Eight years ago, Greg Kuenzel swapped life as corporate finance advisor in Perth, Western Australia, for an opportunity to join the Australian mining crowd in London. Having spent several years working with small exploration companies he had developed a taste for the sector and has since been involved in a number of junior resource stocks. Last December he brought his latest venture to the Alternative Investment Market. As the chief executive of Noricum Gold (LON:NMG), Kuenzel is eyeing the prospect of gold exploration and production at projects in Austria.
Noricum was originally listed on PLUS Markets in June 2010 at the same time as Kuenzel, the company's chairman Marcus Edwards-Jones, and their mining advisors identified, negotiated and acquired the Austrian licenses. The company switched its listing to AIM last December and has now launched an exploration program at its two main targets - the highly prospective Rotg"ulden and Kliening projects. With the price of gold surging last year and recently nearing a record high of $1,500, the investment case for backing small-cap gold explorers like Noricum looks increasingly compelling. Indeed, the company had no trouble raising lb2.12m on its admission to the market. With exploration now under way in Austria, investors are watching to see how and when the company could build value quickly. The answer to that could lie in 100,000 tons of old tailings dumps at the Kliening project, which could provide a near-term cash boost to fund exploration and development elsewhere and drive the company's strategy to become a significant gold producer in the country.
Ben Hobson: Greg, before we talk about Noricum Gold, tell me about your background and your experience with junior resource companies.
Greg Kuenzel: I moved to London almost eight years ago now and started working with a couple of Australian mining entrepreneurs who were quite active in the AIM market at the time. They had just been involved with the float of Asia Energy [now Global Coal Management (LON:GCM) ] and were also involved in Empyrean Energy (LON:EME) . It was a buoyant time in the AIM market and we had a lot of interest from investors in the mining and resource sector. We set up two AIM cash shells at the time, one being Summit Resources, which went on to become Atlantic Coal (LON:ATC) and reversed into a producing anthracite mine in Pennsylvania. For the past three years, up until the middle of last year, I was Finance Director of Atlantic Coal but left to focus on Noricum Gold. We also did another cash shell, Cue Energy [now Alecto Energy (LON:ALO) ], which had a bit of a tough start but we recently recapitalized it and it has got some really interesting projects lined up in Mauritania, both in gold and uranium.
I guess it is part of the Australian mining crowd in London, everyone knows everyone and having spent the last few years in the AIM sector in mining you get to know a lot of the people involved. I had met our chairman, Marcus Edwards-Jones, previously when we were doing some work on Cue Energy. In early 2010 there was obviously a lot of interest in the gold sector, we were seeing a lot of projects, and along with a couple of shareholders and other board members we thought it was a good time to look at some of those, hence setting up the original cash shell on PLUS.
BH: How did you go about identifying projects and bringing the company to the market?
GK: I guess it is just part of this smaller market, after being involved in it for a few years you tend to see a lot of deals, a lot of projects. We had seen several gold projects, not just in Europe, some in Africa, and there was obviously a demand for these projects given the gold market, and at the time I was looking at starting up something new. I had been involved in setting up AIM cash shells previously and talking to a couple of our advisors I was quite intrigued by the PLUS market, particularly as a starting point. So we all got together and we had two or three projects that we were specifically interested in. This Austrian one was one of those and our technical people looked at it, they liked it, they were very excited about it and so we decided to go ahead and list the company. We were originally only going to raise about lb250,000 to lb300,000 but we ended up raising closer to lb850,000. Once we had listed it on PLUS we took things a little bit further and negotiated terms and then a couple of months later suspended the listing on the back of the Austrian transaction and at the same time decided to move the company to AIM.
BH: What areas do your licenses cover and what work has gone on there previously?
