mining – initiating covereage 26 july 2017 · mining – initiating covereage 26 july 2017...
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Calidus Resources Limited (CAI ASX)
MINING – INITIATING COVEREAGE 26 July 2017
Brandon Hill Capital 1
Price Chart
MAIN
SHAREHOLDERS HOLDING
Keras Resources 30.25%
Eight Investment Partners 5.04%
David Reeves 0.79%
Keith Coughlan 0.62%
Source: Bloomberg
Research:
Peter Rose
Peter.Rose @brandonhillcapital.com
www.brandonhillcapital.com
Stock Data
Share Price: 0.023
Market Cap (M): A$16.5
EV (M): A$15.5
Company Summary
Calidus is the spin out of the Australian gold assets in Keras Resources. It is currently exploring the Warrawoona Gold district where it has consolidated a previously fragmented historic gold mining district.
52 Week Range (A$)
0.019 0.023 0.029
GOLD IN THE PILBARA,GOLD IN THE PILBARA,GOLD IN THE PILBARA,GOLD IN THE PILBARA, AUSTRALIAAUSTRALIAAUSTRALIAAUSTRALIA
Investment Investment Investment Investment CCCCaseaseasease
An investment in Calidus is an investment in brownfields gold exploration on a freshly
consolidated set of leases in the Marble Bar district in the Pilbara region of Western
Australia. These leases contain a 2012 JORC compliant gold resource of 5.78Mt grading
2.2g/t for 410k oz of gold. Calidus is actively drilling to increase both resource size and
confidence and will deliver active news flow targeting a resource update in early 2018.
High High High High GradeGradeGradeGradessss
The existing resource grade of 2.2g/t is one of the highest of the Australian open pit
explorers/developers in our comparison universe and historical exploration indicates
there are many significantly higher grade assays in the numerous targets on the leases
that make up the Warrawoona Project. Although currently small, it is worth noting that
the grade at Copenhagen is 6.1g/t. Nearby Coronation has similar intersections indicating
that will also have a similar higher grade resource once delineated. These will significantly
and positively, impact the economics and speed of payback once in production.
Early Early Early Early Exploration SuccessExploration SuccessExploration SuccessExploration Success
Calidus has released the results of the first 17 RC holes drilled in the gap zone. Every hole intercepted gold mineralisation at relatively shallow depths with the best intercept being 27m @ 5.84g/t from 91m downhole. Allowing for the angle of the hole, this represents a true width of approximately 14m and a depth of around 65m.
ValuationValuationValuationValuation
BHC believes that with the current exploration programme, Calidus will increase its ore resources by around 80% to more than 700koz’s. This could be higher, but Calidus wants to de-risk the orebodies, so some of the current drilling will be infill, designed to lift material from the Inferred to the Indicated categories. We believe that an increase in the resource quality will lift the EV/resource oz closer to their peers resulting in a conservative, 50% valuation uplift per resource oz. We believe a near term market capitalisation of circa A$39M or A$0.043/share is easily achievable, indicating an 85% uplift from the current share price of A$0.023.
UpsideUpsideUpsideUpside PotentialPotentialPotentialPotential
With the main orebodies open along strike and all orebodies open at depth, and only shallow drilling having been conducted to date, there is potential for a significant increase in resources, over and above that which the current round or drilling will deliver. One other major aspect is that some of the Pilbara resources run high grades, and with Copenhagen and Coronation running better than 6g/t there is upside potential from better grades.
Politically StablePolitically StablePolitically StablePolitically Stable
The project is located in Western Australia, a pro mining, politically stable jurisdiction. The project is based on existing mining leases which predate native title claims, eliminating many of the problems facing mining developments in Australia today.
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Calidus Resources Limited Initiating Coverage
26 July 2017
Brandon Hill Capital 2
CONTENTS
Gold in the Pilbara, AustraliaGold in the Pilbara, AustraliaGold in the Pilbara, AustraliaGold in the Pilbara, Australia 1
Executive SummaryExecutive SummaryExecutive SummaryExecutive Summary 3
Project HistProject HistProject HistProject Historyoryoryory 4
The ProjectsThe ProjectsThe ProjectsThe Projects 6
ValuationValuationValuationValuation 22
Investment RisksInvestment RisksInvestment RisksInvestment Risks 25
Appendix A Appendix A Appendix A Appendix A –––– Directors & ManagementDirectors & ManagementDirectors & ManagementDirectors & Management 26
Appendix B Appendix B Appendix B Appendix B –––– Company StructureCompany StructureCompany StructureCompany Structure 27
Appendix C Appendix C Appendix C Appendix C –––– Regional GeologyRegional GeologyRegional GeologyRegional Geology 28
Research DisclaimersResearch DisclaimersResearch DisclaimersResearch Disclaimers 32
Brandon Hill Contact ListBrandon Hill Contact ListBrandon Hill Contact ListBrandon Hill Contact List 34
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EXEXEXEXECUTIVE SUMMARYECUTIVE SUMMARYECUTIVE SUMMARYECUTIVE SUMMARY
Calidus’ Strategy
The current strategy of Calidus is to increase resources, finalise the consolidation of the Warrawoona/Klondyke goldfield
in the Pilbara region of Western Australia and to develop a substantial gold mine. There is an existing JORC Compliant
(2012) resource of 410k oz at a grade of 2.2g/t with significant exploration upside. Following a successful IPO and capital
raising, the company plans to rapidly expand the current resources via brownfields extensions to current mineralisation
and regional targets.
Why the Pilbara
As with many mineral fields in Australia, this area of the Pilbara has been owned by many different mining companies which
has historically lead to sub-optimal development and exploration. The Warrawoona Goldfield has not seen a concerted
exploration programme since gold was discovered in 1897 due to the fragmented ownership of the area. This leaves it in
a unique position of having known outcropping gold mineralisation that has not been developed. Calidus, having
consolidated the main mineralised shear of the area is embarking on the first modern systematic exploration programme
to rapidly and cost effectively increase resource ounces.
Valuation BHC believes that with the current exploration programme, Calidus will increase its ore resources by around 80% to more than 700k oz’s. This could be higher, but Calidus has stated that it wants to de-risk the orebodies, so some of the current drilling will be infill, designed to lift material from the Inferred to the Indicated categories, and potentially to measured resources. We believe that an increase in the resource quality will lift the EV/resource oz closer to their peers resulting in a conservative, 50% valuation uplift per resource oz. Further, a larger resource of 700,000 oz’s will increase the valuation. When taking into account the dilution from an additional 250M shares being issued to Keras Resources Plc (from achieving a resources of more than 500k oz’s) and a lower cash balance of A$1.5M, we feel a market capitalisation of circa A$39M is easily achievable, indicating a ~85% uplift from the current share price of A$0.023. The 192.5M outstanding options are not included in this calculation.
Shallow Orebody
The Klondyke, Fieldings Gulley, Coronation and Copenhagen are relatively shallow orebodies 78% of the historically drilled
intercepts are shallower than 100m and exploration to date indicates the ore bodies continue at depth. There have been
many relatively high grade intercepts recorded over mineable widths and from surface and much of the 7km’s of Klondyke
shows outcropping on surface. Initially BHC anticipates that mining will be by open pit.
Metallurgy
Historic metallurgical test work, especially on the Klondyke which was tested extensively, indicated that the gold was free milling with some recoveries exceeding 93%. Given the shallow level of oxidation in the area, this is extremely important.
Infrastructure
The area is well serviced by existing infrastructure, being located only 20km outside of Marble Bar. There is a sealed road
from Marble Bar to Port Headland, which is only 2 hours away and a good all weather road from Marble Bar to the leases.
The leases are granted Mining Leases, which existed prior to the native title regime and have access to fresh water. Apart
from having the local Mining Registrar located in Marble Bar, the town also boasts a sealed airstrip and accommodation
for 100 single rooms.
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Calidus Resources Limited Initiating Coverage
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PROJECTPROJECTPROJECTPROJECT HISTORYHISTORYHISTORYHISTORY
Location
The Warrawoona Project is located 25km south east of Marble Bar and approximately 150km south east of Port Hedland,
in the far north of Western Australia.
Exhibit 1: Location of the Warraoona Gold Project
Source:Source:Source:Source: Calidus ResourcesCalidus ResourcesCalidus ResourcesCalidus Resources
Listing History
Calidus Resources Limited (“Calidus”) was originally listed as Pharmanet Group Limited Which was bought out of voluntary
administration on 7 March 2017.
On 22 March 2017, the Company announced it had entered into a conditional binding agreement (Acquisition Agreement)
with Keras Resources PLC (Keras) and Keras (Gold) Australia Pty Ltd (Keras Australia) under which the Company would
acquire 100% of the issued capital of Keras's wholly owned Australian subsidiary Keras Australia from Keras.
The name was changed to Calidus Resources at an Annual General Meeting (“AGM”) on Tuesday the 30th of May 2017. At
this AGM, the resolution was passed to acquire Keras Australia, the owner of the gold assets within Keras for 225M
Consideration Shares and 525M Performance Shares. At the same time it was announced that there would be an offering
of 350M shares to raise up to A$7M and up to 875M Options to raise a further A$875,000 via a prospectus.
The Resolution was approved and conditional approval for the listing of Calidus was received from the ASX on 1 June 2017.
