By Richard Hemming
MINING exploration could be decribed as making an art form out of finding a needle in a haystack, and nowhere is this more the case than for Gold Road Resources, which has been busy prospecting in the vast Yamarna Gold Belt in the middle of Australia.
The area the company has tenements over is about 5000 square kilometres, and stretches 250 kilometres in length. Rarely in the Australian market is there more potential to make a major discovery.
Gold Road is at the crossroads.Credit: Phil Carrick
But Gold Road is at a crossroad: does it plug away in an exploration program, looking for its multimillion-ounce pay day; or does it race into production?
In mid-February it trumpeted that it could get enough cash to continue prospecting beyond this year from a relatively small, but high-grade discovery. But this is only if it does a ''truck and treat'' - meaning it carts the ore a hundred miles to be crushed and treated somewhere else, by someone else.
Alternatively, it could try to expand its gold resource to the levels that would justify a small plant that could process 250,000 tonnes of ore a year. The cost would be at least $30 million.
The company is certainly doing its level best trying to find the stuff, and drilled 170,000 metres of holes in 2011, and is drilling 150,000 more in the current year.
Finding gold in such an extensive area is clearly no easy task, and is reflected in Gold Road's 38¢ share price, which gives it a market cap of $144 million.
But punters know that excitement could lie just around the corner. In April last year, the shares shot up to 80¢, based largely on ''near-ology'', meaning a huge discovery occurred nearby, and a little geology.
About 20 kilometres to the south is Australia's last big gold discovery, Tropicana. Here 5 million ounces was found as recently as 2005, and is being developed by global goldmining giant AngloGold Ashanti, which is in a joint venture with Australian miner Independence Group, which discovered it.
Tropicana and the Yamarna Gold Belt region are as remote as it gets, although Gold Road has brought in a Michelin-rated French chef from Perth to make life that little bit easier. The theory is that the old-time miners didn't go that far east into the desert, because there was believed to be no water there. Some argue that the region has a potential similar to that of other world-class greenstone belts, like Kalgoorlie Norseman, for example, had 100 years ago, before 120 million ounces were discovered in it.
But the clock is ticking for executive chairman Ian Murray and his team. At the very least they will have some good meals out there over which to contemplate which hole to drill next.
Lachlan's star on the rise
ONE goldminer that is successfully managing the transition from exploration to production is Lachlan Star, whose shares have climbed 63 per cent in the past six weeks.
The company, which owns the CMD goldmine in Chile, has more than doubled its resource over the past year to 3 million ounces, which more than doubles its mine life. The good thing for investors is that Lachlan easily has the production capacity to handle it, with a capacity to process 8 million tonnes of ore a year.
This is a stock our Under the Radar Report tipped from 89¢. Now it is at $1.45 and one big invested fund believes it will go much higher, claiming the news means the stock is worth three times its current share price. Of course, invested fund managers always talk their book.
Richard Hemming is an independent analyst who edits a fortnightly newsletter: undertheradarreport.com.au.
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