Since Jurie Wessels took the reins as chief executive of Goldstone Resources GRL in May 2009, the company has snapped up a collection of prospective gold projects in west and central Africa that have given its investors a reason to get excited. Together with exploration director Dr Hendrik Schloemann, Wessels has built a shimmering prospector's portfolio that started in Ghana and now stretches west to Senegal and south to Gabon. The more advanced Homase project in Ghana has the potential to tempt GoldStone's strategic partner Unity Mining UML to consider putting it into production once it has reached critical mass and all the other projects could be a company-maker in their own right.
GoldStone first listed on London's Alternative Investment Market in 2004 when it raised £5.6m to fund exploration work in Guyana. Mixed results and a string of inconclusive new projects followed before Wessels got the chance to step up from FD to CEO and change the company's strategy. In May 2010 the company raised £2,125,771 through a share placement to Unity Mining (at that time known as Bendigo Mining), which occurred shortly after GoldStone entered into a strategic alliance with the Australian group. As part of that deal, Unity acquired a 20% interest in GoldStone. In June the company went on to raise a further £2.06m in a share placing with investors, again including Unity.
Today, the amiable South African is relaxed on which of the company's projects will take the lead in 2011. Drilling at its first and flagship project at Homase in Ghana is about to get under way and a positive result there would be a welcome boost. But it is the prospect of an asset deal in Gabon that gets Wessels most energised. As first in line with applications on significant licence areas in the country earlier this year, he believes GoldStone could be transformed if it gets its way. In the mean time, Schloemann's eye for a project and Wessels' nous for a deal have helped drive the GoldStone share price up from under a penny to 7p in 18 months without a single hole drilled. In an interview with Stockopedia, Wessels revealed the thinking behind the company's strategy.
Jurie, you are a lawyer by training so how did that lead to you getting involved in running mining companies?
I am a mineral lawyer by background and the short answer is that moving from being a mineral lawyer to an explorer was a natural progression for me. When it comes to exploration I tend to think that it is 80% people orientated, 10% rocks and 10% pure luck. You need all these things to make something work and that is why Hendrik and I are such a good combination. I have got the legal and the business knowledge, Hendrik has the geology and technical skills and both of us have the entrepreneurial ability to make something work. It really makes a good fit.
GoldStone has got exploration licences in west and central Africa – so what exactly have you got in terms of projects and how far are they developed?
We have got five different projects in three different countries. The first is our flagship project at Homase, which is about 15km away from Obuasi, which is AngloGold Ashanti's AU biggest gold producing mine in West Africa and one of the bigger mines in the world.
When Hendrik and I took over the management of Goldstone in May 2009, I became CEO and he became exploration director, there were no projects in the company. We basically had ourselves, our skills and about $0.6m with which to make the company work. We identified a number of countries in Africa that had a low-risk profile and were attractive to us and our investors. We then started trawling for projects by going into these countries and into the field and letting it be known that we were looking for projects. It took some time but ultimately we were in a favourable position to hand pick a number of projects, most of which we sit with today.
The first one was Homase, which was attractive to us because it had been mined previously by AngloGold Ashanti between 2002 and 2003. We thought that was prospective in itself. We acquired the licence by completing a joint venture with a local partner and we started to work from there. That property is significant because it is on a similar geological structure that formed the Obuasi mine – the structure that contains the mineralisation cuts in to our project and straight through the pits that were previously mined by AngloGold Ashanti. We started by going over information from records compiled by previous explorers and the Minerals Commission in Ghana. We were then able to calculate an initial resource of about 280,000 ounces without drilling a hole. Our plan is to improve on this resource by drilling other areas of prospectivity within the licence area, which basically amounts to drilling underneath the pits and along strike from those pits. We have not yet done that but we are preparing to drill in the area.
We managed to add to the prospectively of the Homase licence area by acquiring a company that holds another licence immediately south of Homase called Akrokerri and which abuts the AngloGold Ashanti Mine. This licence area (which is up for renewal) to our mind added significant upside because we basically excluded anybody else from working on the structure that lies between us and AngloGold Ashanti. We also believe, although we are still corroborating it, that it may be possible to get to a historical resource using historical data for Akrokerri as well.
