Alloy has 40% of the Horse Well JV that Doray has farmed into and earned a 60% holding so far by paying $2m in about 1.5 years. Doray could increase to 80% by spending another $2m by December 2016, however, Alloy can retain its 40% if it contributes its 40% of the $2m, ie $0.8m and recently raised $1.3m at 1.1c per share, so AYR can retain its 40%.

A company recently said to me that they came to recognise that JVs are great. If it is say a 60/40, the JV partner has to finance their 40%, we only have to finance 60%. Should the partner be unable to finance, it has to dilute lower - far better than paying a premium and taking over. As for the JV partner, it can go on to become a great company too, as was the case with Placer Pacific (PLP) taking 60% of Granny Smith leaving Delta Gold (DGD) with 40%, (until Placer Dome later decided to take everything).

In Doray's MQ 2016 results presentation (I/ERA listened in), the final question (not by me) received the reply on 29 April 2016, (Doray) stating that Horse Well (HW) was their regional exploration favourite and potentially capable of becoming Doray's third mine, possibly being in production in 3 to 4 years' time as a stand-alone plant fed by a number of ore sources. (Doray have previously stated that the target at HW is an ~1moz resource, and gold production ~100kozpa). Doray were attracted to HW due to its inclusion in a greenstone belt that has mines such as Bronzewing, Mt McClure and Jundee; and exploration at HW has continued to be encouraging.

The location of Horse Well (HW) in WA is easy - you can even spot it from outer space looking at about the middle of WA as there is an almost perfect circular feature next to it, namely a ~25 km to ~30km diameter impact zone (ie size wise - from ~Sydney Airport to Hornsby, or Melbourne City to Dandenong South, or Kalgoorlie to Coolgardie, or London to St Albans, or ~15 to 18miles) caused by a meteor, that altered the geology around it, either 570 or 1630 million years ago - (because of understandably associated tectonic activity, there are debates over when it occurred). And otherwise HW is about 50km north of Jundee, on the northern limb of the Yandal greenstone belt, with Jundee on the southern limb.

HW was mostly explored and discovered by Eagle Mining (who discovered Nimary [now part of Jundee]) in the early to mid 1990s. There are at least 5 references or indications that Eagle expected Horse Well to be its next stand-alone mine, based on its (southerly) Horse prospects. Eagle even had sterilisation drilling at Bronco and Filly in 1996 (at the time it was ramping up and achieving a "tick-over" status for its Nimary mine and plant).

But, just backtracking over some of that history : HW was discovered by Orpheus Geoscience using geochem over a hill in 1992, and the Wiluna JV was then formed in March 1993 by the sole tenement holder (Alastair Hunter), comprised of Hunter (HTR, 29%); with Matlock (20%) and Eagle Mining (EMN, 51%) earning 71% by gradually spending $5m, and Orpheus continuing to cover exploration with some Eagle personnel. The WJV also took over Nimary (southern Jundee) where Hunter had been exploring since 1990, with Eagle managing Nimary from 1994.

Further geochem at HW in 1993 focused on Bronco, Filly and Palomino, then RAB, then RC. The best lag was 4.7g/t rock ship in a quartz vein breccia at Bronco, while the RAB had 6m @ 4.7g/t & 8m @ 5.3g/t at Palomino, with RC at Palomino intersecting 24m @ 5.2g/t, 19m @ 3.6g/t & 15m @ 2.4g/t.

While RC at Palomino in 1994 was still encouraging with 14m @ 7.3g/t & 11m @ 4.9g/t, the two diamond drillholes were disappointing with only 3 intercepts >1g/t. Eagle were distracted at the time by their progress at Nimary and those 1cm solid gold intersections (that they showed in presentations) at ~240m in Nim3 (next to Barton Deeps). So in 1995 drilling switched to RAB at Bronco and Filly, with follow-up RC intersecting 10m @ 4.7g/t & 4m @ 15.9g/t at Bronco, and 10m @ 24.3g/t & 8m @ 7.2g/t at Filly.