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Corporate History Corporate History Corporate History Corporate History
19 Sep 2016 Acquisition of the Klondyke Gold Project
17 Nov 2016 Initial Drilling Programme Commences at Klondyke Gold Project
30 Nov 2016 Completion of Drilling at Klondyke Gold Project
20 Dec 2016 High Grade Gold Intersected at Klondyke and Update to Tribute with KalNorth
9 Jan 2017 Further High Grade Gold within Broad Mineralised Zones at Klondyke
16 Jan 2017 Tenement Applications in Warrawoona Gold District
14 Feb 2017 Initial High Grade Resource at Copenhagen Deposit
21 March 2017 Listing of Australian Gold Assets on the ASX
28 April 2017 Expansion of Prospective Australian Gold Footprint
30 May 2017 Approval for Pharmanet Group to Acquire Keras
1 June 2017 Conditional Approval for Calidus Resources Listing
5 June 2017 ASX Capital Raising Complete
15 June 2017 Calidus Resources Commences Drilling at Warrawoona
22 June 2017 Calidus Resources Commences Trading
12 July 2017 Maiden Drilling Programme Delivers High-Grade Gold Intercept of 27m @ 5.85g/t at
Warrawoona
25 July 2017 Further Strong Drill Results at Warrawoona
In the time line of key historical events, we have only stated with the current focus on the Klondyke Goldfield in the north
of Western Australia following the initial acquisition by Keras plc.
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THE PROJECTSTHE PROJECTSTHE PROJECTSTHE PROJECTS
Exhibit 2: The Western Australia
Source:Source:Source:Source: operationworld.orgoperationworld.orgoperationworld.orgoperationworld.org
Warrawoona – Consolidation
Calidus holds a 100% interest in the Warrawoona Gold Project ('Warrawoona' or 'the Project') in the Pilbara region of
Western Australia. Warrawoona comprises a 100% interest in the Klondyke project and the right to mine the Haoma
tenements, which provide the Company with control over the Warrawoona Greenstone Belt. This is the first consolidation
of this part of the greenstone belt. Calidus continue to consolidate the Warrawoona Goldfield through negotiated deals
with existing tenement holders. The tenements cover Archaean aged greenstones of the prospective Warrawoona Group
of the Pilbara Supergroup of the East Pilbara Terrane.
Warrawoona Gold Project
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Renewed Interest in the Pilbara for Gold Mining
Recent interest in the Pilbara Goldfields really commenced in 2010 when Northern Star Resources purchased the Paulsens
operations, located 180km west of the mining town of Paraburdoo on the border of the Ashburton and West Pilbara Mineral
Fields, Western Australia. Despite underground mining having been conducted in the 1930’s, modern exploration did not
commence until 1976 when CRA acquired the leases. It then underwent several changes of ownership until Northern Star
acquired the assets. Currently, Paulsens mines around 0.47mtpa of ore to produce ~70k oz of gold at an AISC of around
US$900/oz.
Since that time, a number of other gold producers have emerged in the area and we mention a few of the more pertinent
below. (Exhibit 1)
Millennium MineralsMillennium MineralsMillennium MineralsMillennium Minerals (MOY ASX) is a 80,000 oz pa producer located 90km to the SSE of Warrawoona. It has a market
capitalisation of ~A$140M. Total resources stand at 1.28 Moz and the Company is completing an aggressive drill
programme to identify more oxide resources and in parallel looking at a sulphide processing route for its extensive
refractory ore resources. There are more details in appendix A.
Capricorn MCapricorn MCapricorn MCapricorn Metals Ltdetals Ltdetals Ltdetals Ltd (CMM ASX) acquired its flagship Karlawinda Gold Project at the beginning of 2016, and moved
quickly to de-risk the project over the past 12 months – upgrading the resource at the Bibra deposit to 31Mt grading 1.1g/t
for 1.14M oz of gold, and completing over 80,000m of resource drilling. A definitive feasibility study is due for completion
before the September quarter 2017. Capricorn has a market capitalisation of ~A$52M
Novo ResourcesNovo ResourcesNovo ResourcesNovo Resources (“Novo”) is a Canadian listed company with a market capitalisation of ~C$169M and is active in the
Pilbara Goldfields. Their main area of focus is immediately to the south of Calidus with the Beatons Creek project. This
currently has a total resource of 558oz with a grade of 2.7g/t and is located 10km from the Millenium Minerals processing
plant. Within the next 6 months Novo plans to release an updated Resource figure and a preliminary feasibility study. A
30kt bulk sample was taken for metallurgical purposes in 2016. Novo also owns the Blue Spec and Gold Spec properties in
the Nullagine area of the Pilbara. These two properties have a combined resource of 415kt grading 16.4g/t for 217k oz of
gold, however, both deposits have very high antimony grades which has a tendency to significantly drive down gold
recoveries due to the more complex metallurgy. We believe that most of the high value attributable to Novo is due to its
extensive gold package in the Pilbara and the announcement of the discovery of gold nuggets at Purdy’s Reward in July
2017. When the Comet Wells and Artemis Farmin JV are included, Novo has extensive leases in the area and Sumitomo
has agreed to partner with Novo in bringing Beatons Creek into production.
De Grey MinDe Grey MinDe Grey MinDe Grey Mining Ltding Ltding Ltding Ltd was established in 2002 and its current focus lies in the Pilbara region on the Turner River Project,
which has found to be prospective for gold mineralisation. Its Pilbara Gold Project has a total resource of 18.8Mt @ 1.7g/t
for 1.0M oz of gold with 54% being in the Measured and Indicated categories contained in several deposits with a plan to
process through a central facility. A scoping study is close to completion.
Kairos MineralsKairos MineralsKairos MineralsKairos Minerals commenced its maiden drilling programme in late 2016 and has already declared a JORC 2012 compliant
resource of 5.692Mt @ 1.42g/t for 258k oz of gold.
PantoroPantoroPantoroPantoro have recently developed their 100% owned Nicholsons Gold Project since acquiring its initial interest in April 2014.
It is currently producing 50k oz pa with targeted expansion up to 100k oz pa. Ore is being produced from an underground
mine and two small open pits are in near term development. More details are available in Appendix A.
The Warrawoona ConsolidationThe Warrawoona ConsolidationThe Warrawoona ConsolidationThe Warrawoona Consolidation –––– MergMergMergMerging the ing the ing the ing the KlondykeKlondykeKlondykeKlondyke ShearShearShearShear and other regional deposits and other regional deposits and other regional deposits and other regional deposits
On October 5 2016 Calidus acquired the Klondyke leases and Haoma tenements “HML Tenements” (which consist of
Copenhagen, Coronation and Fieldings Gully) in the first consolidation of the Warrawoona gold belt.
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The transactions has enabled the Company to access the entire klondyke shear which was historically owned by different
owners. This now gives the Company access to 7.5km strike of the main mineralised shear and the opportuity to join the
two separated resource area into one continuous 3km resourse, prior to any step out drillingThe immediate opportunity is
to close this “gap” area and deliver a resource along the entire strike and optimise any development scenario.
Also, as part of the acqusition of HML Tenements the Company has access to other regional deposits nearby being
Copenhangen, Coronation and Fieldings Gully which could provide further sources of ore in a development scenario.
These deposits are only 10km from the Klondyke shear.
Figure 3 illustrates the total Klondyke shear that is now accessible to the company following the acquisition of Klondyke
and option to purchase the HML tenements (in the green striped sections).
The project is located approximately 70km from Bamboo Creek and 90km from Millennium Minerals (see Exhibit 1) where
excess processing capacity may be available if a tolling option is pursued. In addition to the open-pit resources there is
the potential for underground mining on high grade lodes.
Exhibit 3: The Klondyke Deposit
Source:Source:Source:Source: Calidus ResourcesCalidus ResourcesCalidus ResourcesCalidus Resources
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Exhibit 4: The Warrawoona Geology
Source:Source:Source:Source: Calidus ResourcesCalidus ResourcesCalidus ResourcesCalidus Resources
The The The The Acquisition of Klondyke and the HML Tenements Acquisition of Klondyke and the HML Tenements Acquisition of Klondyke and the HML Tenements Acquisition of Klondyke and the HML Tenements
Keras acquired 100% of Arcadia Minerals Pty Ltd (“Arcadia”) whom owned the Klondyke leases. The total consideration for
the acquisition was A$1.42M (£0.8M) in cash and the issue of 100,000,000 Keras ordinary shares, at a market price of 0.62p,
being the closing price on the 5 October 2016. These shares were subject to standard lockup and orderly trading terms. In
addition, Arcadia retains a 2.5% royalty of the gross value of the proceeds on production of gold from the tenements. The
royalty is capped at A$3.5M which will only commence post the production of 20,000 ounces from the Arcadia properties.
Haoma (HML) Tenements
Keras acquired the five year right to mine the HML Tenements and the irrevocable right to acquire within a 5 year period
the HML Tenements for a total consideration of A$1.25M, comprising A$500,000 in cash and a Convertible Note in the
amount of A$750,000 with the right to convert into Calidus ordinary shares at the 30 day VWAP post this announcement.
The agreement with HML represents a first step in a regional consolidation to create the critical mass required to develop
a stand-alone, owner operated open-pit gold mine in the Pilbara region of Western Australia.
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Klondyke Overview
Klondyke comprises four granted mining leases covering a total area of 490 hectares and has a JORC 2012 compliant
resource of 5.6Mt @ 2.08g/t gold ('Au') for 374,000 ounces, which is also open at depth.