The most important thing for us is that there is a lot of exploration upside on the Homase/Akrokerri project. We believe that we have got a similar story with our project that you see at Kinross's KGC Chirano Gold Project, Perseus Mining's (ASX/TSX: PRU) Ayanfuri project and PMI Gold's (TSX.V: PMV) Kubi and Obotan projects. All these projects were once at a very similar stage that we are now – they were either bought or acquired with a known resource, in similar environments where someone had previously worked and they were then developed from there. We believe that we have got sufficient exploration upside to replicate what they have done in exactly the same way.
As far as Homase is concerned, at this stage it is our flagship project but we believe that all of our other projects, in particular our Gabonese projects, have got the potential to very quickly reach flagship status.
But Homase and Akrokerri are not the end of the story in Ghana, are they?
Shortly after we acquired the Homase licence we went on to secure Manso Amenfi, which is a joint venture with a local party which also lies in prospective terrain from a geological perspective. It is right at the intersection of two structures; the one structure comes from the north-east, roughly from where Homase is situated and there are many mines and properties located alongside this structure. The other one comes from the south, which is close to the Salman gold deposit. So it is highly prospective terrain.
Secondly, and importantly for us, is that around the licence area there is intense artisanal mining all along the structure. So although the property is very much grass roots it shows a lot of promise from a purely geological perspective and that there has been mining in the area.
In regard to both projects, they are situated very close to existing mines and existing projects that have turned out to be very good. For instance the Manso Amenfi project is located very close to Golden Star Resources' GSC Bogoso mine, which is about 20-30km away. If we are able to identify a resource that is big enough to be mined but not big enough to justify an independent mining operation, then we can always transport the ore to Bogoso. That is our second option but our first option is obviously to find something that is viable in its own right.
Looking further afield, can you tell me about your interests in Senegal and further south in Gabon?
The project in Senegal is called the Sangola project and this is important for us because the area is known for its mineralisation. It is a recent province of gold mineralisation that has been found. The area has been explored by many companies and there has been about 30m ounces of gold discovered there in the last ten years. Our Sangola licence area is virgin ground, nobody has touched it before and it lies right next to Randgold Resources RRS Massawa gold deposit, which is around 4-5m ounces at this stage. The geological structure that is responsible for this deposit continues right through our licence area and is called the Main Transcurrent Shear Zone (MTZ). That is, for us, a good bonus and one of the positive factors that should be considered when one explores for gold in the area. That will obviously be the focus of exploration for us. We are currently busy with a permit wide soil sampling programme there so hopefully we will be able to identify some anomalies that are worth further investigation.
Our last two projects are licences which have not yet been granted to us but we have been acknowledged by the Gabonese government to be first in line. We have also received recognition from them that we have complied with the licence requirements and it is now a question of the political institutions granting them to us. That takes some time but nobody else has been granted licences in Gabon for the last year or so, so we are not the only ones. These licences are very important for us because in recent years the European Union has spent €14m in Gabon doing a geochemical and geophysical survey over the country to add value to the Gabonese mining industry and make it more appealing to investors. They had a conference where they released this information and then opened the areas up for application. During the study the EU identified ten or 12 areas that were highly anomalous for gold. We were able to choose two of them, which we believe are the most prospective ones for geological reasons. The gold in soil anomaly is consistent over more than 10km, follows the underlying rocks and shows characteristics that would be appealing for anybody that is a geologist. Having worked in Africa for so long, we had our application ready even before we knew what was available so we had a head start over all our competitors and filed applications on the day that we got hold of the licence area information. Gabonese law states that the first one in line should be the first one considered for the licence. We have complied with the technical requirements and national requirements so everything looks good for us as far as Gabon is concerned.
With this portfolio of projects, how do you balance up the priorities of where to explore?
