Ventersburg Concession Crashes the Harmony Party and some important neighbours for Lexington Gold
“..Not many people know or appreciate the fact that gold deposits in South Africa are often accompanied by Uranium. This would indicate that on top of any gold that there is also this possible icing on the cake…”
Here, we take an in-depth view of Lexington Gold. Has the market missed these key points :
- The recent RNS from LEX has brought the Ventersburg asset into focus
- Next door neighbours are China State owned Gold One (G1) and Sibanye Stillwater
- G1 has taken a decision to mine its Ventersburg concession directly adjacent South
- G1 has completed drilling program and has JORC reserve of 4.31mn oz
- G1 approaches LEX for economies of scale, they know their tenement extends to LEX’s
- LEX independent geological consultants estimates 1.39-3.55mn oz in our concession worth $3.68 – $9.4bn
- PLUS silver and trendy Uranium. Uranium could be worth 6-10% as much as the gold
- The Harmony JV, pending Exploration target study at Bothaville still bubbling along.
- If a decision to mine is taken by Harmony, LEX shareholders could be in for a serious upside conservatively estimated at GBP100mn vs 14mn mkt cap.
Introduction
In 2023, when well-known Aussie prospector Mark Creasy injected his South African assets into LEX, the initial excitement pushed the stock price to 10p/share. However, since then, the market appears to have been discounting the prospects for Lexington Gold with the share price hovering around 3.5p. However, though the share price has been subdued, those who follow the stock seem to be encouraged by the constant stream of bullish announcements emanating from LEX, which promptly get ignored by the market. How long things can stay this way though?
The contradiction between a market cap of GBP14mn vs its potential exploration targets of up to 90mn oz, potentially worth, at current prices, US$238bn, is becoming so crass as to verge on insanity! Though it should be said at this point, that aside from the Jelani JV with Harmony, which has a WRE/LEX JORC attributable reserve of 2.95mn oz, all the prognostications relating to exploration targets have to be proven up with REAL drilling.
The Ventersburg Projects
The Ventersburg tenements are all located in the SE of the Witwatersrand which runs to the South of Johannesburg. As is well known, this is the most prolific gold producing area in the world.
Recently, as announced separately, LEX commissioned Shango Solutions, the in-house geological consultant, to complete an independent study examining the potential of the Ventersburg concession and how it value could be added for shareholders with a view to establishing an exploration target. The study can be seen here https://www.rns-pdf.londonstockexchange.com/rns/4650O_1-2024-12-2.pdf
The focus of the interest by G1 in the WRE Ventersburg concession is concentrated on the SW of our concession and the NE of G1’s. G1 had proved up its 4.3mn oz JORC reserve as long ago as 2013. However, in 2023, another 30 hole program was initiated bordering the WRE concession. The results were the same. Although no new reserves were identified (as yet, at least), G1 was so impressed with the results of this program they 1) Started planning the the construction of a drift shaft to the payzones and a processing plant capable of producing 150k oz per year; 2) applied for and obtained a mining license; and 3) Though obviously, we can’t prove this conclusively, it seems that it has triggered interest in the WRE concessions.
The above link to the map shows the intersection of the border between WRE (Grey) and G1 (Green. Blue and Dark Beige). Historic drill holes are also shown here and the density of G1s drilling close to us is obvious if one focuses on the bottom left of the map. The red shapes on the map indicate potential payzones with the ones having unbroken lines being stronger. It is clear that most of the G1 concession lies in the lower of the three shown here. It is also clear that it is highly unlikely that the gold mineralisation which extends to the border with WRE, just stops in its tracks right there and then. The overwhelming likelihood is that it continues. This possibility is shown on the map inside the brown “hatched” area bordering the green G1 current reserve outline. The only question is how far does it extend? This will have to be proven with a drilling program.
The issue of “how far” is paramount. To quote the recent RNS, which is derived from the Shango report; “Gold One’s payshoot model suggests that high-grade mineralisation trends extend into WRE’s Ventersburg tenement areas, creating an opportunity for joint exploration and development”. The Shango report (p.38) also identifies the importance of the payshoot concept in the Witwatersrand area which is based on historic geological and water activity that took place 2.5bn years ago. The payshoots occur periodically and represent the channels in which the gold was being carried and then deposited.
Interestingly, the estimation of the extent of the current manifestation of the payshoot, goes from the one at the North end of the G1 property to the top of the one in the middle of the WRE property. Again, from the recent RNS, “Recent data suggests the presence of payshoots, which trend in a northwest-southeast direction, extending into WRE’s tenement areas. Historical and recent drilling data indicate the potential for multiple mineralisation zones, including uranium concentrations, within the same geological horizons”. In the greater scheme of things, this begins to show the importance of the Sibanye Stillwater (SS) property to the South of the G1 tenement. This clearly shows the predicted presence of possibly 6 very interesting payshoot zones, two and a half of which are in the SS property.
Merge the Whole Lot into One Tenement?
And this is where it starts to get even more interesting from a speculative standpoint. Up until now, we have been focusing on the likelihood of a formal tie up between G1 and LEX’s WRE. However, the recent RNS is quite clear that LEX is looking at the bigger picture. Take a look at these quotes;
Firstly, “Lexington and Letsema (LEX’s South African Partners in WRE) are in discussions with Gold One Africa to explore the consolidation of the Ventersburg Goldfield, aligning adjacent properties to maximise resource and operational efficiencies”
And just above this quote; “Sibanye-Stillwater’s Robijn Project, also nearby, hosts Indicated Mineral Resources of 13.6 Mt at 5.8 g/t (2.54 Moz gold) and 0.129 kg/t U3O8, as well as Inferred Mineral Resources of 9 Mt at 5.7 g/t (1.65 Moz gold) and 0.127 kg/t U3O8 over its Beatrix Reef”.