By December 1995, Eagle's Nimary gold mine was in production, and in September 1996 it was regarded as "ticking over" at 800ktpa @ 5g/t for ~120kozpa at cash costs of A$200/oz, and more veins were being discovered at Nimary. In 1996 sterilisation drilling was undertaken at Filly and Bronco, and there are a number of references to presentations, comments and media in 1995 and 1996, that Eagle regarded Horse Well as its next gold mine based on the Horse prospects. References were also made to "gold everywhere", with some of the very high >1oz/t grades At Filly SW (g/t in 10 consecutive 1 m intervals: 45, 36, 64, 23, 14.7, 24.1, 19, 7.5, 6.5, 5.7) sourcing from somewhere deeper.

The Horse prospects appear to mostly be contained in a NW/SE elliptical "pod" of mostly basaltic rocks between two NW/SE structures (possibly [per EMN] underlain by a deep-seated granitoid [dome?])

In late 1996, Eagle re-interpreted Palomino with an untested down plunge component. Subsequent RC drilling at Palomino in MQ1997 identified lineation-controlled, east dipping, northerly plunging ore shoots, characterised by intense silica-carbonate-sericite-pyrite alteration with better intercepts such as 12m @ 7.6g/t from 152m, and EMN established an oxide resource of 240kt @ 4.3g/t (~33koz, variable depth ~25m south to ~60m north as shown in the Figure). RC was also undertaken at Clydesdale, Filly and Bronco; ultra-detailed aeromag flown from Colt to Filly South; and 3 anomalous areas identified using Aircore in the north (Mt Teague area) on mag highs along an interpreted syeno-granite contact (all in MQ1997).

The 3 anomalies were Dusk 'til Dawn (DD), Crack o' Dawn (COD) & a trace anomaly (4m @ ~0.1g/t from 28m) ~1km NW of DD, with follow-up RC intersecting 11m @ 3.5g/t from 44m at COD and 17m @ 0.2g/t from 36m at DD. In July 1997, follow-up infill aircore (to ~50m) at COD around the 11m @ 3.6g/t intersection, encountered mostly shallow lowish grade mineralisation at ~1/g to ~2/gt over 1m to 4m.

However, that was it !, Great Central Mines (GCM) made a logical (yet surprising as GCM was banned from takeovers due to its 1980s behaviour) Part C cash offer of $3 per share ($235m) for Eagle Mining (the gold price was ~US$325/oz and had fallen from $390/oz in March 1996) and by 8 October 1997 GCM had acquired >99% control of Eagle. At the time it was speculated (in my stockbroker research of 8 October 1997) that the Jundee plant would be expanded and the Nimary mill possibly sent to Horse Well, but that did not happen, instead the Nimary plant was expanded for $6m in DQ1997 to be able to treat 700ktpa of hard ore. The last reference I/ERA have to Horse Well was on a post merger analysts' visit in mid-October 1997.

GCM was banned from takeovers by the institutions (instos) that supported it who told Joseph Gutnick/GCM that there must be none of that 1980s behaviour or we will sell. While the EMN takeover was a logical move (as shown in the Figure - there was a shared boundary at Jundee/Nimary and the ultra high grade was in the south), the subsequent acquisition of Wiluna was not and resulted in GCM's downfall.

GCM overextended itself to acquire Wiluna in a mix of loans from Normandy (NDY), and at one stage a bridging loan from Plutonic (~$20m to $40m at 25% per month!), because the banks refused to lend GCM any more money. GCM thought that Plutonic owed it for its success, which it did really as GCM had sold to Plutonic (originally called Pioneer) the prospect area over the western side of Marymia Hill that resulted in the success of Plutonic (it had in fact been onsold from Redross (Ross Kennedy) after minor exploration). (Redross then merged with Titan Gold to form Resolute who kept the eastern end because they thought it was better exposed whereas the western end was undercover [a bit like Delta Gold keeping the eastern end of Sunrise Dam]).

Anyway, the acquisition of Wiluna caused GCM to produce a figure/diagram of its new empire - that figure closely resembled another historical figure.... "Bond International Gold". A classic pyramid where the value of one stock depended on the value of another in the stable, in a spiral of circles. Post the Wiluna acquisition, the instos kept their word and dumped all their GCM stock on the market, which began the downward spiral, and eventual loss of GCM to NDY.

