Is Conroy Gold the Jewel the Irish had hoped for?
“…If Conroy Gold can follow up with a positive drilling programme its share price, which has fallen back to around 23p since news of the deal pushed it up to 45p, may start to climb again…”
Founded some 25 years ago Conroy Gold and Natural Resources (AIM:CGNR) has waited a long time for an opportunity to prove the possible presence of a significant gold deposit across a broad swathe of north eastern Ireland. Now, after the announcement of a joint venture partnership earlier this year, and the commencement of drilling last week, momentum seems to be gathering.
The company’s primary interest is a gold trend stretching for some 40 miles along the Orlock Bridge Fault Zone, situated on the island’s Longford–Down Massif. Conroy’s licences encompass four major gold targets, Clontibret, Clay Lake, Glenish and Slieve Glah. A 2012 JORC estimate states Indicated and Inferred resources of 320,000 Oz Au and 197,000 Oz Au, with an overall grade of 2 g/t Au, based on analysis of a fraction of the Clontibret area, drilled to a maximum depth of 350 metres. The deposit remains open in all directions as well as depth, and gold intersections including 16.6m at 6.5 g/t Au have been recorded outside the current resource area. Conroy says the Clontibret deposit is geologically comparable to the prolific Fosterville deposit in Victoria, Australia.
The company is also targeting other metals for which the Longford–Down Massif is known, including zinc, lead, copper and antimony. It also has exploration interests in Finland’s Lapland gold belt, not far from Europe’s largest gold repository, the 4 million Oz Au mine at Kittila.
Conroy has been led since it was founded in 1995 by Chairman Professor Richard Conroy, whose long and varied career spans natural resources, politics and medicine. Currently Emeritus Professor of Physiology in the Royal College of Surgeons in Ireland, Professor Conroy co-authored the first text book on the circadian rhythms that govern human sleeping patterns, and has contributed influential research on jet lag, shift working and decision taking in business after intercontinental flights. A former member of the Irish Senate, he has served as a government spokesman on Energy, Industry and Commerce, Foreign Affairs and Northern Ireland.
In the 1970s he founded the Irish offshore oil exploration company Trans-International Oil, which initiated the Deminex Consortium that included Deminex, Mobil, Amoco and DSM. He went on to found Conroy Petroleum and Natural Resources, which discovered the Galmoy zinc deposits in County Kilkenny some 35 years ago, galvanising the Irish base metal industry.
Conroy’s busy 2021
The company’s breakthrough joint venture was announced on 25 February when Conroy signed a Letter of Intent with Turkish mining firm Demir Export for a proposed earn-in agreement to develop its gold trend licences. Conroy choose Demir ahead of Anglo Asian Mining, with which a joint venture had been proposed last summer. The partners’ initial focus will be the construction of a mine at the the Clontibret deposit. If successful the other targets will be similarly developed. The agreement commits Demir to investing €9m up to the point of construction of the mine in return for a 40pc stake in all of Conroy’s Longford-Down Massif gold interests. If construction goes ahead Demir’s interest would increase to 57.5pc.
Conroy followed up the announcement a few weeks later with a £2m fundraise. The placing follows a £800,000 fundraise last August. The company recorded a loss after tax for the half year to 30 November 2020 of €703,294, as against a loss of €278,008 in 2019. As of 30 November 2020 its net assets amounted to €18,696,306, with cash and cash equivalents of €503,879.
Conroy maintained its momentum with the announcement earlier this week that the first holes have been drilled at Clontibret. The programme’s commencement was preceded by several promising updates further delineating the prospect’s potential. A February geophysical survey indicated ‘structural features that are known to host gold mineralisation’ at the Clay Lake target, and further gold discoveries were found at Glenish, rock chip sampling discovering gold with values up to 0.2 g/t as far as 200 metres to the east of the target, suggesting it may extend further than previously thought.
The following month the Massif’s capacity to yield other metals was highlighted by positive results from an infill zinc-in-soil sampling programme on the northern section of a 20 km2 area that lies to the south of the gold trend. A third of the 65 samples collected recorded values greater than 500ppm zinc over an area of just under a kilometre, 10 being reported as being greater than 1,000ppm zinc, with the overall range being from 74ppm to 3,700ppm zinc. The results, indicating the presence of a range of associated elements including lead, cadmium, manganese and nickel, have encouraged the company to plan a follow-up drilling programme to further confirm the presence of base metals.
Elsewhere, a high resolution ground magnetic survey has identified new drilling targets on the company’s gold exploration acreage in Finland. Previous geochemistry in the company’s permit area in Sodankylä has been encouraging with gold-in-soil values, of up to 4,470 Au ppb. The new targets revealed by the ground magnetic survey include two highly magnetic bodies and a series of shear zone hosted gold targets. Continued analysis of the results may justify an application for further gold exploration acreage in the country.
Increased demand for gold and commodities
As we noted when we looked at Lexington Gold (AIM:LEX) earlier this month, there are clear signals the price of gold is picking up after retreating from the highs of more than $2,000 reached last August. The price fell at the turn of the year after money piled into equities following the rollout of coronavirus vaccines in the US and Europe, and as bond yields rose. But the price has risen by some 5pc over the past month, moving back above $1,800. Demand has spiked in China and India, two of the biggest consumer markets for the yellow metal.
And fears of rising inflation as the world economy recovers from the pandemic have prompted investors and central banks to increase their holdings, underlining the metal’s continued status as a safe-haven asset and store of value. Jittery markets wobbled last week in response to US consumer price index figures showing a 4.2pc rise, with a further shake out of the growth tech stocks most likely to lose value if prices rise. Although governments and central banks are reluctant to spoke gathering economic momentum with higher interest rates, sellers are worried prices might be going up for a while, not just temporarily. One bearish trader said: ‘The pandemic might be the systemic earthquake that changes the inflation outlook we have been used to for the past 30 years.’
Although cryptocurrency advocates argue bitcoin may establish itself as a form of ‘digital gold’, the currency’s continued volatility makes it a dubious store of value, as we discussed in our recent feature on Argo Blockchain (LSE:ARB). UBS Wealth Management, Pimco, T Rowe Price and Glenmede Investment Management are among institutional fund managers that have expressed reservations in the past few days about the credibility of cryptocurrency investments as an asset class. Gold, it seems, remains the first port of call for the vast majority of seasoned investors looking for a safe harbour.
And if Conroy can unlock the other metals that its assets seem to contain it may be able to take advantage of what appears to a strong long term upturn in demand for commodities. Earlier this year we discussed the possibility the global economy may be entering a new commodities super cycle. Commodity indices have surged as the world economy gradually recovers from the pandemic, driven by demand for the materials necessary for the energy transition, and the promise of sustained government support for green infrastructure programmes. Investors are also turning to commodities as another hedge against inflation. As one asset manager put it: ‘If you think the inflation regime will change more than markets expect, and you want to hedge this, the best way is to add cyclical commodities to your portfolio.’
Conroy’s long wait to prove the value of its assets has gathered significant momentum over the past year. As this BBC report on the prospect broadcast seven years ago shows, a breakthrough has been anticipated for some time. Despite the strong tailwinds behind commodities many junior miners have had a tough time in recent years in accessing risk capital. Institutions and private investors have been burned too many times to give easy money to speculative exploration plays simply because commodities prices are going up. Conroy’s deal with Demir gives it the opportunity to be one of the exceptions. If the company can follow up with a positive drilling programme its share price, which has fallen back to around 23p since news of the deal pushed it up to 45p, may start to climb again.