Why would the RNS go to the length of quoting the mineral reserves of SS and alluding to the “resource and operational efficiencies” in the next paragraph if there was nothing afoot? Whether there have been conversations between SS and LEX or G1 is difficult to say, but it is an intriguing, and highly likely possibility. Note also the use of the phrase “aligning adjacent PROPERTIES”. If we take the liberty of joining the dots up here, we end up with a very interesting picture
The total inferred and indicated reserves on both G1 and SS’s tenements are 8.5mn oz in addition to which we can add whatever LEX/WRE can prove up in future on its tenements. Perhaps minimum 10mn oz in total with a grade in excess of 3g/ton, higher than the grades being mined at the Modder East property run by G1 where they are mining gold at a similar depth (300m) at a grade of 2.84g/ton. The Modder East operation is a particular case in point as it destroys the myth that there is only “deep” gold in South Africa and that the easy stuff has largely been worked out. Modder East has been operating continuously since 2013 without interruption even when the price of gold dropped to $1,250/ton a few years ago. G1 therefore have the expertise to put this into operation with the operational history in the area they already have, which may well explain why they have obtained a mining license for this property. Potentially adding SS and the LEX/WRE properties to the mix would make the economies of scale even more compelling.
Let’s throw Some Fissile Material into the Mix……Uranium
Not many people know or appreciate the fact that gold deposits in South Africa are often accompanied by Uranium Oxide (U2O8). Uranium is present in both the SS and G1 concessions. Presumably, since the same structure as G1’s comes into the LEX/WRE tenements, they will be of a similar grade. This would indicate that on top of any gold that we may be able to prove up, there is a possible icing on the cake amounting to between US$315-660mn on LEX/WRE concessions alone as the reserves get proved up. Although this is not going to catapult LEX into the big league of Uranium miners, it provides a very useful kicker to enhance profitability of the operation.
Conclusion: A very attractive, potentially transformational period
So let’s round up what we have in the mix so far……
- A JV with Harmony Gold where further studies by Harmony may lead to a decision to mine imminently. LEX share of the JORC confirmed 6.02mn oz is 2.2mn. Not a bad start.
- A potential tie up with G1 who have already decided to mine their 4.3mn oz Ventersburg resource next door to LEX. We know the G1 geology extends into the LEX tenement next door.
- The Sibanye Stillwater tenements containing another 4.3mn oz may well come into play.
- LEX still has the NE Bothaville, Klerksdorp concessions and, most interesting of all, the potentially massive up to 90mn oz in Kroonstad, which would represent a brand-new gold field!
- LEX still has the USA concessions with JORC reserves on one of them, with very interesting recent drilling results at Jennings Pioneer, next to the old Barite Hill mine.
- The potential of cream on the cake in Ventersburg of Uranium
And the market says that this mix of JORC reserves and massive potential is only worth GBP14mn? In the last couple of months, there have been some very interesting developments on the gold patch including acquisitions of small to medium sized producers. Let’s take a quick look at these.
- Northern Star’s acquisition of De Grey mining for US$3.25bn. Reserves 11.2mn oz. equivalent to US$290/oz.
- Potential acquisition of Condor gold for $65mn+, final price to be determined, equivalent to US$29/oz
- Consolidated Gold Fields acquisition of Osisko for US$1.56bn, equivalent to US$300/oz
- Greatland Gold’s acquisition of Newmont’s 70% interest in the Haverion project for US$89
Neither 1) or 3) is in production yet, but plans in that regard are advanced, whereas 2) has assets in Nicaragua which is a somewhat despotic state run by a dictator and his wife. 4) was a consolidation as was 3) where the JV partner bought out its junior partner (Echoes of the Jelani JV?). The average price paid for gold assets in the ground in a Cipher Report study analyzing actual prices between the 90s and 2013 was US$60.
See the link to the Cipher report here ;
https://www.cipherresearch.com/_files/ugd/578903_8f934b272e544ad6aadaeebbe87672ca.pdf .
However, this data was gathered way before the recent huge run in the gold price that has taken place.
Valuing a company like LEX is very difficult to do without a significant amount of gut feeling. However, we can be sure of at least one thing. LEX does have a share in a 6.05mn oz JORC at the Jelani JV amounting to 2.21mn oz. Even at the $60/oz level, that would amount to over GBP100mn. If a decision to mine is taken by Harmony, that value, at least in theory goes up, after all, the infrastructure required to start mining is largely in place, there surely must be upside there.
Effectively, a valuation of GBP100mn is not out of the question and is underwritten by the Jelani project alone compared to the current market valuation of GBP14mn. Everything else, Ventersburg, Kroonstad, the USA projects, Uranium etc., are all effectively thrown in for nothing. The Kroonstad project is a potential monster. Imagine what may happen if Harmony buys out LEX’s interest in the Jelani JV, LEX cashes in and mounts the mother of all drilling programs on Kroonstad, and the other South African assets? Why would a huge company like Harmony want to have to deal with a junior explorer like LEX when it would cost say GBP100mn to buy it out? LEX does not have any form of exclusivity and if it is advertised too much we could have other interested parties bidding!
Why is the Market ignoring Lexington Gold and the Aussie Billionaire ask @TMSreach. Click here to find out.
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Five Gold Stars for Lexington Gold – Interview