However, in DQ 1997 GCM stated that a review of Eagle's regional exploration data, established Gourdis-Vause as the initial main target (no mention of Horse Well), with a resource of ~7mt @ 1.8g/t. The rest of the exploration spend was on Jundee-Nimary (and Wiluna), and as for Horse Well and its possible gold mine - it became forgotten. Normandy (NDY) took over GCM in April 2000, Newmont (NEM) took over Normandy in February 2002, and Northern Star (NST) acquired Jundee from Newmont in May 2014 for ~$83m. Horse Well having been sold to AYR in April 2006.

The above description is what I have in my/ERA report on Alloy Resources (available on the websites of www.eagleres.com.au & www.alloyres.com ), and I thought that was it. But another chapter became known to me over the Sydney RIU conference in May 2016; when GCM owned it.

Yes, GCM had ranked Gourdis-Vause above HW in 1997 and that is also the version in a closure/summary document of HW. However, that ranking in 1997 was because GCM wanted oxide feed for its planned expansion of its Jundee and Nimary plants. But in June 1998, a review of EMN's exploration prospects upgraded HW's potential to No.3, and well above Gourdis-Vause.

GCM began a process of relogging the EMN drillholes which identified for example in November 1998, that 10 of the RC drillholes shown as drilled to grid north were actually drilled to grid west, and in February 1999, of two diamond drillholes at Palomino, some units had been mislogged in that the previously logged ultramafics were instead schistose altered basalts.

Exploration intensified at HW in February 1999, with a proposal to test the Horse Well mineralised system which appeared similar to the 2km x 2km Jundee system and in which a revised aeromagnetic interpretation showed that the HW prospects appeared to be connected by structures that paralleled the mineralised directions shown by drilling. One of the main advances was the recognition that the greenstone belt could be divided into a number of structurally bounded domains, and that all the main gold mines appeared to be situated well away from the domain-boundary shear zones.

In GCM's MQ1999 report it was stated that compilation of data on HW had confirmed the presence of a number of high grade structures similar to Jundee and an RC drilling program
had been planned and would commence shortly.

In April 1999, a sigmoidal quartz vein was found in the shear that links Filly and Palomino at Horse Well. The 2m long vein was Z shaped, implying dextral shear on the zone. The significance of it was commented as remaining to be seen but apparently a parallel could be drawn with the shapes of veins and direction of shear at Bronzewing. Additionally, a 3D interpretation of Filly South in Vulcan resulted in a new interpretation of two north plunging shoots that pass close to one another at the prospect but do not intersect, and a drillhole was going to test the Filly South model, targeting the higher grade shoot at a depth below surface of ~110m.

In June 1999, the depth continuation of Palomino's mineralisation was regarded as proven with RC intersections of 3m @ 9.7g/t from 170m, 1m @ 8.1g/t from 245m & 1m @ 4.2g/t from 312m. In GCM's JQ 1999 report, they stated that the best intersection of 3 metres @ 9.7g/t
from 170m, was associated with quartz veining and carbonate-pyrite alteration in a metabasalt/dolerite sequence. Which is the first and only reference I have encountered of dolerite at HW/Palomino.

In October 1999, a 120m further north step out at Palomino intersected 3m @ 5.3g/t from 144m (again verifying continuity), while a deeper drillhole at Bronco intersected 6m @ 5.4g/t from 233m. In November 1999, further follow-up RC was planned at Palomino and Bronco, but that was it, nothing else happened, GCM was being taken over by Normandy (NDY) and by April 2000, it and the GCM exploration team had gone. It has been stated that after takeover, NDY (Robert CDC) immediately shut down all GCM exploration and retrenched the GCM staff.

Clearly EMN started to focus on Horse Well after Nimary was "ticking over" and possibly planned to have an open-cut over Palomino to unravel the mineralised lodes' directions - in the same way as the mineralised lodes at Jundee were unravelled despite the peppered drilling shown in the Figure (both Jundee-Nimary and HW having been described as "gold everywhere"). But just as EMN started to seriously focus on Horse Well, it was taken over by GCM.

GCM initially ignored Horse Well, and just as it started to seriously focus on Horse Well, it was taken over by NDY, as for the southern/Horse prospects that has mostly been it for the past ~17 years.

