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THE BIG PICTURE-Time to revisit Bezant Resources now Gold Fields’ option removed

Bezant Resources suffered a blow earlier this year when Gold Fields decided not exercise its option to buy Bezant’s flagship Mankayan project, but all is not lost for the AIM-listed company. 
THE BIG PICTURE-Time to revisit Bezant Resources now Gold Fields’ option removed

Bezant Resources (LON:BZT) suffered a blow earlier this year when Gold Fields decided not exercise its option to buy Bezant’s flagship Mankayan project, but all is not lost for the AIM-listed company.

It received a non-refundable US$9.5mln payment from Gold Fields and remains well funded even after returning a large wad of cash to shareholders, while Gold Fields remains a significant shareholder with a 21.6% stake.

Bezant also inherited some promising technical data emanating from the due diligence work carried out by the gold major.

The data showed that mineralisation was present up to the end of the longest hole drilled to date on the porphyry copper-gold project, increasing the previously known depth extent of the mineralisation on the eastern part of the deposit by more than 200m to 1,491m.

A high-grade zone of 342m from a depth of 692m revealed an average copper grade of 0.6% and an average gold grade of 1.01 grammes per tonne (g/t).

"The additional data, as well as the increase in the depth extent of the known mineralisation on the eastern part of the deposit, will be incorporated into our already comprehensive database and assist with the recommenced sale/JV process seeking to identify new potential acquirers and/or partners for the project,” said Bezant chief executive Bernard Olivier.

Gold Fields passed on the opportunity to acquire the project following a decision to spin off all but one of its South African mines in 2013 and to focus on production from Ghana and Australia. 

Bezant said it would re-engage with third parties that have historically expressed an interest in the project as well as starting discussions with newly identified potential buyers and/or partners for Mankayan. It favours an outright sale over a long-term commercial or joint venture partnership to finance the development.

Mankayan is located about 240km north of Manila and 6km east of a world-class, high-grade  copper-gold mine operated by Filipino primary gold producer Lepanto Consolidated Mining Co.

Mankayan has a JORC-compliant indicated resource of 221.6Mt and 36.2Mt of inferred resources, grading 0.49% copper and 0.52g/t gold, equating to an indicated resource of 1.1Mt of copper and 3.7Moz of gold.

Gold Fields decision not to exercise the option may have been disappointing, although it is worth noting that Bezant’s shares actually closed higher on the day the announcement was made. The gold producer had already deferred its option once so at least the uncertainty was removed.

“The project fundamentals have not changed,” commented Shamim Mansoor, an analyst at N+1 Singer. 

She values Mankayan at £19.8mln and Eureka, Bezant’s copper-gold project in Argentina, at £2.9mln. Bezant’s current share price values the company as a whole at just £8.5mln.

Eureka is a near-surface resource that could be amenable to straightforward, low-cost, and environmentally acceptable mining and processing operations.

Environmental approval was received last year and results from the first phase of an exploration programme supported the project’s potential.

“Eureka is the sort of project that could be developed quickly and with modest pre-production capital,” said Sanlam Securities, adding that “although Argentina is not the best jurisdiction, Eureka is in Juyjuy Province which is very pro-mining.” 

A pro-mining location is certainly very helpful. A Reuters report last month noted that there was no shortage of potential copper deposits and that challenge was actually getting the copper out of the ground amid an often hostile political environment. Between 2000 and 2012, copper prices grew at a compound average rate of 13% a year, yet production climbed just 2.6% a year.

The outlook for copper prices does look healthy.

Miner and commodities trader Glencore Xstrata (LON:GLEN)  said on Tuesday that it expects the copper market to shift back to a deficit post 2015 as a result of mine closures forecast in the second half of this decade.  

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