The New Empire – Part I
“…with the share price once again at rock bottom Empire may still be one to watch if it can find a way of taking advantage of at least one of the several new opportunities it has given itself by undertaking the difficult process of change…”
The tough process of transformation embarked upon by gold miner Empire Metals (AIM:EEE), attempting to pivot from a long-time focus on Georgia to fresh assets in Western Australia, has tested the patience of investors. The company’s share price has fallen away dramatically over the few years, and its most recent operations update on its flagship Australian venture disappointed many investors. But with a new position carved out in a highly prospective region there may yet be grounds for believing Empire can reinvent itself.
The company’s previous flagship, a 50pc interest in the Bolnisi Copper and Gold Project in the Caucasus mountains, had been sunk by a long running dispute with the Georgian National Agency of Mines over the extent of the licence. After protracted negotiations with prospective buyers, Empire finally reached an agreement this year to sell its holding for $3.3m to project partners the Caucasian Mining Group.
Messy as it may have been, the sale injected a vital shot of capital into the company’s efforts to reorient itself towards Western Australia. Last year Empire took its first big step on its new path by acquiring a 75pc interest in the Eclipse Gold Project, centred on a historic mine located 55 kilometres north-east of Kalgoorlie. 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 gold for 754.25 oz gold. 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 Project’s 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 last November to raise £2m to support exploratory drilling.
Reverse circulation (RC) drilling at the Eclipse shaft and the Houdini prospect last autumn recorded intercepts including 14 metres at 3.78 g/t gold from 22 metres, including 1 metre @ 21.4 g/t gold, and 1 metre @ 16.65 g/t gold, and a second phase early this year confirmed several veins running in parallel to the main Eclipse vein, including an anomalous stockwork style of near-surface mineralisation in the vicinity of old workings called Jack’s Dream.
Empire doubled down on its Australian focus in May, when it took a controlling interest – also 75pc – in the Central Menzies Gold Project 90 km north-west of Eclipse. The Project, comprising four exploration licences covering a granite-greenstone belt within the Menzies Shear Zone, is circled by the 320,000oz @ 2.1g/t gold Menzies Gold Project operated by ASX-listed Kingswest Resources, and is directly south along the strike of the 15 kilometre Yunndaga line of workings, which has a historic metal inventory of 1.1 million ounces (Moz) of gold. Historic drilling at Eclipse undertaken by previous owner Mel Dalla-Costa, a well known figure on the Western Australian gold scene, encountered several high-grade intercepts including 5 metres @ 19.59 g/t gold from 30 metres, and 3 metres @ 5.15 g/t gold from 35 metres. Under the agreement Empire will spend AUD$500,000 on exploration at Central Menzies within a nine-month option period, with the right to exercise the option for AUD$1.75m in cash and AUD$1.25m worth of shares.
Empire pursued another prospect in the region last year, signing a Binding Heads of Agreement with ASX-listed Artemis Resources Limited to acquire a 41pc interest in the Munni Munni Palladium Project in West Pilbara, a 64 km2 exploration licence with a JORC-compliant Resource of 24Mt @ 2.9 g/t Platinum Group Element (PGE) and gold. Empire undertook a brief drilling programme last June, but as with its former Georgian assets, Munni Munni has been troubled by ownership issues. Last summer Artemis was served a writ of summons by its joint venture partner Platina Resources Limited, which claimed that the agreement with Empire breached the terms of the venture. Artemis is defending its position against Platina’s claim in an ongoing dispute.
Empire changed its leadership in June to reflect its new Western Australian focus, appointing Shaun Bunn as Managing Director, a metallurgist with more than 25 years’ experience in the region’s gold mining sector.
This summer’s drilling
The company has made progress at both Eclipse and Central Menzies this summer. It started exploring Central Menzies, aiming to verify the RC drilling data it inherited, and to acquire fresh geophysical survey data. Last month Empire reported that soil sampling and analysis of historic drilling data had identified two mineralised corridors with elevated gold concentrations, allowing the company to design a 2,100 metre drilling campaign expected to be completed later this month. Empire anticipates ‘adding further drilling targets to the development plan as we complete … geochemical mapping’.
This summer’s drilling at Eclipse has sought to test the extent of previously identified mineralised systems, particularly around historic workings at Jack’s Dream. In July Empire announced that 19 holes had been drilled for a total of 1,893 metres, and three core diameter drill holes for a total of 201.1 metres, discovering ‘several parallel veins in addition to the main Eclipse vein’, and confirming intercepts from previous RC drilling. Operations also revealed a previously unidentified mineralised lode, referred to as ‘Twin Shafts’, running sub-parallel to the Eclipse vein. Significant drilling intercepts included 5 metres @ 3.54 g/t gold from 126m downhole at Jack’s Dream, 4 metres @ 4.78 g/t gold from 66 metres downhole at Twin Shaft, and 2 metres @ 3.65 g/t gold from 53 metres downhole at Eclipse.
But late last month a long, and rather cautiously worded, update announced a shift of focus. Of the more than hundred drill holes drilled over three exploratory programmes over the past 12 months, only eight had encountered significant gold intercepts within the oxidised zone within 30 metres of surface along strike from the main Eclipse shaft. The company now thinks ‘the main gold mineralisation at Eclipse is more prevalent at depth’ and ‘is perhaps orders of magnitude larger than originally anticipated.’ It therefore ‘believes that the development of a small-scale open pit operation is not the optimum path for unlocking the value of Eclipse, and may ultimately lead to the sterilisation of the higher value gold mineralisation within the high-grade primary lodes and supergene enrichment near the base of weathering.’ Further drilling will be necessary to ‘expand the exploration and development focus on the wider potential that is offered by combinations of the Eclipse lode with the Jack’s Dream extension and Twin Shaft lode with the objective of delivering a larger mineralised inventory to advance towards feasibility stage’. A subsequent update stated that ‘we are completing our initial assessment of the small-scale mining opportunities at our Eclipse Gold Project’ and expects to provide a technical update shortly.
The change of plan left the markets uncertain about the company’s ability to execute and fund drilling at greater depth, the cash generated from the sale of its Georgian assets notwithstanding. Empire’s last set of results, published in April, prior to the sale, stated a cash position (as at 16 April 2021) of £1.23m. A year-end loss of £572,989 was reported (31 December 2019: £675,592).
Empire’s share price has been battered over the past few years as its Georgian venture has run aground, and investors are yet to be convinced it can successfully engineer its shift in focus. Riding high at 25p four years ago, the company’s stock price nosedived to just over 1p as its Caucasian venture foundered. The price rallied somewhat last year as the company made efforts to reinvent itself, entering 2021 at 4.6p. But after the mixed news from Eclipse it was back down to 1.65p at the time of writing. Earlier this week Empire’s directors tried to shore up confidence – and perhaps quash rumours of a further placing – by increasing their stake.
Current and prospective Empire investors understandably want results sooner rather than later in Australia after several frustrating years. Empire must demonstrate it has a convincing and affordable plan if it is going to have an opportunity to realise Eclipse’s potential. But if it can forward a plausible programme a case can still be made that the company may come good. It has taken action to extricate itself from its Georgian difficulties, staking out a new position in one of the world’s most prospective gold regions. It is embarking on initial drilling at Central Menzies later this month. Eclipse still looks good on paper. And at some point there may be a positive update regarding the Munni Munni prospect. There are a lot of ‘ifs’. But with its share price once again at rock bottom Empire may still be one to watch if it can find a way of taking advantage of at least one of the several new opportunities it has given itself by undertaking the difficult process of change.