Just how much exploration upside is there on Galantas Gold’s (LON:GAL CVE:GAL) ground in County Tyrone, Northern Ireland?
The answers to that tantalising question will begin to be answered, at least partially, as the company’s ongoing drilling programme at its Omagh Gold Property continues.
Already, the signs are good.
Late in January, Galantas announced an intersection across a true width of 13 metres of 9.9 grams per tonne gold on the Joshua vein at Omagh.
That’s good grade, in anyone’s book.
But it’s the geological implications of the broader programme that are really beginning to quicken pulses.
Because in addition to the new hit at Joshua, the ongoing drilling has also uncovered a completely new vein, now dubbed “Kestrel.”
The intersection is smaller, across just 0.7 metres of ore, but because the grade runs 35.8 grams per tonne, what it points to could be huge for Galantas.
“It definitely looks as though there is structural significance to this,” says chief executive Roland Phelps.
Quite what that significance is remains to be seen.
But the official announcement talks of another high grade intercept that was encountered 156 metres to the north of where the new vein has been identified, and speculates that the two structures may be connected.
The thinking is that the earlier hole might represent a northern extension of the new vein, although as Galantas makes very plain, “the distance between the cores is too far to extrapolate with any degree of certainty.”
More to the point, although the newly discovered vein is proof of the ongoing prospectivity of the area to the west of the Joshua vein, in itself it doesn’t entirely explain or account for the wealth of magnetic anomalies that Galantas has previously identified in the area.
“There may well be several structures over there that we haven’t yet discovered,” says Phelps.
And given that, it’s important that the company cracks on.
“We’re going to be doing work on the new vein,” says Phelps, “and doing drilling on Joshua.”
Demonstrating the ongoing upside at Omagh is important to Galantas because the in the background talks are continuing in regard to financing a restart at the old Omagh workings.
It’s not long since these were shut down, but now new permits have been secured and new economic modelling has been done.
The additional resources proved up by the ongoing drilling should slot nicely into that process.
“Our ideal is to increase the permitted resources that are available for the mine,” says Phelps.
“That’s been the focus of our efforts – the central proposition of Galantas Gold is that we are a near-term gold producer with a resource that is quite obviously growing. We think we’ve got a lot further to go in terms of adding new ounces.”
But how close is the funding for this proposed re-start?
It’s close, but not imminent, according to Phelps. Previous numbers that have been put into the market have now been re-worked, and given that the development cost is likely to be spread out over time, the company won’t need to raise all the capital it requires at once.
What’s more, it’s worth bearing in mind that because the old workings have left in place a mill, a tailings facility and the land itself, the capital required for new plant will be correspondingly reduced.
That in turn makes the internal rate of return numbers look highly attractive – they showed a return of over 70% on recent modelling.
And then there’s the effect of the ongoing weakness of sterling against the dollar.
After all, the sterling gold price has held up well over the past couple of years, and overall is down only by just over 5% over the past five years.
Which way it goes from here remains to be seen. But Phelps says Galantas will be comfortable with gold at least down to £700.
Given that the current price is £786, that allows for plenty of room for manoeuvre.