The resource is currently confined to two separate 1km portions of the total 7.5km of mineralised strike length highlighting
the significant potential for a large increase in resource along the untested strike length. The company has completed a
10,000m RC drilling programme along the “gap” with the aim of connecting the strike length and increasing the resource.
Exhibit 5: Klondyke: Looking south-east along strike
Source:Source:Source:Source: Calidus ResourcesCalidus ResourcesCalidus ResourcesCalidus Resources
Ore Resources
Klondyke Gold Resources
The current ore resource reported in accordance with the JORC Code (2012 Edition) is shown in the table below.
Exhibit 6: Klondyke Deposit Mineral Resource Estimate (JORC 2012)
Klondyke DepositKlondyke DepositKlondyke DepositKlondyke Deposit InferredInferredInferredInferred Mineral Resource/ Estimate (JORC 2012) JORC CategoryMineral Resource/ Estimate (JORC 2012) JORC CategoryMineral Resource/ Estimate (JORC 2012) JORC CategoryMineral Resource/ Estimate (JORC 2012) JORC Category
0.5g/t Cut0.5g/t Cut0.5g/t Cut0.5g/t Cut----OffOffOffOff 1.0g/t Cut1.0g/t Cut1.0g/t Cut1.0g/t Cut----OffOffOffOff
Tonnes (Mt) Grade Au (g/t) Au (koz) Tonnes (Mt) Grade Au (g/t) Au (koz)
5.60 2.08 375 5.29 2.15 365
Source:Source:Source:Source: Calidus ResourcesCalidus ResourcesCalidus ResourcesCalidus Resources
The Klondyke drilling was completed using a combination of RAB, RC and diamond drilling from surface. A total of 155 RC
drill holes for 15,130m, 35 diamond drill holes for 7,914m, and 9 RAB drill holes for 699m have been completed at the
project over a period of 30 years by seven different companies (Exhibit 7). Holes were drilled in various orientations but
most commonly to the northeast or southwest, orthogonal to the overall strike of the mineralisation. Holes were almost
exclusively inclined at -60° on a variable spacing averaging 25m x 25m. The Lynas drilling is recorded as having collars
surveyed via total station in AMG84 Zone 50. The method of collar surveys for other drilling is not known. No collar survey
checking is recorded. Drill holes have been geologically logged. Logging took note of lithology, colour, ore minerals,
sulphide percent, quartz percent, alteration and alteration type and weathering intensity. RC holes have been logged in
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1m intervals. Diamond holes have been logged in variable length intervals according to geological characteristics. Results
are recorded in a digital database.
Block modelling and grade estimation was undertaken using Surpac mining software. Data was provided by Calidus in MS
Access format. The data was checked graphically for error anomalies such as spurious collars, downhole surveys, assay /
depth mismatches. Overlapping assays were checked via the use of Surpac extraction routines which preclude the use of
data that has overlapping sample intervals. Saunders reported that no errors were encountered.
Data was composited to 1m using a threshold of 0.75m. Geological domaining of Copenhagen mineralisation was based
on the strike continuity of multiple horizons of continuity within the broader shear zone. A total of 41 domains were created
representing mineralisation with sufficient continuity to be deemed Mineral Resources. A nominal cut-off of 0.8g/t Au was
applied to the interpretation of the Copenhagen domains.
For the 2014 model, top-cuts were applied to the composite files on an individual domain basis. These were determined
for each of the 41 domains using a relative difference approach in which the composites were ranked and their relative
difference plotted graphically to determine values at which the continuity of grades disintegrated. Cut values for each
domain ranged from 3.38g/t to 14.65g/t Au with an average of 5.73g/t Au. Following review of these top-cut parameters
in 2016, it was recognised that the top-cut values assigned to some domains may have been overly conservative. In order
to assess the suitability of the top-cut values a number of complementary approaches were taken: relative difference
approach, sichel mean calculator and metal at risk. As a result of this assessment, for the revised resource estimation, 12
of the domains were interpolated without applying a top cut while the other 29 had a lower top-cut applied. However, the
memorandum on the revised resource did not specify the actual top-cut grade applied to each domain.
Variography was studied using Supervisor geostatistical software. Nine of the main domains representing a continuous
stratigraphic position within the Copenhagen shear were appended and scrutinised as one large domain for the purposes
of variographic analysis to improve the number of available composites and continuity. A log-normal transform was applied
to deduce continuity directions and the appropriate back transform was employed before the parameters were used in
estimation. This geostatistical analysis indicated grade continuity was in the order of 200m along strike.
Block model dimensions were chosen to cover the extents of mineralisation as defined by current drilling. A block size of
10m (y) x 10m (x) x 5m (z) was chosen with sub-blocking of 5m x 5m x 2.5m.
Resource estimation was performed using ordinary kriging interpolation for gold. No other elements were estimated.
Grade interpolation used search criteria consistent with the geostatistical models developed by the variography. Each
domain was estimated using a separate composite file pertinent and constrained to each domain’s wireframe. Validation
of the block model included swath plots, visual inspection and average composite versus average block grades.
Exploration History of Klondyke
The entire Klondyke exploration leases have defined mineralisation that extends for a distance of 7.5km along strike with
a large number of workings. The depth potential is significant with 78% of all holes drilled being shallower than 100m.
There has been no geophysics conducted with only very limited drilling and testing of parallel structures.
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Historic Programmes
1980 -1986 The Klondyke project has been subject to modern mineral exploration by Aztec Mining, CRA, Fortuna,
HML and Lynas.
This exploration has included geological mapping, soil sampling, aeromagnetics, aerial photography,
bulk sampling, underground sampling, drilling, resource modelling and petrology
1994 to mid-
1995
Exploration comprised rock sampling, geophysics, soil sampling, RC drilling, core re-sampling and
photo- geological/structural/prospectivity interpretation.
A ten drill hole RC program conducted in 1994 in the eastern portion gave elevated gold results. Re-
sampling of Klondyke Queen drill core returned elevated gold values and demonstrated that gold also
occurs in sericite-quartz-dolomite-pyrite alteration, as well as in the fuchsite-quartz-pyrite alteration.
Mid 1995 –
mid 1996
Fieldwork from mid-1995 to mid-1996 included drilling, geophysics, geological mapping, petrology and
metallurgy. In all, 80 drill holes for 14,110m of drilling, including 9,032m RC drilling were completed
2005 Jupiter who conducted RC drilling over the western portion (M45/668) of the tenements and at
Kopcke’s and Klondyke King prospects. In total 12 shallow RC drill holes were completed on M45/668
on the previously identified narrow zones of mineralisation.
A further 15 RC drill holes were completed at the Kopcke’s and Klondyke King prospects. The RC
drilling delineated a near vertical 30-50m wide envelope of gold mineralisation within a pervasive shear
zone structure. The overall average grade of the mineralised intercepts within the shear zone was in the
order of 2.0g/t Au.
The poddy nature of the gold mineralisation is due to the generally narrow, discontinuous, irregular
and partly boudinaged auriferous quartz veinlets. Assessing the economic potential of the gold
mineralisation for the deposits was challenging due to the low drilling density and poor collation of
individual gold intercepts within the mineralised zones.
2007 Jupiter drilled 10 infill RC holes for 2,191m at Klondyke King and Klondyke Queen (M45/669),
undertaking some metallurgical test work and a conceptual scoping study. Drilling encountered zones
of mineralisation comprised of gold in quartz stringers and gold associated with pyrite and lesser
chalcopyrite and arsenopyrite in altered and sheared country-rock. Assays over the mineralised zones
returned anomalies with values from 0.3g/t Au to 23.4g/t Au.
2011 Klondyke Consolidated Resources Limited (KCRL) commissioned Vidoro Pty Ltd (Vidoro) to complete
an Independent Geologists Report on the Klondyke project. This was undertaken as an in support of
KCRL’s intent at the time to complete an Initial Public Offering.
2012 BMGS completed a field investigation to collect a range of structural observations to support re-
interpretation of previously collected geophysical data. Approximately 240 structural observations were
collected from surface features across the Klondyke project and a number of potential cross-cutting
geophysical features were identified for further investigation.
In 2012 BMGS undertook an independent Mineral Resource estimate of the Klondyke gold deposit and
prepared a JORC 2012 compliant resource report on behalf of Jupiter.
2016 Keras undertook a limited programme of 4 RC holes to twin historic holes to validate previous work.
Recent Klondyke Drilling
Six holes were drilled on the on the main Klondyke trend in 2016. The results of these holes were released on the 9th
January 2017, and were twinned holes to substantiate earlier drilling.
