Is Tanami Gold back in favour?
Shares in the miner plunged to a 16-month low of 67¢ in December on a mix of investor concerns, including the company’s debt position.
However, the stock has defied the torrid market to actually gain ground to Friday’s close of 80¢ over the past five months, while peers have recorded hefty losses.
Its robust performance has sparked a bit of chatter among market onlookers but Tanami founder and deputy chairman Denis Waddell says look no further than the company’s Groundrush deposit within its Central Tanami project in the Northern Territory where the company has been racking up a string of impressive drilling results in its quest to take the one-time open-cut underground.
The latest, on Friday, from the second hole of a step-out drilling program focused on the down-plunge extension of two recent intersections included 17m of 109 grams a tonne from a depth of 322m and 25m of 3.2g/t from 279m. The deposit has 535,000oz in resources and remains open at depth and along strike.
Every exploration update is validating Tanami’s decision in December to defer a feasibility study over Central Tanami, 90km east of its Coyote gold mine, to get a better handle on Groundrush and how its growing resource base would affect Tanami’s mine plan and the refurbishment of the project’s treatment plant.
Tanami bought Central Tanami, including the 1.5mtpa plant, from Newmont for $22 million just over two years ago after the US giant produced the last of Groundrush’s 610,000 open cut ounces.
The company will soon have five diamond and RC rigs working over the deposit as part of an accelerated drilling program, which could absorb as much as $17 million this year.
The grand plan would see Groundrush as the centrepiece of a renewed mining hub producing up to 150,000oz within three years of start up, adding to the 50,000oz turned out by Tanami’s Coyote-anchored Western Tanami project.
Hartleys renewed its speculative buy rating on the stock in the wake of Friday’s announcement, with a 12-month price target of $1.47.
The broking firm also noted Tanami’s debt and its weak cash position, though Waddell said the improved production from Coyote and the financial support of Tanami’s major, Hong Kong’s Allied Group, meant the group had enough to cover its immediate needs.