Ireland: A New Gold Province?
By Jackie Steinitz
25 Jan 2007 at 03:26 PM EST
resourceinvestor.com
LONDON (ResourceInvestor.com) -- A fabulous collection of prehistoric gold objects in the National Museum in Dublin indicates that Bronze Age people in Ireland had access to plenty of the precious metal. But archaeological opinion was long divided as to whether the gold had been mined in Ireland (if so where were the mines?) or imported.
It is only relatively recently that gold has been found in any quantity in the Republic of Ireland, and still production is virtually zero. Ireland does not feature in the most recent table of gold production by country compiled by the United States Geological Survey, even in a list of 95 gold-producing countries. But this could be about to change.
Earlier this week Conroy Diamonds and Gold plc [AIM:CDG] announced a major step forward for its gold exploration programme in the Longford-Down Massif with the announcement of the first JORC-compliant resource estimate for a small part of its Clontibret deposit.
The resource, which was calculated by international mining consultants CSA, has been defined for less than 20% of the Clontibret target anomaly, and Clontibret itself is just one of a series of gold discoveries made by the company in the Longford-Down Massif which extends for at least 50km along strike from County Armagh in Northern Ireland though County Monaghan and County Cavan in the Republic of Ireland.
Here Professor Richard Conroy, founder and Chairman of Conroy Gold and Diamonds, talks to Resource Investor about the announcement.
RESOURCE INVESTOR: Congratulations Professor Conroy on this very exciting announcement. Please could you tell us about the significance of this, both geologically-speaking and the significance that it will have for the company?
RICHARD CONROY: The announcement related to an independent estimate that one part of one gold occurrence on our property has a JORC compliant inferred resource of between half a million and a million ounces of gold. The estimates have been calculated to an average depth of about 150 metres below surface, and the mineralisation remains open at depth and along strike.
From a geological point of view this shows that there is gold in the area which can be measured, is available in economic quantities, and is not just occurring as surface anomalies.
From the company point of view it is enormously significant. It represents a turning point which transforms us from an exploration company which has demonstrated a very extensive gold bearing area to a company with significant measured mineral resources. Moreover drilling results from our other discoveries along the Massif suggest that it is not unreasonable to expect that they too could yield significant resources, though we don’t yet know whether they will be greater or lesser in size than Clontibret or indeed the full size of Clontibret.
It has taken a long time and a lot of work and patience to get to this point and we have had to face doubters and high risks along the way. But the time and effort has been well spent.
RESOURCE INVESTOR: You already have a track record of discovering deposits. Could you tell us about this, and about how the Company found Clontibret.
RICHARD CONROY: Yes, I have had the good fortune now to be involved in three significant discoveries.
The first followed after I founded Conroy Petroleum and Natural Resources Limited. As the name suggests our primary target was petroleum but we suspected that there may have been something else of interest in the local orebodies. Through a combination of geophysics, geochemistry and geology we discovered the Galmoy zinc and lead deposit and were able to develop a major mine there, undertaking all the steps from grassroots exploration, through the feasibility studies to mine development.
At the time that Galmoy was discovered there was only one base metal mine in Ireland. Today Ireland is most definitely on the mining map. With the production from Galmoy (now owned by Lundin Mining [NYSE:LMC]), the neighbouring Lisheen mine (which is owned by Anglo American [LSE:AAL; Nasdaq:AAUK]), and the existing Tara mine owned by Boliden [TSX:BLS] Ireland is now among the world’s top ten producers of both zinc and lead, capable of supplying 40% of the zinc needs of Western Europe.
However, once a mine is in production it becomes a decreasing asset and so one has to ensure that there is a another major project coming up over the horizon While we were developing Galmoy we therefore also participated as partners in an early-stage gold exploration project in Alaska. The principal credit must go as always to the technical people, but again I was lucky enough to be involved in what turned out to be a major gold discovery - the Pogo gold deposit in Alaska. We were prepared to back the exploration project when a lot of others would not. (Pogo is expected to produce 350,000 – 500,000 ounces pa in a JV between Sumitomo Metals Mining Inc, Teck Cominco [NYSE:TCK; TSX:TCK-B, TCK-A] and Sumitomo Corp [OTCPK:SSUMY]).