• Hole KKC003: 60m @ 1.00g/t from 0m to EOH incl. 2m @ 5.77g/t gold (‘Au’) from 6m, 4m @ 1.94 g/t Au from 15m,
16m @ 1.97g/t Au from 35m
• Hole KKC004: 44m @ 1.08g/t Au from 0m incl.13m @ 2.28g/t Au from 14m
• Hole KKC005: 38m @ 1.52g/t Au from 0m incl.28m @ 1.98g/t Au from 0m
• Hole KKC006: 37m @ 1.60g/t Au from 50m incl. 21m @ 2.66g/t Au from 62m
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Calidus Resources Limited Initiating Coverage
26 July 2017
Brandon Hill Capital 13
• Hole KKC007: 38m @ 1.92g/t Au from 0m, incl. 23m @ 2.68g/t Au from 2m
• Hole KKC008: 90m @ 1.34g/t from 0m to EOH incl. 6m @ 3.32 g/t Au from 11m, 6m @ 4.45 g/t Au from 24m, 7m
@ 1.87 g/t Au from 57m, 5m @ 3.42 g/t Au from 69m, 4m @ 5.50 g/t Au from 86m to EOH
Exhibit 7: Klondyke Geological Cross Section
Source:Source:Source:Source: Calidus ResourcesCalidus ResourcesCalidus ResourcesCalidus Resources
These results are interesting from several points of view. The results show a higher grade core located in broad zones of
lower grade mineralisation and occur from surface. Secondly, they are good, long intersections, and hole KKC008 ended
in high grade ore. This underscores the potential for the discovery of additional mineralisation. Further, these assay results
were determined by standard fire assays. Historically, screen fire assays have provided more accurate grades and
comparisons have shown that fire screen assays return on average 20% higher gold values that standard fire assays.
Satellite Tenements
As the greenstone package spreads out to the west of Klondyke, there are numerous old workings and known deposits
identified by previous explorers. These include the Copenhagen, Coronation and Fieldings Gully deposits.
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Calidus Resources Limited Initiating Coverage
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Exhibit 8: Location of Deposits that comprise the Warrawoona Gold Project
Source:Source:Source:Source: Calidus ResourcesCalidus ResourcesCalidus ResourcesCalidus Resources
Copenhagen
Copenhagen is located 10km from Klondyke and is situated on an old mine. JORC 2012
inferred mineral resource of 180,000 @ 6.1 g/t to maximum of 100m depth and along 140m
of strike which is open in all directions
No resource has been calculated, significant intercepts include:
• CRC97-8 4m @ 59.48 g/t Au from 64m
• RC13 10m @ 6.25g/t Au from 14m
• RC8 8m @ 9.73 g/t Au from 16m
• RC7 6m @ 15.47 g/t Au from 26m
• RC4 10m @ 6.82 g/t Au from 18m
• CRC9 7m @ 8.51 g/t Au from 51m
• RC7 8m @ 6.88 g/t Au from 12m
• RC1 11m @ 7.23 g/t Au from 30m
It should be noted that a small pit was developed in the 1980’s to a depth of 19m. This has
been excluded from the resource calculation.
Drilling is planned and mapping confirms prospectively
Coronation
Coronation is located 12.5km from Klondyke and 3km along strike of Copenhagen.
No resource has been calculated, significant intercepts include:
• PCR10 9m @ 5.21 g/t Au from 9m
• PCR10 8m @ 7.64 g/t Au from 64m
• WCR3 3m @ 16.67 g/t Au from 16m
• AT2 12m @ 7.08 g/t Au from surface
• AT1 4m @ 5.71 g/t Au from 12m
• WCR1 2m @ 31.5 g/t Au from 30m
Fieldings Gully
The Fieldings Gully mine is located 15km from the centre of the Klondyke area and is an old
operating mine. Fieldings Gully has a historic non-compliant resource of 315,000t @ 1.8 g/t
Au for 18,266 ounces at a 0.5g/t Au cut-off. The resource remains open at depth and along
strike. Significant intersections include:
• FG97-7 14m @ 3.09g/t Au from 53m
• FG97-12 4m @ 5.29 g/t Au from 12m
• FG97-12 3m @ 17.58g/t Au from 20m
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Calidus Resources Limited Initiating Coverage
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Brandon Hill Capital 15
Copenhagen Gold Resources
Exhibit 9: Copenhagen Deposit Mineral Resource Estimate (JORC 2012)
Source:Source:Source:Source: Calidus ResourcesCalidus ResourcesCalidus ResourcesCalidus Resources
The Copenhagen deposit is located in the western portion of the Warrawoona project area on Mining Lease (M45/240) of
6.0705 hectares.
Calidus have recently released a Mineral Resource estimate for the Copenhagen gold deposit of 0.17Mt @ 6.1g/t Au at a
grade cut-off of 0.5g/t Au for contained metal of 36,000oz which have been classified as Inferred Resources and reported
in accordance with the JORC Code (2012 Edition). These are shown above in Exhibit 8
The digital database assembled by Calidus for Copenhagen records 53 drill holes for the Copenhagen prospect. Drilling
used for the estimate has been completed using those RC drill holes for which assay data was available - a total of 19 RC
drill holes for 2,995m. 17 historic holes were drilled by Fortuna and HML prior to 1998 with two RC holes for 140m recently
completed by Calidus as part of their confirmatory drilling program over the Warrawoona project (refer Exhibit 5 above).
Holes were generally inclined at -60°to the southwest on a variable spacing averaging 25m x 25m.
Satellite Tenements Exploration History
Prior to 1940 the Copenhagen deposit had been worked via small scale excavation and fossicking defining the surface
expression of the high grade lode. RC drilling was undertaken in the 1980’s and 1990’s mainly by Fortuna Mining and HML.
Small scale open pit mining with a vat leach operation was built at the project in the 1980’s, ceasing in 1988 having
produced some 30Kt of oxidised ore. The gold grade won from this material was reported as 4.11g/t Au. A mineral resource
model was constructed by Continental Resource Management Pty Ltd in 1992.
Drilling of 2 check holes commenced in mid-November 2016 and were designed to test the veracity of the existing drill
holes. Both holes intersected thick, high-grade mineralisation.
• Hole KKC001: 18m @ 6.3g/t gold (‘Au’) from 33m (incl. 6m @ 9.27g/t Au from 34m) • Hole KKC002: 9m @ 6.9g/t Au from 49m (incl. 6m @ 9.47g/t Au from 49m)
Detailed mapping of the greater Klondyke area commenced prior to this and reported visible gold in chip samples,
extensive old workings and expansive shear zones.
Category Tonnes (Mt) Grade Au (g/t) Contained (oz)
Inferred 0.17 6.10 36,000
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Exhibit 10: Copenhagen Oblique Drill Section
Source:Source:Source:Source: Calidus ResourcesCalidus ResourcesCalidus ResourcesCalidus Resources
Exhibit 11: Copenhagen Project Cross Section
Source:Source:Source:Source: Calidus ResourcesCalidus ResourcesCalidus ResourcesCalidus Resources
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Calidus Resources Limited Initiating Coverage
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Brandon Hill Capital 17
Exhibit 12: Further Regional Consolidation
Source:Source:Source:Source: Calidus ResourcesCalidus ResourcesCalidus ResourcesCalidus Resources
The Company is seeking to further consolidate tenements in the region with applications lodged as depicted in Exhibit 11.
On the 16th January 2017 Calidus announced that it had lodged applications for two tenements in the Warrawoona district
on prospective greenstone terranes that flank major granitic intrusions and which are vital to gold mineralisation in the
region – including at Warrawoona. These applications cover an area of approximately 170km2 including 28km of
stratigraphy. The tenure hosts a multitude of historic gold occurrences and artisanal mining operations. These applications
have passed the public opinion phase and are awaiting heritage clearance.
On the 28th of April, Calidus secured an option over one granted exploration licence and two exploration applications
covering in total 7,363 ha of prospective ground. The licence and applications cover extensions of the Klondyke Shear and
the Marble Bar Goldfield which lies 25km from Klondyke and produced 170,000 ozs of gold from 196,500t of ore. This area
has seen no modern exploration.
It is encouraging that the ability exists to peg tenements so close to a large gold system such as Warrawoona. This may be
because of the previously fragmented ownership of the region. This has historically been a problem for many mining
districts in Australia, and this latest pegging is seen as the first step in consolidating the region around the dominant gold
holdings at Klondyke.
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Calidus Resources Limited Initiating Coverage
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Brandon Hill Capital 18
Calidus Exploration and Development Programme
The short term focus of the Company is to increase and upgrade the resource along the Klondyke shear by drilling in the
“gap” which can be seen in figure. The Company is also drilling at both the Copenhagen and Coronation deposits.
The drilling in the Gap area has recently been completed, although all assays have not yet been received.
Exhibit 13: Klondyke Long Section Showing Location of Initial drilling
Source:Source:Source:Source: Calidus ResourcesCalidus ResourcesCalidus ResourcesCalidus Resources
Calidus announced the first drilling results on the 12th July 2017. This consisted of the first six holes for a total of 826m of
drilling, a part of the 10,000m programme. Geologically, the holes all intersected classic Klondyke style mineralisation,
comprising strongly sheared, silicified, pyritised and fuchsite altered felsic and mafic schists. Widths have been as expected
in most holes and above average in hole 17KLRC0001, which together with its high grade, has yielded the outstanding
intercept of 27m @ 5.85g/t Au (including 1m @ 39.14g/t), one of the best intercepts to date at the project.
