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Emmerson Resources pegs out territory for royalty-style returns

Emmerson sold Edna Beryl to Territory but will get 12% of gold ore produced.
First ore is loaded at Edna Beryl mine
OVERVIEW: ERM The Big Picture
Edna Beryl mine owner Territory Resources loads first ore at the Emmerson-discovered small mine

Emmerson Resources Limited (ASX:ERM) (FRA:42E) has set a template for returns from its Tennant Creek mines in the Northern Territory, trucking ore from a small mine to a Territory Resources Ltd mill where the strategic partner will toll treat the gold.

The Western Australian company welcomed the trucking of first ore from the divested Edna Beryl mine last month to the mill at Cloncurry in northwest Queensland.

New mine owner Territory’s achievement was welcomed by Emmerson, which was to receive first commercial returns from Tennant Creek Mineral Field (TCMF) thanks to the milestone, in the form of 12% of gold produced.

Emmerson managing director Rob Bills told Proactive Investors’ Stocktube video channel the Edna Beryl first-trucking achievement had made for a “very remarkable day” for the company.

READ: Emmerson Resources to achieve first commercial gold returns from Tennant Creek field

Bills acknowledged last month the company had changed tack, saying “it’s more like a royalty company now out of Tennant Creek.

“Now that we’ve got a processing route, a way to monetise these things, potentially once we drill out Mauretania, then that will also become one of the small mines.

“We obviously have to negotiate commercial terms with Territory around that, but we now have a processing route, so we can monetise it.

“From the shareholder point of view, rather than just doing exploration and it sitting there, we can now monetise it.”

Selling the mines and taking a share of the gold or profit brings in returns for the company which also sold a mill on the field to Territory, which the partner is refurbishing.

Bills told Proactive Emmerson planned to use the funds collected from its monetisation model to self-fund exploration at its projects in the NT and New South Wales.

He said in the December 12 interview: “We have aimed to get to the production stage as soon as possible so this arrangement short-circuits the process and enables us to get early cash flow.

“Edna Beryl is the first of our small mines and we get 12% of the gold produced out of that mill.

“We do not pay for any of the mining, processing or transport, so it doesn’t really matter where it gets processed.”

 

The strategic partners’ templated approach will result in varied returns to the company, depending on the arrangement.

Bills told Stocktube: “We get 12% of the gold, 6% of the gold or a profit share-type basis and Territory does the mining and processing.

“In terms of the other small mines, at this stage, it looks like Black Snake and maybe Chariot will be the next mines.

“This will be determined by a mine schedule which Territory is doing a lot of work on, while the permitting process is being progressed by the Northern Territory Government.”

Emmerson's priority focus at Tennant Creek in the NT

Emmerson's priority focus at Tennant Creek in the NT

Tennant Creek Mineral Field assets

Emmerson has accumulated a portfolio of small mines in the Tennant Creek Mineral Field (TCMF).

The TCMF is one of Australia's highest grade gold and copper fields, producing more than 5.5 million ounces of gold and 470,000 tonnes of copper from historical deposits including Warrego, White Devil, Orlando, Gecko, Chariot and Golden Forty.

Emmerson made the first discoveries on the field in a decade, with the finds including high-grade gold at Edna Beryl and Mauretania and copper-gold at Goanna and Monitor.

Emmerson sold Territory the Warrego Mill on the Tennant Creek field last year.

The partner will use the mill it is refurbishing it to service future production from the mineral field.

This refurbished mill will come on board in the June 2019 half-year, and could be ready as early as the March 2019 quarter.

Emmerson’s managing director said the benefits of the strategic alliance were that it had the exploration expertise while Territory had the mining and milling capability.

“This will enable us to work together to unlock all of these stranded gold assets.”

Although Emmerson sold Edna Beryl, the company has retained 100% of the remaining 75% of the Tennant Creek field, including the recent discovery at Mauretania.

The company finished drilling on the field in December 2018 and is expecting results from the drilling campaign by late January or early February 2019.

Bills confirmed the expected timing and told Stocktube: “One of our flagship discoveries called Mauretania … we drilled some really exciting looking rocks there, and some very thick intersections of what we think potentially could the host of the gold.

“So, it all looks very exciting.”

Emmerson ground in NSW

Emmerson ground in NSW

New South Wales portfolio plans

Emmerson also holds ground in NSW, on the Macquarie Arc.

In 2015, Emmerson identified Macquarie Arc in NSW as an under-explored, world-class porphyry copper-gold province.

The arc hosts more than 80 million ounces of gold and more than 13 million tonnes of copper, with the deposits heavily weighted to areas of outcrop or limited cover.

Emmerson believes there is an opportunity to apply its predictive targeting models and systematic exploration approach to discover new deposits of copper and gold on the field.

The company said five of its projects in the state had many attributes seen in deposits on the arc but had been under-explored due to overlying cover, such as farmland, and lack of systematic exploration.

Fifield project in NSW, which features the Whatling Hill copper-gold prospect

Fifield project in NSW, which features the Whatling Hill copper-gold prospect

Emmerson plans to drill its NSW ground this year, at targets such as the Whatling Hill copper-gold prospect at Fifield project.

The explorer had encouraging soil geochemistry results from an enlarged aircore drilling program at the discovery and is increasing its landholding in the area, within the Lachlan Transfer Zone.

Bills told Proactive’s Stocktube video channel in November 2018 the company believed it had found a cluster of deposits in NSW.

He said: “Our thinking is that we’re onto a number of these deposits.

“There's some good news at Kadungle, we’ve now got good news at Whatling Hill and south of Watling Hill; so we think that we’re onto a cluster of these porphyry copper deposits.”

 

Capital matters

Emmerson had $4 million cash at the end of September 2018 financial quarter after using $797,000 for operating activities, tipping $56,000 into investing activities and taking $1 million from issuing shares during the quarter.

On September 27, 2018, the company had two substantial shareholders, JP Morgan Nominees Australia Limited with 12.63% and Evolution Mining Limited with 11.84%.

The then top-two duo held 24.46% of the company.

READ: Emmerson Resources major shareholder increases stake by nearly 10 million shares

Emmerson’s top 20 largest ordinary shareholders held a collective 49.65% of the company in late September 2018.

Among the investors was Noontide Capital Pty Ltd with 2.73%.

Noontide progressively upped its stake in the project in the months that followed, holding a 16.8% stake at the time of its last declaration in November 2018.

— with Danielle Doporto, John Miller

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