Homase is a clear target and we shall be drilling there very soon. Whether we drill or not at the others is dependent on the results of the surveys. At Manso Amenfi and Sangola we will be drilling if there is an anomaly identified on it that justifies us starting with a drilling program. But in Gabon, if that is granted, the projects are basically drill-ready.
Is it your strategy to bring one or more of these projects to production?
We have got Unity Mining of Australia as a strategic partner. Unity took an interest in us in May last year and subsequently participated in the share placing at that time. From that point of view, yes, we are at a stage where we would try to develop something and then Unity would take it over or we would sell it on. We are not miners, we are prospectors and we believe Unity has got the skills to identify these projects at an early stage to be mineable and take them over from there.
Given the positive upswing in the gold price in recent years, how bullish are you about the future for GoldStone in the context of the wider gold mining industry?
Obviously it is hard for me to say that I am impartial when it comes to the gold price but based on fundaments I believe that what has happened since 2008 is not yet fully washed out and that we will still see a lot of uncertainty for some time to come. Generally speaking, people revert to gold to keep their asset value in place and I think for that reason, and for quite some time, gold will continue to be the commodity to invest in. If I had to make a projection I would say that I could see gold close to $1,600 per ounce by the end of the year and maybe a bubble developing some time next year. I think for the next two or three years a stable price of $1,300 or $1,400 would be what we can expect. For us, being in an opencast situation, the price could even drop below $1,000 and we would still be very prospective unlike other mines in South Africa which are running at deep levels. It costs about $700 for some of these big mines to produce an ounce of gold and that cost will only go up so I think the price will keep track of that. So, yes, I am bullish about the gold price.
GoldStone has actually been listed on AIM since 2004. With your new strategy and a fundraising already completed, are you satisfied with the way the market has worked for you?
It has been excellent for us. GoldStone began trading on AIM in 2004 and raised £5.6m for an exploration project in Guyana. At that stage I was FD and we executed an exploration programme that identified gold but unfortunately not enough to commercialise. For a long time afterwards I was in the background waiting for the opportunity to take over control of the company from a management point of view. The fundraising that we did in May 2010 was at the wrong time because the dip in the market meant that ultimately the placing occurred at 3.5p. That was unfortunate for our shareholders because of the dilution but it did secure the company and there is a lot of prospectivity around it now. I would have liked to have seen a bit more institutional interest; it was the private investors that carried us but I think the institutional interest will come.
Investor interest and the strength of the share price has increased notably since the end of last year. Why would you say private investors should now take a closer look at the company?
Because there is so much exploration upside in the company. If you look at other companies that have got similar resources and prospectivity behind them, these companies have often got significantly higher market caps than we do. I would say that if you compare them with us that we have got as much or even better prospectivity. We are working in countries that are fairly risk averse – Ghana and Senegal are known for their stability and Gabon is similar and has been very stable for the last 60 years.
Looking ahead to the rest of 2011, what are your priorities for GoldStone?
In the best case scenario I think the first thing that will happen – something that everybody who is a shareholder in the company is waiting for – is that we will start drilling at Homase. We have been held up there because of regulatory issues connected to the environmental protection agency of Ghana due to work that AngloGold Ashanti had done in the area before. I believe that will happen very shortly and we will then be able to start drilling. The second thing is that we hope to add to the Homase/Akrokerri resource by using the historical data. How significant that will be, at this stage I couldn't tell you but it is certainly worthwhile looking at. We will also be waiting for Manso Amenfi's preliminary soil sampling results and likewise Sangola's. Depending on whether it is positive or not there will be upside in it for us if we go on to do some intrusive work, digging trenches and drilling.
I would say that the bigger one would be Gabon. If we do get Gabon then it will move the company significantly up the value curve simply because both those projects are company makers in their own right. Of course we are always looking out for new things. When we did the fundraising in May we stated categorically that we would want to do further acquisitions of projects that look good. We are currently looking at some interesting properties that are close to some of our projects and which might just be something that could improve our value.
Thank you for talking to Stockopedia.
Thank you.
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