writ of summons by its Munni Munni joint venture partner Platina Resources Limited, which claimed that the agreement with Empire breached the terms of the venture. The dispute is ongoing, Artemis defending its position against Platina’s claim.
A potentially transformative acquisition
Just a few weeks later, however, Empire made what seems to have been a game-changing breakthrough: an agreement with Philips Exploration Pty Ltd to acquire a 75pc interest in the Eclipse Gold Project, also in Western Australia, for AUD$100,000 (approximately £55,000) in cash, with a further AUD$150,000 (£82,144) to be settled through the issue of shares. The agreement includes a provision giving Empire the option to acquire the remaining 25pc of the project. The numbers included are for the option, to exercise the option, and the consideration was AUD$1,000,000 in cash and AUD$1,000,000 settled via the issue of 14,191,020 new ordinary shares as per the announcement released on 10 December.
Eclipse’s long history reflects Western Australia’s gold mining heritage. The mine, which has changed hands several times since the turn of the last century, was sunk to its current depth of 78 metres in 1910, and has recorded historic production of 954 tonnes at 24.6 g/t Au for 754.25 oz Au. Sporadic re-exploration since the 1990s has hinted at the mine’s continued potential. A 2014 drilling programme identified high-grade mineralisation within a 30 metre zone either side of the main Eclipse shaft, and soil surveys have indicated elevated gold concentrations in portions of the Eclipse mineralised system. Two additional targets have also been identified, the Houdini and Easy prospects, north-west of the main Eclipse shaft. Empire completed a placing in November to raise £2m to support the acquisition and an initial work programme.
An agreement to sell Bolnisi
As the programme was getting underway the company released further good news, announcing an agreement to sell the Bolnisi Copper and Gold Project in Georgia to Canada-listed Candelaria Mining Corporation (TSXV:CAND). The agreement – an all-equity total consideration of CAD$7m – gives Empire exposure to Candelaria’s promising development projects in Mexico, as well as a continued stake in Georgia through an equity holding in the Canadian company. Candelaria’s primary focus is the prospective Pinos Gold Project, an underground mine with combined Measured and Indicated Mineral Resources of 25,000 oz of gold and 497,000 oz of silver, where the company is working to produce 13koz of gold a year over a seven-year mine life for an all-in sustaining cost of US$835/oz.
The agreement commits Empire to some significant internal reorganisation: Empire CEO Mike Struthers and Non-Executive Chairman Neil O’Brien will both join the Candelaria board, the former as CEO, but will retain their positions on the Empire board, with Mr Struthers moving to the position of Non-Executive Director. Candelaria will resume Empire’s efforts to resolve the licence’s permitting issues. It should be noted that the agreement is subject to approval by Empire’s Georgian partners, the Caucasian Mining Group, which has yet to be confirmed.
Progress at Eclipse
In the meantime Empire has made good progress with its initial work programme at Eclipse. In October the company began a 2,300m drill programme designed to test mineralisation at the main Eclipse shaft, and Houdini, which soon yielded its first positive results, the assay results for one drill hole recording 14m @ 2.57 g/t Au from 94m downhole, including 4m @ 4.98 g/t Au from 97m.
By December the initial work programme, comprising soils geochemistry, a ground magnetics geophysics survey, and Reverse Circulation drilling, was complete, giving the company detailed geophysics over the whole area that will guide future work. The results in Eclipse’s uppermost 50 metres indicate mineralisation is open at depth and promising findings included those for hole ECRC20-022, which recorded 14m @ 3.78 g/t Au from 22m, including 1m @ 21.4 g/t Au, and 1m @ 16.65 g/t Au, indicating the potential for a profitable and high-grade open pit operation.
Earlier this month Empire confirmed a new 4,000m drilling programme comprising more than 40 holes, designed to infill the first phase drilling as well as test extensions to the mineralisation at Eclipse both along strike and at depth, including better definition of the near-surface resource potential. The programme, which is expected to take four to six weeks, will also test known mineralised structures parallel to the main Eclipse vein, which have historically yielded attractive intersections.
Set fair for 2021?
Empire’s solid progress on the ground at Eclipse comes as the price of gold is touching the levels it reached during its rally last summer. Gold surged to a record of $2,072 an ounce in August due to the economic fallout from Covid-19, and earlier this month reached a two-month high of $1,959 a troy ounce, driven by rising expectations of inflation stimulated by Covid recovery packages and a fall in the price of the dollar (a cheap dollar makes gold and other commodities less expensive to buy in foreign currencies).
After some challenging times over the past couple of years the stars now seem aligned for Empire as the company moves into 2021. It’s share price continues to trend upwards, now around 4.4p, up from 2p just prior to the Eclipse deal, taking the company’s market cap to £13.5m. Following its November fund raise and the planned – though as yet unconfirmed – sale of Bolnisi, Empire has the funds to carry out its work programme. The company’s last set of interim results reported a pre-tax profit of £256,515 for the six-month period ended 30 June 2020 (six months ended 30 June 2019: loss of £377,327), and a net cash balance of £364,369 (year ended 31 December 2019: £50,840).
Empire’s share price spiked at 5.69p in early November as the good news from Eclipse rolled in: with results from its latest work programme due in the next month or so the price may be set to reach and break through that high in the next few weeks.