• Hole 17KLRC001: 27m @ 5.85g/t from 91m including 1m @ 39.14g/t
• Hole 17KLRC002 : 6m @ 4.75g/t Au from 11m
• Hole 17KLRC002: 21m @ 1.28g/t Au from 23m
• Hole 17KLRC002: 8m @ 3.58g/t Au from 49m
• Hole 17KLRC003: 17m @ 1.03g/t Au from 117m
• Hole 17KLRC003: 5m @ 3.12g/t from 155m
June – Aug 10,000m RC drill programme targeting resource increases at Klondyke and the satellite
deposits. The current resource at Klondyke is divided into two zones due to previously
fragmented ownership of the tenements. This programme is aimed at increasing the resource
size and category,
The gap area is 700m long and has had limited drilling conducted on it, despite some
encouraging intercepts: 19m @ 3.44g/t; 14m @ 3.83g/t and 21m @ 2.66g/t
• 5,000m into the “gap area”
• 2,000m into the existing western portion of the resource
• 2,000m of the Copenhagen and Coronation deposits
• 1,000m along strike extensions
Sept- Nov Second 10,000m drill programme
Q4 2017/Q1 2018 Resource update
Q3 2018 Commence PFS
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Brandon Hill Capital 19
• Hole 17KLRC004: 7m @ 1.58g/t from 53m
• Hole 17KLRC006: 9m @ 1.21g/t from 113m
The second tranche of drill results was released on the 31st July 2017.
• Hole 17KLRC007: 2m @ 5.58g/t from 29m
• Hole 17KLRC007 : 6m @ 2.26g/t Au from 91m
• Hole 17KLRC007: 16m @ 2.62g/t Au from 124m
• Hole 17KLRC008: 15m @ 2.04g/t Au from 6m
• Hole 17KLRC008: 8m @ 1.43g/t Au from 55m
• Hole 17KLRC009: 20m @ 1.47g/t from 2m
• Hole 17KLRC013: 12m @ 1.45g/t from 8m
• Hole 17KLRC014: 14m @ 1.83g/t from 8m
• Hole 17KLRC015: 6m @ 2.56g/t from 61m
• Hole 17KLRC015: 6m @ 4.61g/t from 82m
• Hole 17KLRC016: 10m @ 1.15g/t from 72m
• Hole 17KLRC017: 5m @ 2.89g/t from 150m
These additional 11 RC holes represent a further 1,186m of drilling. Drilling in the gap area is now complete with the last
samples having been despatched to the laboratory. The rig is now moving to infill and twin holes in the existing resource
area to either side of the gap. This will assist in the next resource calculation which will cover the 3km of continuous
mineralisation that has been discovered to date.
The balance of the current 10,000m drilling programme will be completed in the September quarter 2017, and this includes
a further 4,174m into the Gap zone, which hosts the existing 374k oz Klondyke Resource.
Metallurgical test work has also commenced with initial sighter works underway on both the Klondyke and Copenhagen
deposits. Klondyke has had extensive metallurgical test work previously and the ore was shown to be free milling with gold
recoveries exceeding 93%. Test work will focus on gravity gold capture upfront before conventional CIL processing due to
the high level of visible gold in the deposit.
Environmental works have also commenced to ensure longer lead items required for a future development are being
advanced in a timely manner and to minimise any delays on the project from a regulatory perspective.
As part of the second 10,000m programme which is planned to be completed early in the fourth quarter of 2017, Fieldings
Gully will also be targeted as a review of this area has shown a non-compliant resource open in all directions that can be
quickly converted to additional resources. It is planned to complete this drilling this calendar year to allow a resource
upgrade soon thereafter.
Use of funds
The funds raised in the recent IPO will be used to repay a loan of A$2.9M used for the purchase of the project, an aggressive
exploration programme and corporate expenses over the next 2 years and exploration.
Expansion of operations & exploration A$3,500,000
Business development A$200,000
Expense of the offers A$803,286
Repayment of the D-Beta Loan A$2,905,000
General Working Capital( includes corporate & admin costs) A$1,086,714
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Calidus Resources Limited Initiating Coverage
26 July 2017
Brandon Hill Capital 20
Metallurgy
Sporadic metallurgical test work has been completed over the Warrawoona project.
1994 CRA commissioned Ammtec to complete test work on a sample from the Kopcke’s area which
identified a high incidence of gravity gold. Gravity recovery from a Wilfley table was very high at 73%
and bulk cyanidation testing reported a 96.4% recovery after 24hr against a calculated head of 3.99g/t
Au. In 1995 Amdel completed a bulk sample test work program to evaluate the gold distributions of
the mineralisation, with large (89 – 587kg) samples of ore processed through a pilot plant comprising
an open circuit mill discharging to a rougher (Wilfley) table (P80 = 106μm) with the concentrate
reporting to a cleaner table and the rougher underflow reporting to flotation.
May 2007 In a conceptual level test program on Klondyke mineralisation was conducted at SGS Perth
laboratories to evaluate the metallurgy and determine basic economic and design parameters.
Existing diamond drill core and RC samples were used.
SGS generated a number of composites and completed assays, mineralogy, relative densities,
determination of bond crushing work index, bond abrasion, bond rod mill and bond ball mill
grindability test work, together with cyanidation test work (SGS Lakefield Oretest, 2007). The program
was designed to determine amenability to cyanide leaching in a milling process plant; amenability to
cyanide leaching in a heap leach plant; optimum crush size; design parameters for processing; key
economic operating parameters (recovery, reagent consumption and leach times); consumable and
utility requirements. The SGS test work confirmed the previous Ammtec and Amdel test work and
demonstrated that gold recoveries in cyanidation would be high, with all 17 (pulverised ore) bottle
roll tests achieving recoveries over 90%, with cyanide and lime reagent consumption at the low end
of normal usage. Core samples were also tested to determine standard bond crushing, rod milling
and ball milling indices; the bond crushing work index was exceptionally high, averaging 38kWh/t.
The high work index suggested care will be necessary in design of the comminution circuit and SAG
milling may be precluded.
2010 In 2010 OREX Mining tested four lump ore samples of oxidised schistose material from Klondyke. The
whole of each sample was stage crushed to passing a nominal 15mm with the coarse crushed particles
typically expressed as elongated slabs. A one kilogram head sample was split out and submitted for
assay, together with two one kilogram samples for test work. One sample was screened at 5mm and
0.5mm, and the fractions assayed. The remaining sample was subjected to bottle roll cyanidation for
60 hours without further crushing. The leach residues were screened at 5mm and 0.5mm and the
fractions assayed. Results suggested positive gold extraction was achieved with low to moderate
reagent consumption. Key observations from this test work were:
� The samples are grab samples and not representative.
� There is a relatively soft component to the ore as tested and raises the
possibility of good gold liberation being achieved by fine crushing without
grinding.
� In all cases significant gold extraction was achieved across all size fractions,
with the greatest extraction achieved from the <0.5mm fraction.
� Reagent consumption was low-moderate.
� Poor liberation of gold in the coarse fractions.
Mining
As Calidus is currently an exploration company with a relatively small resource there are no definitive mining plans as yet,
but we believe that any operation will probably commence as an open pit, truck and shovel operation.
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Calidus Resources Limited Initiating Coverage
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Brandon Hill Capital 21
Capital Structure
Number Number Number Number Security Description Security Description Security Description Security Description 717,736,035 Fully paid ordinary shares 87,500,000 Quoted options exercisable at $0.025 each on or before 13 June 2019 31,000,000 Unquoted options exercisable at $0.025 each on or before 13 June 2020 24,000,000 Unquoted options exercisable at $0.03 each on or before 13 June 2020 50,000,000 Unquoted options exercisable at $0.02 each on or before 18 April 2021 250,000,000 Class A Performance Shares 275,000,000 Class B Performance Shares
The performance shares will be issued as delayed consideration to Keras Resources in the form of:
a) 250,000,000 performance shares will convert into fully paid purchaser shares on a one for one basis upon the earlier of:
• The announcement of a JORC 2012 compliant Indicated or Measured Resource of at least 6Mt with cut of grade
of 0.5g/t Au for at least 500,000oz of gold at the Klondyke Gold Project; or
• Sale (directly or indirectly) of all or part of the Purchaser’s Warrawoona Gold Project for a cash consideration of at
least $50,000,000.
b) 275,000,000 performance shares will convert into full paid purchaser shares on a one for one basis upon the earlier of:
• The announcement of a positive pre-feasibility study which demonstrates the project is commercially viable; or
• Sale (directly or indirectly) of all or part of the Purchaser’s Warrawoona Gold Project for a cash consideration of at
least $50,000,000.
As it stands, Keras Resources is a 30.25% shareholder of Calidus and assuming all performance targets are reached with no
additional equity being issued by Calidus, Keras will end up with circa 58.24% of the shares on issue. With a long track
record of accessing capital, Keras could prove a supportive shareholder by participating in future capital raises.
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VVVVALUATIONALUATIONALUATIONALUATION
Background
We have selected a number of the companies in the comparison table of the latest Calidus presentation with particular
focus on gold explorers or developers with potential open cut operations within Australia. We have also included two
producers in Pantoro and Millennium Minerals because they operate in the Pilbara and Kimberley, not too far from the
Calidus leases and demonstrate the potential to profitably produce in the region. Gold Road has been included as it
indicates the upside potential if a multi-million ounce orebody is discovered.
Valuation Technique
Historically we have valued gold resources at US$50 per ounce of resource, however, currently the average market
capitalisation for the explorers in Appendix A, excluding Calidus, is A$50.9/oz. On this metric, with a resource of 410koz,
the Warawoona gold project has an implied value of A$20.9M.
