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Sunshine Gold (ASX: SHN): Interview with MD Damien Keys

May 17, 2023

SHN, Sunshine Gold

Sunshine Gold (ASX: SHN)

We spoke to Dr Damien Keys, Managing Director of Sunshine Gold (ASX: SHN) about the company’s transformational acquisition of the Greater Liontown project, which markedly increases the company’s ground in the Ravenswood area near Charters Towers in Queensland and also adds a significant lead-zinc resource in Thalanga.

The Ravenswood Consolidated project now includes a VMS resource of 4.94 million tonnes at a massive 12 per cent zinc equivalent, plus 50,000 ounces of gold. We talked with Dr Keys about what comes next in terms of the significant number of walk-up drill targets.

Full transcription below.

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Stuart: Hello, and welcome to “Stocks Down Under.” My name is Stuart Roberts, and I’m one of the co-founders of that service. And joining me on the morning of Tuesday, the 16th of May, 2023 is Dr. Damien Keys from Townsville. He’s the CEO of Sunshine Gold ASX:SHN. Damien, good morning.

Dr. Keys: Good morning, Stuart. How are you?

Stuart: So, I imagine you’re about to contemplate a name change. It’s no longer Sunshine Gold, it’s Sunshine plus lead, zinc, a bit of molybdenum, copper, and a whole lot of other stuff. Thanks to your big acquisition of the Liontown project, as you’re calling it, in the Greater Ravenswood area. Congratulations on what could be the deal of 2023.

Dr. Keys: Yeah, thank you. We’re pretty happy with it. And Sunshine Zinc, Copper, Gold is a bit of a mouthful, so we’re looking at Sunshine Metals.

Stuart: That’s a good change. Yeah.

Dr. Keys: Good change to keep it simple. Yeah, we’re thrilled with the acquisition. I think we’ve got a fantastic asset with a grading ground resource already proven up and enormous exploration potential, and we’ve picked it up for an amazing price. And more importantly, it bolts on beautifully onto the ground, and we’ve already been able to put together in the Ravenswood District.

Stuart: All right. Let’s paint the picture here. Up until now, your flagship project has been Triumph, down near Gladstone looking for a fresher host of gold, if I recall. You’ve just done a deal with the administrators to get hold of not just Thalanga, but a whole of exploration ground in the neighborhood of Thalanga near Charters Towers. We’re talking something like 1800 square kilometers. $3.4 million, and you pick up a resource of about 4 million tons at 12% zinc equivalent, and about 25 walk-up targets. So, that’s a pretty good…that’s potentially a company making you’re sitting on.

Dr. Keys: Yeah. Well, it’s actually 5 million tons at 12%.

Stuart: Even better, it gets better every time.

Dr. Keys: [inaudible 00:02:07] better. And that’s accounting for recoveries and the like. So, it is a really high-grade resource. I guess if you put it in perspective to things like Rumble Resources have put out an initial resource up at their Haiti project. I mean, it’s 94 million tons at 3.1% zinc equivalent. So, we’re looking at what’s a really rich in situ resource. Thalanga has produced 10 million tons of high-grade zinc, copper, lead, gold, silver ore, and Highway Reward, which is another VHMS system slightly different, it’s a copper-gold rich system, produced 4 million tons of 6% copper and a gram of gold, and that was largely mined in the ’90s. We see potential for both the zinc, copper, lead systems, and also more of these Highway Reward style copper-gold pipes, VMS pipes. I guess the modern analog for Highway Reward is that the DeGrussa mine, that Sandfire mine in WA, it was a real company maker. It took them from a junior explorer to a mid-tier producer pretty rapidly. And I hope and we’re hoping that prospects like coronation can do the same for us.

Stuart: Look at the presentation, I mean, every one of those prospects you’re looking at, they’re open in every direction you look at. So, it’s fair to say your exploration geos are going to have a field date literally over the next few years.

