It’s been fascinating to watch the rising levels of interest in gold exploration and development work in the Australian state of Victoria in recent months.
At the end of last year there was already some sign that a boom in exploration might be getting underway, although a slight shadow was also being cast by a new tax structure that the state was also proposing.
But fast forward into 2020, with the coronavirus pushing gold up to more than US$1,800 an ounce and, more to the point, to new all time highs in Australian dollar terms, and the boom is now a hard and fast reality.
The biggest action is around the Fosterville gold mine owned by Kirkland Lake Gold Ltd (TSE:KL), which has been pushing up production numbers and keeping a pretty tight grip on costs too.
The company has long held a significant package of land in Victoria, and recently sold some licences off to a company called Fosterville South Exploration (CVE:FSX) which recently listed on the Canadian Venture Exchange and subsequently enjoyed an upward surge in value such that it is now valued at more than C$150mln.
That valuation isn’t based just on the licences ECR rolled into it, but the share price action is nevertheless indicative of how hot the region is right now.
ECR retains ground near the Fosterville South tenements, and is busily working away on them, with a recent £600,000 funding top up helping to grease the wheels.
The plan, according to ECR’s chief executive Craig Brown, is to continue preparatory work on the ground both on Bailieston and Creswick, ahead of drilling that’s likely to get underway in September.
The markets are jumpy at the moment, so the shares could move ahead of time, particularly since there are whispers of potential joint venture deals, but be that as it may it seems clear enough that once the rigs start turning all eyes will be on ECR and interest will start to rise.
One reason everyone is so interested in Victoria is that the government released a fair amount of ground in the Fosterville vicinity to tender after the relevant time periods had elapsed, and all sorts of people came through the territory to have a look. Newmont was nosing around, but so, according to Brown, were at least 20 others.
While they were there, naturally enough, some of them also took a look at Bailieston and Creswick, and some of the companies that did so have wanted to do return visits. That’s not been easy with all the coronavirus restrictions that subsequently got put into place, but the flip side of that has been the upward pressure on the gold price and, if anything, an even greater spike in interest.
So, quite how things will turn out for Bailieston and Creswick remains an open question. As it stands, following the recent raise, ECR has a total of £1.25mln to get to work on the projects itself. But as Brown points out, exploration is an expensive business, and while raising modest tranches of money might be easy now, in what amounts, frankly, to a gold bull market, it may not always be so.
With that in mind, it may make a lot of sense for ECR to sign up a bigger partner with deeper pockets now, while the going is good.
Either way, there ought to be plenty of interesting newsflow over the next few months, as geochemical, geophysical and then drilling work gets underway, and as the suitors continue to pile up on the ECR threshold.