One of the key differentiators with explorers is the average grade of their resource. The Calidus Resource has an average
grade of 2.2g/t and we note that the closest to this in our comparison table is ABM Resources with a grade of 2.14g/t with
a smaller resource of 0.31M oz. Whilst they do have some gold in the Indicated category, their market capitalisation equates
to a value of A$111/oz. BHC believe that this bodes well for Calidus, where the current drilling programme is in part infill
drilling with the aim of de-risking the orebody, suggesting that the next ore resource calculation will deliver at least part of
the resource in the Indicated category. We also expect a significant percentage increase in the resource size given historical
and more recent drilling results in the tenement between the two resource envelopes of the Klondyke prospect.
The next key point on grade is the value derived from a profitable operation. Appendix A clearly shows that Pantoro has a measured resource of 0.77Mt grading 7.35g/t. They have a relatively small resource of 0.38M oz, however, the grade is very high at 7.43g/t. As a producer, Pantoro is de-risked but it demonstrates the upside potential for a similar production profile, with a resource of 0.38M oz, the market values Pantoro at A$501/oz.
It is also noted that the proposed Rothsay mine of Egan Street Resources has a resource of 0.26M oz at a grade of 11.6g/t.
The current proposal is to mine this using long hole open stoping with cemented rock fill pillars. This has an expected
mining cost of A$111/t and has a market capitalisation of A$57/oz.
Notwithstanding an initial open pit, if the Copenhagen deposit (and potentially the Coronation deposit) can be expanded
and the grade of 6g/t can be maintained, it would be profitable with a strip ratio of up to 30:1. This is just a scenario, but it
does indicate that the deposit(s) could be very profitable.
Conclusion
BHC believes that the ore resources at the Warrowoona /Klondyke gold project can easily be doubled in the short term.
Longer term we believe they can be expanded by significantly more than this. The current round of drilling is focusing on
infill drilling to raise the confidence levels by moving ore from the Inferred to the Measured and Indicated categories as
well as drilling between the two JORC resource envelopes on Klondyke. Further, the drilling at Copenhagen is expected
to result in an extension of the resource which we believe will continue to grade around 6g/t.
These moves will impact the value of Calidus three ways:
1. The increase in ore resources should raise the market capitalisation by A$42 for each additional ounce added to
the resources
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Brandon Hill Capital 23
2. There is also likely to be an improvement in terms of market capitalisation per ounce of resource related to higher
grades, and this is where the Copenhagen resource is so important
3. The de-risking of the orebodies as the category moves from Inferred through Indicated to Measures is most likely
to raise the market capitalisation per ounce of resource above A$42/oz.
4. Once the resource increases above 500k oz an additional 250M performance shares will be issued. Whilst this
should not impact the market capitalisation per ounce of resource, we do anticipate it will impact the share price
Up-side potential
Apart from the three short term impacts to the valuation of Calidus, there are some longer term impacts which could be substantial:
1. Most of the drilling to-date is shallow and has delineated the orebody to 150m depth which means the majority of the delineated resource could be potentially be mined by open pit at manageable strip ratios
2. Only sporadic metallurgical test work has been conducted on these ores. Some initial metallurgical studies have been budgeted for and positive results will further de-risk the project.
3. A positive pre-feasibility study would be expected to increase the valuation.
Valuation
With Calidus currently being an exploration company, we have to derive our valuation by comparison with similar gold
companies in the Pilbara. With a market capitalisation of A$32.3/inferred ounce of resource, Calidus is already trading at
a discount to most other gold explorers in the Pilbara and other parts of Western Australia.
BHC believes that with the current exploration programme, Calidus will increase its ore resources by around 80% to more
than 700,000oz’s. This could be higher, but Calidus has stated that it wants to de-risk the orebodies, so some of the current
drilling will be infill, designed to lift material from the Inferred to the Indicated categories, and potentially to measured
resources. We believe that an increase in the resource quality will lift the EV/resource oz closer to their peers resulting in a
conservative, 50% valuation uplift per resource oz. Further, a larger resource of 700,000 oz’s will increase the valuation.
When taking into account the dilution from an additional 250,000,000 shares being issued to Keras Resources Plc (from
achieving a resources of more than 500,000oz’s) and a lower cash balance of A$1.5M, we feel a market capitalisation of
circa A$39M is easily achievable, indicating a ~70% uplift from the current share price of A$0.024.
There is room for a significant increase in this outlook due to increasing the total resource further and also that we believe
Calidus should trade at a premium, not a discount to their lower grade peers. Further, as Calidus move through the phases
of feasibility, they can be valued on a DFS basis which should also prove positive.
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Comparison TableComparison TableComparison TableComparison Table
Company Calidus ABM Resources Primary Gold Capricorn Metals Echo Gold Road Egan Street Carbine Pantoro Millennium Minerals
Country Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia
Listed ASX ASX ASX ASX ASX ASX ASX ASX ASX ASX
Stage Exploration Exploration Exploration&Production Exploration&Developer Exploration
Exploration&Developm
ent Exploration Development Production Production
Mkt Cap (AU$ mil) 16.5 37.5 33.7 51.5 40.8 584.4 15.2 14.4 177.0 144.5
Mine Warrawoona Suplejack Mount Bundy Karlawinda Yandal Gruyere Rothsay Mount Morgan Halls Creek Nullagine Gold Project
Mine Type OP OP&UG OP OP OP UG OP UG OP
Project Ownership 100% 100% 100% 100% 50% 100% 100% 100% 80%
Reserves/Resources
Proven & Probable [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected]
Measured [email protected] [email protected] [email protected] [email protected]
Indicated [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected]
Inferred [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected]
Total-Tonnes(Mt)/grade(g/t) [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected]
Contained Gold Moz 0.41 0.31 1.2 1.1 0.96 3.36 0.26 0.85 0.376 1.28
(Potential)Mine Life 9 <2 years(Julius Deposit) 13 5.5 9.5 4 13.6
Strip Ratio 1.8:1 5.5:1 5:1
Production 100,000oz pa 30,000oz pa
50,000oz pa moving to
+80,000 ~85,000oz pa
Recovery 93-96% 86% 91-93% 94% 95% 71% 97% 90%
Capex $2.6M A21.7M $0.6M
C1 cash cost $832/oz A$836/oz A$395/oz $832/oz $1227/oz
Total Cost AISC A$1,054/oz A$1,186/oz A$945/oz A$1,020/oz A$549/oz $1,028/oz $1362/oz
Comments Operates on land Estimated project CAPEX Testwork completed Acquired Bronzewing Sold a 50% interest Definitive Feasibility Finalised a 6-month
owned by Traditional of $155M recently at Karlawinda Processing Hub in Gruyere to Goldfieldstargeted for Q3, 2017 option to 100%
Owners DFS completion by Recent completion for A$350M 1st production mid-2018ownership
Sep quarter 2017 of Julius Bankable 1st production 2018 High grade deposits gold equiv. Comes
Feasibility Study LOM Avg Production= with copper
270Koz pa
Mkt Cap/Resource 40.3 121.0 28.1 46.8 42.4 173.9 58.4 16.9 470.6 112.9
EV/Resource oz 37.8 96.7 27.0 45.2 41.7 73.6 38.8 9.3 452.2 93.2
Aiming to move to 80-
100,000ozpa in
2017/2018 inclu
Likely moving
underground in 2018
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INVESTMENT INVESTMENT INVESTMENT INVESTMENT RISKSRISKSRISKSRISKS
Commodity Prices-Currency
Gold projects are by definition exposed to the gold price. Since the project is in Australia, it is exposed to the Australian
dollar gold price which has been remarkably stable for the past 9 months at around A$1650. The likely movement in the
Australian dollar over the next 12 months is downwards, whilst we expect the gold price to move marginally upwards. This
suggests a slowly improving gold price when expressed in Australian dollars.
Geological
Several studies have been conducted on the lease areas, with a significant amount of drilling. It is very re-assuring that the
latest round of drilling saw each hole intercept gold which we believe was payable. We do not expect any problems with
the geology.
Drilling
The proposed drilling programme commenced on the 15th June. Given the location and the relative shallow holes, they
are all RC for the first 10,000m, we do not envisage any problems with the drilling, however, it should be noted that drilling
is fraught with problems, relating to the weather, geological and ground access problems, environmental accidents, and
unexpected shortages or increases in the costs of consumables, spare parts, and labour; mechanical failure of operating
plant and equipment amongst others. The initial area is the gap area of the current Klondyke Resource which is 700m long.
This area has had limited drilling despite some encouraging intercepts and BHC anticipates that the results will be
satisfactory.
Environmental
These deposits are in a remote part of West Australia, which is a very pro mining state. However, we note that as yet no
flora and fauna surveys have been completed. The area is known to be home to local native bats and a bat management
program will have to be developed if development increases significantly in the Klondyke area. Whilst there is a low
percentage of pyrite mineralisation and the local rocks have a high carbonate content, no acid rock drainage survey has
been undertaken and this will need to be addressed.
Technology
The initial metallurgical work indicated that the ore from Klondyke was of medium hardness with a Bond work index of
10kWh/t but had a high crushability index of 38kWh/t. This suggests that the crushing circuit will have to be designed with
great care, although it may be possible to blend the feed to the mill. Other than this, metallurgical test work was very
encouraging, showing excellent recoveries and good potential for a gravity concentrate to be produced.
Financing
Calidus has raised sufficient funds from its Initial Public Offering to cover its working capital requirements and pay for the
initial planned exploration programme. Subsequent to this, there will be a definite requirement for additional financing
and the availability of this will be dependent on the results of the current drilling programme and the preliminary feasibility
study.
