Terrain Minerals’ flagship is the Smokebush gold and silver project, which sits roughly 350 km north of Perth in the Yalgoo-Singleton greenstone belt of Western Australia, on the flank of a granite next to Mt Mulgine and in the same district as Golden Grove. Smokebush is 100% owned and hosts the Lightning and Monza prospects plus earlier-stage targets including Wildflower, Hurley and Paradise City, and Terrain also holds the Larin’s Lane gallium and rare earth prospect nearby, the Carlindie project in the Pilbara and the Biloela copper-gold project in Queensland. In this interview, I asked about the maiden resource, the newly designed drill campaign off the back of an IP survey, metallurgy, treasury and dilution, permitting and the path toward early production.
TL;DR
They just put out a maiden inferred resource of 54,000 oz gold at 2.5 g/t plus 156,000 oz silver at 7.2 g/t, with 17,500 oz in a pit shell and 36,500 oz in a 2.2 g/t underground envelope, and CEO Virgin was upfront that this is a first pass that needs a lot more holes. Those holes are driven by seven priority chargeability targets, the strongest immediately north of Monza. A 45-hole RC program of 7,420 m is now planned, and the CEO expects it to grow to around 10,000 m, which he said would cost roughly A$1.5 million. Against that, they reported A$1.4 million cash last quarter, so a raise or a funding deal is coming, and he was deliberately careful on that topic. Metallurgy results were being finalised the week of the interview and are the nearest real binary, because roughly half the pits at the neighbouring Warriedar ground are refractory. He also said that this is his first role as an executive director of a listed company and that he does not have a shareholder value creation track record yet, which is worth weighing against the 3.7 billion shares on issue and roughly A$11 million market cap.
What have they done for shareholders lately?
The mining lease is granted, and they published the maiden Lightning inferred resource last month off 97 RC holes and four diamond holes for about 16,000 m. This month a dipole-dipole IP survey returned seven priority targets, with the best one measuring well above background and modelled as a discrete steeply east-dipping source north of Monza, and they have designed drilling to test it. Drilling is currently paused while they reinterpret and design the next program. Metallurgical work is running at Lightning, with the last results being completed that week, and government-funded metallurgy through Curtin University on the Larin’s Lane gallium and rare earth prospect is also due. On the housekeeping side, they have completed their own heritage and environmental surveys, have no native title claim over the ground after an application was dismissed in court, and have submitted a permit application for a haul road plus a land access deed. Shareholder count is about 1,780, which he said has doubled in around 18 months, with roughly 80% of the register in the top 300 holders.
How much money do they have and what are they spending it on?
Last quarterly reported A$1.4 million cash, and Virgin said flatly that this will need to be addressed at some point. The last raise was in May for about A$1.5 million. There are 3.7 billion shares out for roughly A$11 million market cap, no warrants because it is ASX listed, and he referenced about 631 million options in the intro while later describing roughly 50 million options held by directors and the geologist. Reporting insiders own about 11% to 12%, all paid for, and he says he participates in every placement and wrote a large cheque in February or March. Spending is going almost entirely into the ground: a 10,000 m program at roughly A$1.5 million, plus metallurgy, permitting surveys and a planned mining study. Overheads are minimal, with Virgin and one geologist plus two non-executive directors. On dilution, he pointed to shares having been issued once to a driller and to local farmers for access, and floated the WA style partnership route where a group funds the mining and takes 30% to 50% of the gold, which he said conversations have already started on. Note the pit shell numbers he gave are garbled in the transcript (about 1.6 million tonnes of waste against an ore figure at 3.5 g/t that is not clearly stated), so do not lean on them.
Upcoming catalysts
Technical: Lightning metallurgy results, expected out to the market this quarter; Larin’s Lane gallium and rare earth metallurgy from Curtin University, due shortly; drill results from the next campaign targeted back in the first quarter; an updated resource aimed at moving inferred into indicated; first holes into the seven IP targets, which he framed as potential new discoveries needing only a couple of holes each; re-assaying of pulps for silver, since he says only 28% of the silver has been assayed so far.
Operational: announcement of the next exploration program and its start, designed at 45 holes for 7,420 m and likely to expand toward 10,000 m; a mining study on the top 150 m of pit material after the resource upgrade, targeted around Q1 to Q2; haul road permitting; follow-up work on Paradise City, Hurley and Wildflower in the new year; early-stage soil and target work at Carlindie in the Pilbara.
Corporate: funding, which he could not discuss in detail; possible partnership or toll treatment deal for early cash flow; conference and roadshow activity including a three-day event in Fremantle in the new year, Sydney a couple of months later, and continued New York and Cape Town trips; a share consolidation is not planned now but he said something will have to be looked at eventually.
Risks
Funding is the obvious risk. A$1.4 million against a program he expects to cost around A$1.5 million means a capital raise is needed, in what he himself called a hard financial market. Metallurgy is the near-term binary, since refractory ore is common in that part of WA and a poor result would force them to rethink the approach or chase only higher grade zones. The resource is small and mostly inferred, so the thesis depends on the next campaign converting categories and adding ounces, and the CEO was explicit that you are only as good as your next drill campaign. Timing risk sits in assay turnaround, currently six to eight weeks against a normal four and longer if QAQC re-runs are needed, and in rig scheduling. Grade may need to hold above two grams for the project to survive a cycle by his own broker-era rule of thumb.
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