So what happened after AYR took over Horse Well soon after listing in 2006. AYR initially focused on Comet and then Laos etc, and undertook a Leapfrog analysis of HW in June 2007. However, the Leapfrog analysis appeared to be inconclusive, interpreting Palomino and Bronco as striking N/S with Filly NE/SW, while the high grade through the drillholes in plan appears to strike NW/SE or NNW/SSE. That with the ~100koz resource at HW probably caused AYR to look elsewhere.

In 2009, AYR focused on mineral sands in NZ and iron ore east of the meteoric impact zone, before focusing on the Warmblood extension SE of the Horse prospects in 2011, as Andy Viner (the current Executive Chairman) joined AYR as MD and re-examined the Horse prospects and possible SE extensions, and the Dawn prospects.

Further encouraging intersections were made at Warmblood such as 8m @ 5.5g/t from 93m and an increasing supergene zone in November 2012, and drilling commenced on Crack o' Dawn (COD) in December 2012 followed by a subsequent decision to fly aeromag. Continuing encouragement occurred at Warmblood and Dusk 'til Dawn (DD) with follow-up RC in late 2013. Doray farmed into the Horse Well JV in May 2014, stating that it was attracted to the potentially similar geology between the Jundee and Millrose greenstone belts.

Possibly the DD prospect area appears to be more similar to the Jundee limb, (although some comparisons have also been made with Granny Smith). DD has dacitic porphyrys in the west and ultramafics (Django) to the east, plus the general broadly N/S striking Celia shear zone (that reputedly extends eventually SE past Dacian's Mt Morgans) apparently traversing across the Millrose greenstone limb from Django in the east through the Horse prospects and Warmblood to the west.

Doray currently (JQ 2016) expected to drill at least 18 RC drillholes to a depth of ~180m at Django of which the first 5 were to focus on the higher aircore anomalies. Django at T-06 was the largest of the 18 or 20 target anomalies determined in 2013. After Django there were still at least another 12 anomalies to test. The HW JV drilled at Warmblood South in MQ 2016 and expected to drill under some of the higher grades at Warmblood (in JQ or SQ 2016, subject to gaining clearance). And the JV was going to review the Horse prospects.

As for the further reduced ~75koz HW resources at Palomino etc, they have now slipped with JORC 2012 from indicated to inferred due to poor drilling density. In fact the HW resources appear to be very conservative.

Reading the 2015 resource documentation shows that the resources appear to have been converted from 2000 to 2004 and then upgraded to JORC 2012 standard, but due to the drill density, have switched from indicated to inferred resources. Also they have been top cut, such that the top-cut, conservative 258.4kt @ 3.73g/t of fresh Palomino ore, after dilution and optimisation becomes an inferred 196kt @ 2.59g/t (ie lower tonnes at lower grade), or an almost halving of the total top-cut resource from 31koz to 16koz for the entire Palomino orebody with its two parallel lodes. [Note : EMN's initial resource in 1997 just for the OXIDE at Palomino was 33koz].The top-cuts are also quite harsh as stated, Palomino's fresh grades of 60g/t to 360g/t have been top-cut/reduced to 50g/t, and Palomino's oxide high of 195g/t became 30g/t.

The depth of the resource has also been limited to 130m because of the lack of drilling, so Palomino's down plunge ore shoot that had intercepts of 10m @ 7.4g/t, 9m @ 5.3g/t & 12m @ 7.6g/t, has been excluded, even from an inferred resource. The resources at Horse Well are possibly so low because HW has been compared to Jundee and HW's drilling does not compare with the (peppered) density of drilling that occurred at Jundee (between 1994 and 1997 for a cost of possibly ~$50m, but still really needed open-cuts to unravel and interpret the numerous structures, as shown in the Figure).

So is it third time lucky under the Doray/Alloy Horse Well JV to become a stand-alone gold mine? It didn't happen under EMN or GCM, although both of them appeared to be heading in that direction. Interestingly the ex-senior geos of the various companies at one stage responsible for Horse Well, all individually bought Alloy Resources shares soon after AYR's acquisition of Horse Well in 2006, and still hold their AYR shares.

Disclosure and Disclaimer : This article has been written by Keith Goode, the Managing Director of Eagle Research Advisory Pty Ltd, (an independent research company) who is a Financial Services Representative with Taylor Collison Ltd (AFSL 247083).

Figure. Historical Sections and Plans of Jundee, Jundee-Nimary and Horse Well's Palomino