I was elected as a Senator in the Irish Parliament and was out of exploration for a while, but I returned to set up the present company, Conroy Diamonds and Gold plc, to prospect for diamonds and gold in Finland and for gold in Ireland.
We had got to know Finland well as one of our shareholders in a previous company was Outokumpu, the Finnish state mining company. Finland was relatively unknown to outsiders as exploration by foreigners had not been permitted from independence in 1917 until Finland joined the European Union in 1995. For a number of geological reasons and especially as there are major diamond deposits just across the border in Russia in the same geology we believe that Finland could eventually become a significant diamond and gold producer.
In Ireland we felt that there were good prospects for gold for a number of reasons. These were partly historical, based on the existence of the Bronze Age artefacts, partly geological, and partly based on local knowledge. In particular I have a childhood memory of some Canadian geologists visiting Clontibret in the Longford-Down Massif to re-evaluate an old antimony mine and stumbling across some gold. It caused quite a stir at the time but was not effectively followed up until now.
After setting up the company we undertook eighteen months of homework, studying databases and so on, before acquiring our first licences. Since then we have acquired a licence area totalling 600 square miles which straddles the border between Northern Ireland and the Republic of Ireland, and we have conducted an extensive programme using modern drilling methods. We have been able to demonstrate that there is gold present at significant grades and quantities along the Massif. We have succeeded in identifying a gold-bearing trend that extends for at least 50km along strike from Co Armagh in Northern Ireland, through Co Monaghan and into Co Cavan in the Republic of Ireland.
The recently announced and independently estimated JORC resource is a major step forward which has confirmed our view of the potential of Clontibret and we believe that there are several other areas which are equally, if not more, prospective.
We hope that the Longford-Down Massif will be more significant that either Galmoy or Pogo. But of course there is a degree of luck in it!
RESOURCE INVESTOR: It is very early days yet of course but do you have any indication of the likely future economics of the deposit?
RICHARD CONROY: The commodity sector is unusual in that the price is not set by the seller but is totally outside his control. Nevertheless, for three reasons I feel quite optimistic about the prospects for the gold price. Firstly I believe that gold will always be the financial instrument of last resort, especially now that the dollar is weakening. There is already evidence that the Chinese are switching some of their reserves, albeit a small percentage, from dollars to gold. Secondly prospects for the use of gold in jewellery, its biggest end-use, seem favourable particularly in view of the growing demand from the emerging middle classes in China and India. Finally gold has a number of interesting scientific properties; for example it is highly conductive and doesn’t rust. It is used therefore in highly diverse products from airbags in cars to spacecraft. New industrial applications are continually being found and this might also boost demand for new gold, even taking into account the significant above ground stocks today. So all in all I am happy with the economics of the product.
As regards the mine it is, as you say, very early days. But I have been through the experience of developing a mine, and a gold mine is slightly less complicated than a base metal one. Early and very tentative figures suggest that a mine at Clontibret could be profitable provided that the gold price exceeds $300 per ounce, or preferably $400/oz at which point it could be very profitable. Of course the economics may change if we find bigger deposits or ones with a higher grade or the price of gold changes.
We are keeping our options open as regards the mine development. We may do it ourselves and I think that we could raise the finance. We have done it before. But we appreciate that there is a lot of effort and skill involved and it is quite possible that we will bring in others, either under contract or in a joint venture, provided that it is on a satisfactory basis for our shareholders. Our contribution is the discovery of world class orebodies.
RESOURCE INVESTOR: What reaction do you anticipate from the local community? And the Irish government? What are the benefits to operating in Ireland?
RICHARD CONROY: The reactions of the local community and government are very important to us and from the very beginning we have always felt that it is important to communicate with everybody. We always call on local people to explain and discuss what we are doing and to ensure that it fits in with any local agricultural needs.
We also take great care when exploring For example, when trenching, we separate out the topsoil from the deeper soil so that when we refill the trenches and reseed we can do so such that it is almost impossible to see where they have been.
