Shares in Power Metal Resources (LSE:POW) spiked more than 30% on Monday as investors rushed in on news of plans for a major expansion to its joint venture gold project in Australia’s hottest mining district.
Power Metal has a 49.9% interest in a JV with UK-based explorer Red Rock Resources (LSE:RRR) called Red Rock Australasia (RRAL). Together the two companies are focused on the sought-after and historic Victoria Goldfields district.
The application covers three new license areas covering 581 square km in a region around 100km north-west of Melbourne.
If granted, the three expansions: EL 007281, EL 007282 and EL007285 (see image below) would increase the JV’s footprint to over 714 square km. That would give the JV one of the largest license footprints in the Ballarat area.
Power Metal’s chief executive Paul Johnson told the market that the move was “a major step forward” for Australian gold exploration that “is building momentum very rapidly” and that he was delighted with the expansion plans. “We continue to apply considerable effort to develop this JV opportunity,” he added.
More than 9 million shares had been traded back and forth by mid-market on Monday, double the 10-day average volume.
History lesson
Gold was first discovered in Victoria Goldfields in the early 1850s and quickly made the area famous. Such was the level of interest that thousands of small prospectors set up basic camps in a bid to seek their fortune.
It is home to the largest ever alluvial gold nugget ever found. Later dubbed ‘Welcome Stranger’, the massive chunk of gold was unearthed by a pair of Cornish miners, John Deason and Richard Oates here in 1869, near the small town of Moliagul.
It weighed 72.5kg (2,332 ounces) and was lying just inches below the surface.
Future perfect
It is understood that more than 2.26 million tonnes of gold still remain underground in the Victoria Goldfields district. The area is experiencing a second-wave gold rush of a sort, with gold production having doubled in the last five years.
Perhaps most notable, the area is home to Kirkland Lake Gold’s Fosterville mine, which produced nearly 620,000 ounces of the precious metal in 2019 alone.
Australia’s ABC news reported in July 2019 that one Ballarat retiree armed only with a retail metal detector, discovered a 2kg gold nugget worth $130,000. The huge find, dubbed ‘You Wouldn’t Believe It’ was 45cm below the surface, hidden under clay deposits.
In a separate RNS, Red Rock Resources chief executive Andrew Bell added that: “There is no area of the licenses that does not have evidence of gold mineralisation and in most cases recorded production from previous alluvial workings, leads, shafts or drilling. In certain areas the workings go down 100m or more.
“The Victoria Goldfields are attracting increasing attention and corporate activity which we expect to lead to a sharp rise in exploration activity.”
The spot price of gold is an additional element to consider. Prices are still holding north of $1,700/oz, seven-year highs against the US dollar. In a recent report titled ‘The Fed Can’t Print Gold’, in reference to unlimited quantitative easing by the US central bank, Bank of America raised its 18-month gold price target to $3,000.
That would be more than 50% above the current all time high price record for the precious metal. The high target was warranted, said bank analysts, because of the coming global recession and the general devaluation of wider equities from unprecedented money printing and stimulus attempts by central banks worldwide.