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Echo Resources - Exploration potential continues to grow

Mar 2018

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Summary - Exploration potential continues to grow

Echo Resources (ASX:EAR) has identified a new, highly-prospective exploration area within its 1,600 km2 landholding in the Yandal gold belt of Western Australia. The area is close to the recently announced Ramone gold discovery of Northern Star Resources (ASX:NST), which is located midway between Julius and Jundee and less than 10 km from Echo’s tenement boundary.

Northern Star highlighted in its exploration announcement that Ramone has the potential to be an open-pit mine with mineralisation outlined over 400 metres of strike so far; results include: 14 m @ 8.0g/t Au, 13 m @ 8.5 g/t Au and 18.5 m @ 6.2 g/t Au (true width).

Analyst comment: when Northern Star acquired a 19% interest in Echo last year, we felt this was due mainly to the potential of the existing reserve and infrastructure at Echo’s Yandal project, which supports a 100,000-ounce gold operation at an all-in sustaining operating cost of AU$1,034/oz. While this is relatively modest for a company of Northern Star’s stature, we believe it would likely add considerable value as a ‘bolt on’ asset to the company’s production portfolio. 

However, following Northern Star’s recent exploration update with respect to the discovery of the Ramone deposit less than 10 km from Echo’s tenement boundary, it appears the near-term producing asset was not the only reason Northern Star took a stake in Echo – as they are also likely keen to test Echo’s northern exploration tenement package, on which little if any exploration work has been completed to date.  

While Echo will accelerate early-stage exploration work at this northern region later in the year, in the interim we eagerly await results from its deep exploration drill programme around the Lotus-Orelia mineralised system that commenced in January. Collectively, Lotus and Orelia have produced 775,000 ounces of gold and both deposits remain open at depth. 

The information in this email should not be the only trigger for your investment decision. We strongly recommend you seek professional financial advice whenever making financial investment decisions. 

Valuation: we maintain our valuation for Echo to $0.60/share (share price $0.34 / share).