Dr. Keys: Yeah. There’s a fair bit of buzz around the office at the moment. And I guess the icing on the cake with the transaction was that the previous owners had just completed 6000 meters of diamond drilling and didn’t get a chance to release that to the market. And we’ve got assays for the first 2000 meters already. And in that assay suite, there’s an intercept of 8.1 meters at 10.7 grams per ton of gold. And we’ve got 4000 meters of logging that either needs assaying, or needs logging and cutting and further assaying. So, yeah, we’re pretty excited about what might come out of that immediately. Immediate news flow, but then certainly the potential of the belt. And we think a lot of the exploration in the district has been focused around the zinc-copper-lead style systems. We think there’s amazing standalone gold opportunities as well, in and around some of these VMS systems.

Stuart: Charters Towers is way up north and then Mount Lacey not far away in the other direction.

Dr. Keys: Lacey is just to the north, but we’ve got Pajingo, which is another 4 million ounces just to our south as well.

Stuart: Right, right. Is it drawing too much to say the neurology is favorable for you in terms of the setting those occurrences were discovered in that could apply to you?

Dr. Keys: Oh, well, certainly, neurology in that we’re in the right district. The district has produced 20 million ounces of gold and it’s produced 14 million tons worth of VMS material. So, we’re certainly in the right neck of the woods. We think we’re a bit further along the pipeline than neurology. We think we’ve actually got a good heads-up on some of these systems already. So, a kilometer to the west of the Liontown Resource, we’ve actually got some really shallow high-grade…well, shallow, good solid-grade intersections. So, there’s hits, like, 17 meters at 3 grams from 12 meters depth, and just along strike, there’s another hit there that’s 30 meters at 2 grams, and that’s from about 14 meters depth. Twelve and 14 meters are the 2 intersections, that’s at Tigertown. Certainly, all the way along this belt, there’s potential for the Mount Lacey style breccias, and also for the Pajingo style epithermal targets. So, yeah. Since, you know, we’re ready to roll is an absolute understatement, the guys are champing at the bit to get out there.

Stuart: Right. And talk to us about some of the near-term opportunities in terms of the prospects that you’re going to prioritize in the next round of drilling that you’re going to do.

Dr. Keys: Yeah. So, I guess those two gold prospects that I’ve just talked about…sorry, the two drill holes at Tigertown. So, at Tigertown, I will go and do some work at. There’s, certainly, potential at the Resource itself at Liontown. So, you’ve got Liontown and Liontown East, and there’s a gap between the two that’s just deficient in drilling. It’s the only reason it’s not in our resource, there’s a hidden between there 1.75 meters at 50% recoverable equivalent. So, you know, we’re certainly convinced that the system doesn’t just die, we’ve got potential to extend that resource. So, we’ll do that. There’s coronation. Coronation’s the Highway Reward lookalike, 2.7 kilometers to the north of Highway Reward, and the previous owners did a detailed gravity survey to pick up the sulfide pods that sit below surface. So, this Highway Reward was just a massive sulfide pod, essentially pyrite and chalcopyrite. So, the density anomaly at coronation looks fantastic, and it’s got rock chip sampling to 13.8 grams on top.

There was an IP survey done between the Liontown and Waterloo Resource that delineated 30 targets back in 2017, and the first one tested was Liontown East, which is now 1.5 million tonnes of ore. We’ve gone back through that data set and we really like the potential along a belt called Snow Leopard and Leopard Town are the two prospects. There’s a big cat thing going on through here. But, yeah, so we’ll go and do some shallow first-pass tests. The anomaly is 2.2 kilometers long. So, our first test will basically be big step off drilling just to see what parts of that system may or may not tick. Yeah, so they’re going to be the focus areas for us straight off the bat.