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APPENDIXAPPENDIXAPPENDIXAPPENDIX AAAA –––– DIRECTORS & DIRECTORS & DIRECTORS & DIRECTORS & MANAGEMENTMANAGEMENTMANAGEMENTMANAGEMENT
Board Directors
Keith Coughlan Non-executive Chairman
Mr Coughlan has almost 30 years’ experience in stockbroking and funds management. He has been largely involved in the
funding and promoting of resource companies listed on ASX, AIM and TSX, has advised various companies on the
identification and acquisition of resource projects and was previously employed by one of Australia’s then largest funds.
Mr Coughlan is currently the managing director of European Metals Holdings (AIM and ASX) and recently retired as
chairman of ASX listed Talga Resources Limited.
Dave Reeves Managing Director
David Reeves is a Perth-based, qualified mining engineer with 30 years of experience in the mining industry and is currently
a of Keras and non-executive Chairman of European Metals Holdings (ASX and AIM). MrReeves has extensive experience
in international capital markets through his involvement with various listed London andAustralian companies and will resign
from his executive position with Keras on completion of the transaction but will remain with Keras in a non-executive
position. Mr Reeves was the Project Manager of Zimplats and Afplats prior to their sale for a combined US$1B and prior to
this, worked with Delta Gold in Zimbabwe and various gold companies in Western Australia in which he assumed various
roles, including the position of Mine Manager.
Peter Hepburn-Brown Non-Executive Director
Mr Hepburn-Brown is a qualified mining engineer with over 35 years’ international mining experience. Mr Hepburn-Brown
is a non-executive director of Keras and Focus Minerals Ltd (ASX). He was most recently managing director of Philippines
based Medusa Mining Ltd (ASX).
Adam Miethke Non- Executive Director
Mr Miethke is a geologist with over 16 years’ experience in the metals and mining industry, including funds management
and more recently as a corporate advisor. Mr Miethke initially worked for Rio Tinto’s iron ore division before joining
Snowden Mining Consultants where he worked across all commodities in Australia, Africa, Eastern Europe and South
America. After completing an MBA in 2008, he joined Regent Pacific Group in Hong Kong as technical director, overseeing
the group’s investment portfolio. Between 2011 and 2016, Mr Miethke was a director of the corporate finance team at
Argonaut Capital Limited, and led Argonaut’s metals and mining division. Mr Miethke holds a Bachelor of Applied Science
with First Class Honours in Geology from the Queensland University of Technology and an MBA from Curtin University. He
is a Member of the Australasian Institute of Mining and Metallurgy and Society of Economic Geologists.
James Carter Chief Financial Officer and Joint Company Secretary
Mr Carter is a CPA and Chartered Company Secretary with 20 years’ international experience in the mining industry.
Mr Carter was most recently Chief Financial Officer (CFO) of Keras. Prior to this he was CFO of Straits Resources Limited,
an ASX200 diversified mining group, and CFO and company secretary of SGX listed Straits Asia Resources where he was
integral to its development as a 10 million tonne per annum coal producer in Indonesia. Mr Carter has experience working
in debt and capital equity markets, tax strategy, mergers and acquisitions and in corporate governance. Mr Carter is also
a board member of Jersey Resources Limited, an aspiring Indonesian coal company.
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APPENDIX APPENDIX APPENDIX APPENDIX BBBB –––– COMPANY STRUCTURECOMPANY STRUCTURECOMPANY STRUCTURECOMPANY STRUCTURE
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APPENDIX APPENDIX APPENDIX APPENDIX CCCC –––– REGIONAL GEOLOGYREGIONAL GEOLOGYREGIONAL GEOLOGYREGIONAL GEOLOGY
Warrawoona Regional Geology
The project area lies in the Warrawoona Greenstone Belt which comprises rocks of the East Pilbara Terrane of the Pilbara
Craton. A major geological mapping project, conducted jointly by the Geological Survey of Western Australia (GSWA) and
Geoscience Australia between 1995 and 2002 provided a much improved geological understanding of the Pilbara Craton.
This work excluded the Fortescue, Hamersley, and Turee Creek basins which had been grouped into the Pilbara Craton by
earlier workers.
The oldest part of the Pilbara Craton is 3.80–3.53Ga crust, which has been identified by geochronology in rare outcrops of
gneissic granite and gabbroic anorthosite. Between 3.53–3.23Ga, mantle plume activity resulted in the deposition of at
least eight successive volcanic cycles on the early crust. The resulting volcanic plateau is now exceptionally well preserved
as the 15–20km thick Pilbara Supergroup. Large volumes of granitic magma were intruded during the same period, and
thick continental crust had been established by 3.23Ga. A major rifting event between 3.23–3.16Ga split this crust into three
continental microplates defining the East Pilbara, Karratha and Kurrana terranes separated by two northeast-trending
basins of oceanic crust.
The East Pilbara Terrane provides the world’s most complete record of Paleoarchean crustal evolution from 3.53Ga to
3.23Ga. Stratigraphy, structure, geochronology, and geochemistry collectively testify that the evolution of this terrane was
dominated by volcanism, magmatic intrusion, and deformation during repeated episodes of heating and melting of
underlying older crust and mantle over 300Ma.
The Pilbara Supergroup of the East Pilbara Terrane is predominantly volcanic and 15–20km thick. Thick partial sections of
this succession are recognised in almost all greenstone belts of the terrane. The three component groups (Warrawoona,
Kelly, and Sulphur Springs) of the Pilbara Supergroup are separated by two major erosional unconformities. The time gap
between the Warrawoona and Kelly groups was c. 75Myr (3.427–3.350Ga), and the gap between the Kelly and Sulphur
Springs groups was c. 60Myr (3.315– 3.255Ga). In both cases, the long pause in volcanic activity was preceded by
deformation and metamorphism, and accompanied by subaerial erosion and deposition of clastic sediments. Shallow-
water sediments between the Warrawoona and Kelly groups are preserved as the Strelley Pool Formation.
Where best preserved, the Pilbara Supergroup is composed of eight ultramafic-mafic-felsic volcanic cycles. Geochronology
on the felsic formations of successive cycles, and on contemporaneous granitic intrusions, some of which are subvolcanic,
indicates that most of the cycles spanned no more than 10–15Myr; these cycles are interpreted to have resulted from
successive mantle plume events.
A characteristic feature of the East Pilbara Terrane is the regional outcrop pattern of granitic domes separated by arcuate
belts of volcano-sedimentary rocks (greenstones) visible on geological maps (Figure 6) and satellite imagery that has been
variously described as “dome-and-syncline”, “dome-and-basin”, or “dome-and-keel” structure. Whereas some previous
workers have interpreted this pattern as either the result of cross-folding or core complex formation, neither of these are
consistent with the full set of geological and geophysical features of the region. The most widely accepted interpretation
is that the dome-and-keel structure arose from punctuated episodes of doming by partial convective overturn of the thick,
dense greenstone succession into a partially molten granitic middle crust from 3.46–2.94Ga.
Regional Mineralisation
Mineralisation in the East Pilbara Terrane occurred during a sequence of magmatic pulses related to mantle plumes, and
extended over almost 300Myr. Deposit types associated with these events include: volcanic-hosted massive sulphide
deposits; hydrothermal barite deposits; polymetallic and base metal deposits in porphyritic felsic stocks; porphyry copper
mineralisation; and mesothermal gold deposits in shear zones around granitic domes. The latter is the most important in
the Warrawoona Greenstone Belt generally and the project area specifically. In the southeast Pilbara Craton, the Mosquito
Creek Orogeny was accompanied by similar orogenic Au deposits between 2.93–2.90Ga. A number of these deposits are
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currently in production feeding the Golden Eagle ore processing plant of Millennium Minerals. Shear-hosted gold
mineralisation occurred at 2.89Ga in the Mount York area of the East Pilbara Terrane
Gold production for the Marble Bar District to 31 December 1972, totalled 356,873oz Au from 357,395t of ore, of which
20,094oz Au was alluvial and dollied. Primary gold mineralisation of economic importance is largely confined to the
Warrawoona Group. Erosion of the Archaean primary deposits during Proterozoic times has locally resulted in the formation
of palaeoplacer gold deposits in Proterozoic conglomerate beds.
Local Geology and Mineralisation
The Warrawoona tenements cover a portion of the Warrawoona Group one of the oldest greenstones of the Pilbara
Supergroup of the East Pilbara Terrane. The Warrawoona Group has a complex stratigraphy. It is comprised largely of high-
magnesium basaltic lavas with lesser tholeiite, andesite, sodic dacite, potassic rhyolite, chert and banded iron formation,
all metamorphosed to greenschist facies. Structurally, the Warrawoona Group rocks are sandwiched between the Mount
Edgar Granitoid Complex to the north and the Corunna Downs Granitoid Complex to the south.
EXHIBIT 14: REGIONAL GEOLOGICAL MAP OF THE EAST PILBARA TERRANE
Source: Calidus ResourcesSource: Calidus ResourcesSource: Calidus ResourcesSource: Calidus Resources
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The sequence from north to south comprises ultramafics and mafics, the dominant rock types, that have been subject to
moderate shearing and alteration; then to weakly to strongly carbonate altered and sheared ultramafic rocks with massive
to foliated mafics; then a narrow band of fuchsite bearing schists with associated chert units that has been referred to as a
mylonite; and finally a felsic volcanic sequence that lies largely to the north.
