2017 Annual Report
It gives me great pleasure to present the 2017 Annual Report for Thundelarra. It was another challenging year for the mineral exploration sector, but at long last the green shoots of recovery appear to be establishing themselves. Metals prices are showing positive trends, global economic growth rates appear to be on the rise, and gold is maintaining price levels that are very attractive for companies with exposure to significant exploration targets. Thundelarra most definitely falls in this last category.
The corporate and exploration strategies we have put in place over the past two years, starting with decision to acquire Red Dragon's gold assets near Meekatharra in the Murchison district of Western Australia, have proved prudent and well-judged. They also demonstrate the capacity of your executive team to think ahead and to plan effectively for different market outcomes.
One of our most significant achievements during the year was the successful acquisition of the Crown Prince prospect, which we believe to be key to unlocking the golden potential we are convinced exists at Garden Gully. The discovery and announcement of visible free gold in drill core recovered at Crown Prince during our inaugural drill programme there has validated our committed efforts to acquire the project. We await eagerly the results of our 2018 exploration programmes at Crown Prince and at the other highly prospective targets forming our very exciting Garden Gully project. It is worth reminding our shareholders that the gold price was at a six-year low of US$1,060 per ounce when your Company acquired the Garden Gully gold assets. The price of the yellow metal has subsequently risen over 25% to levels around US$1,330 per ounce at the time of writing.
Shareholders in exploration companies recognise that exploration is a high risk game, but it is the potential for high rewards that attracts both investors and explorers. And exploration success is basically a numbers game: the more holes you drill, the better your chance of success. Luck will also play a part, but as an old colleague of mine in the exploration game used to say: "This 'luck' thing is amazing, you know. The more holes we drill, the luckier we seem to get!". Your Company recognises this and so we do everything possible to ensure that we continue to explore aggressively while managing cash reserves prudently. If we are not actively exploring and systematically identifying and drilling valid targets, then we are not likely to be making new discoveries.
Seven drilling programmes carried out during the year (two diamond and five reverse circulation) tested targets at sixteen prospects within four separate projects. Your Company drilled 69 holes for a total advance of 12,711m : an 8% increase in metres drilled compared to the previous year. Geophysical surveys (both surface and downhole) were also conducted at several of the prospects drilled, mainly to aid in the identification of drill targets. This is a significant performance for a junior exploration company and clearly demonstrates our commitment to aggressive exploration.
On the broader market front, it is very gratifying to see that the green shoots that had begun to appear in 2016, and which we all hoped were signalling the long-awaited recovery in the resources sector, have indeed continued to flourish, particularly for gold and lithium explorers. There is still uncertainty around overall market and investor sentiment for the exploration sector, but it is much less than in recent years and there is now definitely investment money available for exploration stories with some substance. Thundelarra continues to fall into that category, as was amply demonstrated by the successful Renounceable Rights Issue and Placement that raised $5.2 million at 2.5 cents in September to fund the aggressive exploration planned for our Garden Gully gold project, northwest of Meekatharra in Western Australia.
Garden Gully and our other gold projects are our main exploration focus for 2018. Your Board continues to believe that the greatest likelihood for market success and share price appreciation lies with a gold discovery, and Garden Gully represents that in spades. However, it would be inappropriate not to mention Red Bore, a project that has been our core focus for several years and which has delivered spectacular drilling results but not yet the glittering sulphide prize that we still believe is present there.
We maintained our conviction that Sandfire, our neighbours operating the DeGrussa copper-gold mine just a few hundred metres from our tenement boundary, would have to approach us eventually as they continued to deplete the DeGrussa reserves and moved towards integrating the Monty deposit into the DeGrussa mine plan. Sandfire did approach us and a very attractive exploration joint venture was agreed and signed, subject to a pre-emptive right in the existing Joint Venture between Thundelarra and W Richmond, holder of 10% of the licence. Mr Richmond decided to exercise his pre-emptive right and so replace Sandfire in the arrangement. He paid $1.5 million cash to Thundelarra and undertook to carry out $1.5 million of exploration expenditure at Red Bore before late January 2019. Achieving that in itself would earn him no further interest, but would allow him to continue to explore.