GK: It has a very, very long history. The project actually consists of five separate license areas; the two we are focusing on are Rotg"ulden and Kliening. Rotg"ulden dates as far back as the Roman Empire. In the 1500s/1600s it was actively mined again for gold and then there was not a lot of activity until the 1900s when it was mined predominantly for its arsenic content. As we get closer to present day, from about 1985 onwards, there were several companies that did some exploration work at Rotg"ulden. The Kliening licenses were held by Lundin Corp. for a while in the late 1980s. More recently there was a privately owned company called Alpine Metals, which raised a few million in 2005/2006 and did a quite extensive underground development and drill program at Rotg"ulden. Unfortunately for them, they came back to raise money and looked to list on AIM in around mid 2007, which wasn't a great time and of course the gold price was still around the $300 mark. So they didn't have much success. Some other entrepreneurial Australian miners stepped in, took an option over the licences, and over the past few years have been sitting on it waiting for the right time and the right vehicle. It just so happened that that was around the time we were setting up our vehicle. The technical people we've got involved, Rod McIllree and Jeremy Whybrow, have a lot of experience in the gold mining sector, particularly with high grade, narrow vein underground seams and they fell over themselves for this so it all sort of fitted in very nicely.
BH: Austria doesn't sound like a typical mining destination so what is the environment like for a junior resource company working there?
GK: To be honest, before I started looking at this I wouldn't have picked Austria as such a pro-mining environment but it actually has an extremely active mining industry. The tungsten mine at Mittersill up until recently was one of the largest tungsten mines in Europe. There is also a substantial open pit iron ore operation at Erzberg. Then, as you of move down to the smaller operations, there is a lot of industrial minerals and quarrying - Austria supplies 2% to 3% of the world's graphite. So it is a very, very pro-mining and mining friendly environment.
In terms of the mining laws themselves, the exploration licenses are issued for five year periods and there are no minimum expenditure commitments. To move to a mining license the most onerous part is the environmental studies but if you can prove you have an economically viable resource you'll be granted a mining license. At a federal and regional level we are seeing support from government and the communities themselves. We are quite lucky in that the areas that our sites are located are not in national parks, the small towns that are nearby are very supportive of any activity in the regions. There are also no wellness centers, which are quite common in Austria. They all have excellent infrastructure, roads, electricity, communications, water, it is all there, particularly on the Kliening site.
We have been spending the last three or four months with a team of geologists and geophysicists reassessing all of the old data, remodeling and cataloguing everything that everyone has done in the past. That is what has set our goals and identified Rotg"ulden and Kliening as the two we wanted to focus on. Rotg"ulden is a little more difficult in that it is in alpine terrain, it is a difficult structure in that there are different types of mineralization, but it is very, very highly prospective. The Rotg"ulden seam has these, what SRK Consulting refers to as "elephants," which are very, very high grade pockets of ore. They are reasonably small but have grades up in the 200/300 grams per ton of gold. We are taking samples now that are still showing those sorts of grades, including 60 ounces of silver per ton. So it is bonanza grade ore but because of their size they are obviously a little more difficult to find.
What Kliening has that Rotg"ulden doesn't is ease of access. Kliening is in a lower altitude area, it is undulating terrain but we are not talking alpine regions and mountains. It is a lot more easily accessible with a highway running down the eastern side of our license and some forestry roads running through the license areas, so that one is very easy to access.
BH: What are your immediate exploration plans on these licenses?
GK: As a result of the re-interpretation and remodeling of all the historical data, and that included everything from drill results to grab samples, channeling, trenching and magnetic work, we have set ourselves three main targets.
We are starting work in Rotg"ulden in early May, we have some geophysicists coming out and redoing some of the down hole electromagnetic and magnetic work. That is mainly to try and pinpoint some of these high grade, massive sulphide ore bodies - the ore is very magnetic so it lends itself to EM and magnetic survey work. From that we are going to pinpoint some underground drilling targets. Following the EM and magnetic work we will be applying for a new drill program, which will take about three months to get approved, and then towards the end of the year we intend to do up to 3,000 meters of diamond core, underground drilling. At the same time, in Rotg"ulden, the strike extends from the historical Rotg"ulden mine, which is in the north, to an area called Altenburg in the south, and we are also going to try and look at this from a regional perspective. So while we are doing this finer underground drilling we are also going to be doing some above ground mapping and potentially some surface drilling and then next year doing an airborne magnetic survey to try and open up the regional play.