Four deformation events are recognised in the area; the earliest is schistosity developed parallel to the margin of the
Corunna Downs Batholith. The second deformation is local and involved tight isoclinal folding. The third deformation event
is represented by intense shear zones which are associated with gold mineralisation. The shears are steep dipping to near
vertical and are considered to have a reverse movement. The final deformation event is a local one observed in the eastern
part of the Warrawoona area. There is evidence of cross faulting following a north-easterly trend at the Klondyke Queen
historic mine. At this locality, the positions of the main shear zones have been displaced, east block north and there appears
to be localised enrichment of gold near this fault line.
Klondyke shear mineralisation is within the fuchsite bearing unit that has associated quartz veinlets. In areas of strong
mineralisation these quartz veinlets occur at a high frequency within the silicified shear zone, as parallel bands often
showing bounding structures, both down dip and along strike. At least four sub-parallel shear zones are recognised and
two of these are associated with historic gold workings. On structural grounds it has been postulated that the individual
shoots should be of short strike length, but of considerable vertical extent. This inference is borne out by observations on
mining workings where the longitudinal extent of the reefs was limited but the depth extent was considerable.
A notable feature of the mineralisation is that much of the observed contained gold is coarse grained giving rise to a high
nugget effect and posing a potential challenge for representative sampling. Over some abandoned workings gold
mineralisation is associated with copper as evidenced by the occurrence of malachite and other copper carbonates.
Mining History
The Marble Bar mineral field was developed as a result of the gold rushes to the Pilbara in the late 1880s. It is likely gold
was discovered at Klondyke during this period. The historic Klondyke mine lies in the Warrawoona Mining Centre and is
reported to have produced 23,936oz of gold from 25,191t of ore at an average grade of approximately 30g/t Au, with an
addition 716oz produced from alluvial and dollied material. Historically gold mineralisation has been known to occur in the
area in the Archaean Warrawoona Syncline in auriferous reefs within mafic, ultramafic and sedimentary schists. The location
of historic workings is shown on Figure 6. Other significant historic producers included the Fieldings Gully, Coronation and
Copenhagen mines. Most historic gold production is thought to be derived from a belt of chlorite schists containing
laminated banded quartz veins. The mineralisation is interpreted as shear zone controlled and related to fuchsite and
sericite-chlorite-carbonate-silica-pyrite alteration along a black chert marker horizon
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Research Disclosures
Peter Rose
Peter has 31 years’ experience in equities as a resources analyst; he has been at Brandon Hill Capital, formerly Fox-Davies
Capital for 10 years. Prior to that he spent 11 years with Deutsche Bank in Australia. Prior to this he spent 2 years with
Prudential Bache and 6 years with James Capel. Peter's industry experience includes 16 years as a metallurgist, 3 years with
De Beers in South Africa and 8 years in the uranium industry, 5 of which were spent at the Ranger Uranium mine. Peter
holds a BSc degree in Applied Mineral Science from Leeds University UK and a Bachelor of Commerce from the University
of South Africa. Peter is also a member of the Institute of Materials, Mining & Metallurgy and a chartered engineer.
+44 (0)203 463 5034
Investment Analyst Certification
All research is issued under the regulatory oversight of Brandon Hill Capital Limited. Each Investment Analyst of Brandon
Hill Capital Limited whose name appears as the Author of this Investment Research hereby certifies that the
recommendations and opinions expressed in the Investment Research accurately reflect the Investment Analyst’s personal,
independent and objective views about any and all of the Designated Investments or Relevant Issuers discussed herein
that are within such Investment Analyst’s coverage universe.
Brandon Hill Capital Limited provides professional independent research services and all Analysts are free to determine
which assignments they accept, and they are free to decline to publish any research notes if their views change.
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RESEARCHRESEARCHRESEARCHRESEARCH DISCLAIMERSDISCLAIMERSDISCLAIMERSDISCLAIMERS
Research disclosure as of 26 July 2017
CompanyCompanyCompanyCompany NameNameNameName DisclosureDisclosureDisclosureDisclosure
Calidus Resources 1,2
Investment Research Disclosure Legend:
1. In the past 12 months, Brandon Hill Capital Limited or its affiliates have had corporate finance mandates or managed or
co-managed a public offering of the Relevant Issuer’s securities or received compensation for Corporate Finance services
from the Relevant Issuer.
2. Brandon Hill Capital Limited expects to receive or intends to seek compensation for Corporate Finance services from
this company in the next six months.
3. The Investment Analyst or a member of the Investment Analyst’s household has a long position in the shares or derivatives
of the Relevant Issuer.
4. The Investment Analyst or a member of the Investment Analyst’s household has a short position in the shares or
derivatives of the Relevant Issuer.
5. As of the month end immediately preceding the date of publication of this report, or the prior month end if publication
is within 10 days following a month end, Brandon Hill Capital Limited and / or its affiliates beneficially owned 1% or more
of any class of common equity securities of the Relevant Issuer.
6. A senior executive or director of Brandon Hill Capital Limited or a member of his or her household is an officer, director
or advisor, board member of the Relevant Issuer and / or one of his subsidiaries.
7. Brandon Hill Capital Limited acts as corporate broker for the Relevant Issuer.
The Investment Analyst who is responsible for the preparation of this Investment Research is employed by Brandon Hill
Capital Limited, a securities broker-dealer.
The Investment Analyst who is responsible for the preparation of this Investment Research has received (or will receive)
compensation linked to the general profits of Brandon Hill Capital Limited.
Research Recommendations Brandon Hill Capital uses a five-tier recommendation system for stocks under coverage:
BuyBuyBuyBuy Recommendation implies that expected total return of at least 15% is expected over 12 months
between current and analysts’ target price.
TradingTradingTradingTrading BuyBuyBuyBuy Recommendation implies that the analysts’ expected total return over the short term compared
against the target price is positive.
HoldHoldHoldHold Recommendation implies that expected total return of between 15% and zero is expected over 12
months between current and analysts’ target price.
TradingTradingTradingTrading SellSellSellSell Recommendation implies that the analysts’ expected total return over the short term compared
against the target price is negative.
SellSellSellSell Recommendation implies that expected total return expected over 12 months between current and
analysts’ target price is negative.
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Disclaimer: Important Information
This document is not independentThis document is not independentThis document is not independentThis document is not independent and should not be relied on as an impartial or objective assessment of its subject matter. Given the foregoing,
this document is deemed to be a marketing communication and as such has not been prepared in accordance with legal requirements designed
to promote the independence of investment research and Brandon Hill Capital Limited is not subject to any prohibition on dealing ahead of
dissemination of this document as it would be if it were independent investment research.
This document has been issued by This document has been issued by This document has been issued by This document has been issued by BBBBrandon Hill Capitalrandon Hill Capitalrandon Hill Capitalrandon Hill Capital Limited for information purposes onlyLimited for information purposes onlyLimited for information purposes onlyLimited for information purposes only and should not be construed in any
circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution,
form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific
investment objectives, financial situation or needs of any specific entity. Brandon Hill Capital Limited and/or connected persons may, from time
to time, have positions in, make a market in and/or effect transactions in any investment or related investment mentioned herein and may provide
financial services to the issuers of such investments. The information contained herein is based on materials and sources that we believe to be
reliable, however, Brandon Hill Capital Limited makes no representation or warranty, either express or implied, in relation to the accuracy,
completeness or reliability of the information contained herein. Opinions expressed are our current opinions as of the date appearing on this
material only. Any opinions expressed are subject to change without notice and Brandon Hill Capital Limited is under no obligation to update the
information contained herein. None of Brandon Hill Capital Limited, its affiliates or employees shall have any liability whatsoever for any indirect
or consequential loss or damage arising from any use of this document.
This report has been approved in the UK by Brandon Hill Capital Limited solely for the purposes of section 21 of the Financial Services and Markets
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Please note that unless otherwise stated, the share price used in this publication is taken at the close of business for the previous day.
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BRANDON HILL CONTACTBRANDON HILL CONTACTBRANDON HILL CONTACTBRANDON HILL CONTACT LISTLISTLISTLIST
International SalesInternational SalesInternational SalesInternational Sales Oliver StansfieldOliver StansfieldOliver StansfieldOliver Stansfield Tel:+442034635061 Email: [email protected] Alex WalkerAlex WalkerAlex WalkerAlex Walker Tel:+442034635018 Email: [email protected] Pierre IseuxPierre IseuxPierre IseuxPierre Iseux Tel:+442034635024 Email: [email protected]
Research Research Research Research
PPPPeter Roseeter Roseeter Roseeter Rose Tel:+442034635034 Email: [email protected] William ArnsteinWilliam ArnsteinWilliam ArnsteinWilliam Arnstein Tel: +44 20 3463 5020 Email:[email protected]
Corporate Finance & BrokingCorporate Finance & BrokingCorporate Finance & BrokingCorporate Finance & Broking Jonathan Evans Jonathan Evans Jonathan Evans Jonathan Evans Tel: +44 20 3463 5016 Email: [email protected] Wei JiaoWei JiaoWei JiaoWei Jiao Tel:+442034635019 Email: [email protected] Robert BeenstockRobert BeenstockRobert BeenstockRobert Beenstock Tel:+44 20 3463 5023 Email: [email protected]
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Calidus Resources Limited Initiating Coverage
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