We are in full agreement with the need for high environmental standards. As a keen birdwatcher I am ensuring that the environmental study will be carried out over a full 12 month period so as to assess the impact on the natural environment over all the seasons. At Galmoy we were the first mine in Europe to have a double lining under the tailings pond. We also take care over the visual impact of the projects and try to make them as unobtrusive as possible.
We have been getting a very good welcome on both sides of the border. There is an appreciation of the impact that the project could have on the local economy, as it did in Galmoy where it made a huge difference.
Relations with the government are good. At Galmoy we were the first mine in Ireland for many years and so in effect we were the guinea pigs for the system. It took a long time then to get all the necessary approvals, but now the whole procedure has been streamlined. It is public policy to support mining so long as is operates to strict environmental standards, and the whole permitting process takes no longer than 18 months.
There are a number of advantages to operating in Ireland. As I have already said the authorities in both the Republic and Northern Ireland are pro-development. Tax rates offered in the South are highly competitive and in the North they are likely to be as positive as can be allowed within the framework of UK government. There is also, of course, an excellent financial, legal and physical infrastructure.
A further advantage, and one that is of great importance in the current climate of labour shortage, is the high quality of labour available. Ireland is fortunate in having produced many high calibre mining graduates many of whom now work abroad in Africa and elsewhere. Salaries and the mining industry are currently very competitive. However many Irish graduates would be very happy to return to Ireland to work, as would many others, as Ireland is a pleasant environment.
I am sometimes asked whether operating within the European Union is a disadvantage in view of the tight regulations. But my feeling is that the EU expects high standards but so do we. Ireland and Finland are in the EU. Both have active mining industries but with high environmental standards. The rules are clear-cut and they don’t change which is highly beneficial to financial planning. Tax rates in Ireland are not onerous.
RESOURCE INVESTOR: What are your plans for the project for next year? What are the funding implications?
RICHARD CONROY: There are three key areas that we will be pursuing. We will be following up the work at Clontibret, we will be investigating other areas within our licence areas on the Longford-Down Massif (which may well be as big or even bigger than Clontibret) and we will be pursuing our exploration for gold in Finland. The Finnish projects are at an earlier stage than in Ireland, but already we are seeing some promising results.
We will also continue to keep an eye out for other projects. A number are brought to our attention but most are not for us. We would want to find one which is relevant to our particular skill set and one where we could really differentiate ourselves from competitors.
RESOURCE INVESTOR: Conroy Diamonds and Gold also holds interests in Finland. You have common shareholders too with Karelian Diamond Resources [AIM:KDR] which was spun off from Conroy Diamonds and Gold in 2005. Please could you tell us a little about operating in Finland, and about the current status of your projects there.
RICHARD CONROY: Like Ireland, Finland has many advantages. It enjoys political stability, a favourable geology, it is a pleasant place to work and it is easy to operate there, especially in winter. Importantly it has an excellent Geological Survey which employs some 900 people of whom about half are qualified to postgraduate level. The Geological survey published a list of their gold discoveries and put these out to tender Agnico Eagle [NYSE:AEM; TSX:AEM] has already enjoyed one major find from these at Kittila where it is developing a major (2 million ounces) gold deposit. We are hoping that there will be further discoveries. Our projects are showing encouraging results.
RESOURCE INVESTOR: Finally CDG is currently trading at 4.75 pence per share which implies a market capitalisation of £4.8 million ($9.6 million). You are a modest man, but what do you anticipate will happen to the valuation?
RICHARD CONROY: It is the privilege of the market to value a share as it sees fit. Up until yesterday I would have had a certain sympathy with the valuation, as the company was conducting grass roots exploration, it was high risk and there was no guarantee of a result.
However the reason that we have been prepared to take high risks is because the rewards can be very high indeed; indeed we have a track record in this. We brought Conroy Petroleum and Natural Resources to the market at 100 pence per share. The price initially languished falling to as low as 20 pence. Even after announcements about the discovery at Galmoy had been made it took time and further work for the share price to recover. But recover it did, eventually rising to over 500 pence.
Of course I can’t forecast the future. But let’s say that my own holding in the company does not distress me at all! I hope that we will see some reflection of the significance of the recent results and the potential it implies for the Company in the share price.
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