On Kliening, it is a little different. We have got two main areas of interest at Kliening, one is a tailings dump from historical mining over the past few hundred years. Because of the nature of their production techniques at that time we think there is a lot of gold left in these tailings. There has been some historical trenching and sampling, none of it has been done systematically, but we have seen some very promising results as far as grades go. We need to do some surveying, we think there's upwards of 100,000 tons in these dumps, so we have got some people out there at the end of April to start doing some mapping, surveying and some systematic sampling. We are pretty confident that if we can get some consistent results there this could potentially lead to some early stage production.
The other target at Kliening is an area called Buchbauer-Bischofeck. We have an approved work program there for up to 5,000 meters of reverse circulation drilling and, again, historical work has confirmed a group of parallel vein swarms. They are a decent size, 2 meters to 2.5 meters, and we've seen grades of up to 22/23 grams per ton there. So at that one, given the ease of access, we could potentially be well on the way to a resource by the end of the year with the 5,000 meters of drilling.
BH: It sounds like there is potential for some early stage production. How realistic is that?
GK: There are few variables in there but assuming everything goes our way, yes definitely. I guess part of being in an environment like Austria is that there is a certain level of bureaucracy in terms of approval processes to go through. It is in a fairly remote area, we're not disturbing anyone, but the process still takes a couple of months to get all the various approvals. So, again, depending on how quickly we could go those approvals, and assuming everything goes our way, that's always a potential.
The great thing about the tailings dumps is they offer a very easy, relatively cheap, early stage production. So if we can get the grades that we need, putting in a portable carbon-in-leach plant costs somewhere around $2m, so we are not talking a large expense to actually put it in. Any cash flows are then obviously beneficial to help support the remainder of the exploration program.
BH: Your deal in Austria got you a number of other licenses - so what are your longer term plans in the country?
GK: Yes, our focus is specifically on Austria. With Jeremy Whybrow, who is a non-executive director but is also responsible for the technical side of the program, and Rod McIllree, who is a technical advisor, they have had a lot of experience in these types of projects and they have had some successes behind them. They like Austria and they like these types of structure so the focus at this stage is on Austria, primarily Rotg"ulden and Kliening. They are going to take up most of our resources and a lot of time and a lot of effort at this stage, but we do have three other license groups which are all very highly prospective. Goldeck and Goldzeche have similar accessibility problems as Rotg"ulden; they are in more alpine regions. Goldzeche has had some very, very high prospectivity, some good historical results, but the existing mines are at around 3,000 meters on a side of a mountain. We have enough to keep us busy at this stage with Rotg"ulden and Kliening. We are going to be doing some mapping and a bit of soil sampling out at Schonberg, one of the other license areas, but we are also on the lookout. There are other smaller operators in this sector in Austria, some privately held companies that have some very interesting and very highly prospective licenses. We have always got our eyes open and if something else becomes available, particularly if we can progress Kliening and Rotg"ulden, it really goes a long way to moving us to where we would like to be, which is a significant producer in the region.
BH: Finally, Noricum has been on the AIM market since the end of 2010. Why would you say that investors should take a closer look at the company?
GK: In summary, we have got some very highly prospective license areas, particularly Rotg"ulden and Kliening. The re-interpretation work we have done to date has allowed us to target some very exciting areas. We have got work about to start and we are pretty confident that we are going to get some good results from that early work, particularly in the Kliening area. We have an excellent team as far as technical experience goes, people who have not only worked in the gold sector but have had a lot of successes with these types of projects. We are funded through the first stage of our work program - we have done a lot of work so far and we are very confident that within a very short time we are going to have some great news flow and some very exciting results.
BH: Greg, thank you very much for you time.
GK: Thank you.
Ben Hobson is the news editor of London-based Stockopedia and covers small-cap and mid-cap companies. He was formerly the editor of SmallCapNews.co.uk, and Acquisition Finance Magazine.