Only by discovering and announcing JORC 2012 compliant resource of at least 30,000 tonnes of copper or copper equivalent will he earn further equity in Red Bore - an additional 75% that would take him to 85% and reduce Thundelarra to 15%. Thundelarra is free-carried during this whole process and would remain freecarried through to production, if a mining development did indeed proceed. An eventual 15% of at least 30,000t of copper (copper is currently trading at US$7,000 per tonne, equivalent to about A$8,750 per tonne) is without question a better proposition than 90% of no commercial resource. Especially when getting to that position would not involve any expenditure by your Company and if, as we hope, there is any new discovery made at Red Bore, then Thundelarra remains the only ASX-listed company that offers stock-market trading exposure to such a discovery.
In summary, we have exciting exploration targets and the money to be able to explore them effectively and efficiently for the coming year. All the Thundelarra management team are shareholders in the Company. We invested more of our own money through participation in the Rights Issue, with some also making additional on-market purchases. Our desire for exploration success and our commitment and drive to deliver it is as closely aligned to that of every other shareholder as it could be.
Our exploration successes continue to be testament to the technical rigour applied by our geological team. Our prospects are not located in simple geological settings. If they were, it is unlikely that they would offer the exploration potential that they do. Exploration success will come from persistence and from patience. The application and diligence of our geological team has identified valid reasons for why many different phases of previous exploration at Garden Gully had not found the mineralisation that we have now discovered at Lydia and other prospects. Each successive set of results gives us another piece of the exploration puzzle and takes us one step closer to that discovery that we all want.
Every shareholder wants quicker results and that is understandable. But we ask shareholders to remember that we must continue to use our cash reserves wisely. Our best chance of finding it is to be systematic and patient in our approach. Every exploration dollar must be made to count.
Thundelarra's commitment to systematic, but financially prudent, exploration will continue unabated in 2018. We will continue to pursue our dreams of exploration success, with Garden Gully our flagship for gold and Red Bore, Curara Well, Allamber or Sophie Downs offering base metal targets. Our 20% free-carried interest in Panoramic's Keller Creek nickel tenement in the East Kimberley could also add value for Thundelarra. Keller Creek hosts the extensions to the Savannah North mineralisation and hence the long-term future of Panoramic's Savannah nickel operations.
I would like to take this opportunity to thank our hard working CEO Tony Lofthouse; Director and Company Secretary Frank DeMarte; fellow Director Mal Randall; and our staff including Bridget Reid and Jenny Jones, for their dedication and efforts during another challenging year. The addition of Rick Crabb as an independent non-executive director will add further experience and value to our team. Particular mention again needs to made of the commitment of our Chief Geologist Costica Vieru and Geologist Stephane Roudaut. Their technical expertise and rigorous evaluation of the geological data garnered from our exploration efforts have been of paramount importance to the exploration successes we have enjoyed this year.
Last but no means least, thank you to you our loyal Shareholders for your continued faith in what we are trying to achieve. I ask that you support the resolutions proposed for the Annual General Meeting and respond by having your proxies voting in favour of those resolutions lodged at an early date.
2018 will be an exciting year as the gold price strengthens and our drilling at Garden Gully continues to deliver the sort of results that we all want to see - like the visible free gold intersected in the Crown Prince drill core! We have exciting projects and the money to explore them and we will continue to do everything within our power to ensure that your continuing confidence is not misplaced.
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About Thundelarra Ltd
Thundelarra Ltd (ASX:THX) is primarily an Australian gold exploration company. Gold, either in stand-alone geological settings or in association with copper, is our principal target. Copper remains an important focus too. Our portfolio also boasts prospects with discovery potential for base metal (nickel, zinc, silver, lead), uranium and graphite mineralisation. We are active in Western Australia (WA) and the Northern Territory (NT).