There’s a nice little epithermal target called Truncheon, which looks interesting. There’s resource extension potential along strike from Waterloo at a prospect called Agincourt. Yeah. There’s no shortage of fantastic targets to get our teeth stuck into. I was just sitting looking at some of the historic data 800 meters to the south of the Liontown Resource, so in the hanging wall stratigraphy, there’s 2 holes that are 150 meters apart with silver hits that are in the hundreds of grams per ton of silver up to 400 grams or 500 grams per ton silver over sort of 5-meter to 10-meter intervals. And that’ll be VMS-associated, or related. So, these systems are going to occupy a large proportion of the stratigraphy and we’ve got 100 kilometers…sorry, we’ve got 80 kilometers worth of the Mount Windsor volcanics to go and look through. So, really good.

Stuart: Just obviously, yeah, there’s been a bit of thinking about what the appropriate pathway to process the ore, given, you know, Thalanga’s historic sort of workings. Does anything bother you about what you need to think about to get a decent flow sheet out of all this?

Dr. Keys: Well, no. We’re pretty enthused by the fact that the flow sheets are pretty well mapped out. So, we’re in the same stratigraphic belt as the historic Thalanga mines. Thalanga, that’s through its 20 years to 30 years of mine life, they had the metallurgy pretty well nutted out. So, there’s been plenty of metallurgy test work done on Liontown already. We see the flow sheet being pretty straightforward. We’ve got zinc refinery in Townsville, we’ve got Glencore with a copper refinery in Townsville and we’ve got the rail line to Mount Isa that passes through the Tennant out to smelters at Mount Isa. So, we’ve got not only a favorable metallurgy but there’s certainly infrastructure around that, you know, is favorable as well.

Stuart: Well, we probably better not forget Triumph before we’re through with this interview. Tell us the state of play at Triumph and what you hope to achieve over the next nine months there.

Dr. Keys: Yeah. So, we just duck down to Triumph in the last 6 weeks, I guess, and completed just under 3000 meters of RC, and we had a focus for this round not specifically on resource growth, although we think that we can achieve that out of some of the drilling. But it was more about determining which veins we’re going to step onto next for the next phase of resource development, and which veins are going to give us the biggest bang for buck. So, we’ve tested more of the Southern Corridor. We’ve extended the drilling footprint in the Southern Corridor, but we’ve also jumped across the other side of the Norton fault. And just extended the Bald Hill drilling, but also stepped to the north of Bald Hill as a prospect gold advance, which back in the day was the biggest producer of gold in the camp originally. And we’ve completed some drilling up there. And I guess to get a size on the scale of the system down here, we’ve stepped off onto a prospect called the Southern Margin, which is right on the southern margin of the big Tonalite body. And we’ve hit some nice veining and alteration in the couple of holes we’ve put down there. So, still, it confirms our belief that Triumph is a huge system, and it’s just a case of getting in there and drill-testing the right veins.

Stuart: Right. And for background, this is the old Norton Gold mine that last worked in the 1940s, but with big potential to return it bigger and better.

Dr. Keys: Yeah. So, we’ve got a couple of hundred kilometers worth of exploration tenure. The old Norton Gold mine was focused in essentially a postage-stamp-size area. But we believe the larger intrusion has potential for significant amount of gold. So, I guess having worked as a pit geo at Ravenswood many months ago, we see the rock types, the mineralization style, and certainly the nature of the veining as being probably the most similar thing to Ravenswood outside of Ravenswood that I’ve actually worked on. So, big potential.

Stuart: Right. For investors who don’t know, Damien, tell me a little bit about yourself. We were sharing before we pressed the button that you did your PhD work on a fault zone out near Mount Isa called Investigator, and that subsequently became one of your projects, which you’ll probably downgrade now that you’ve got more work in the Ravenswood area to work on. Tell us about yourself before Sunshine.

Dr. Keys: Yeah, well, I guess I’ve had a long association with Queensland and WA. I started as a mine GO at Mount Isa Underground in 2000, and have worked through the Mount Isa district in an exploration and mining capacity but also with my doctorate, and then spent a bit of time in WA where I got to meet all the industry’s colorful characters and certainly get a real taste of Yilgarn Gold. I was fortunate enough to work for Silver Lake Resources and as geology manager at Daisy and subsequently do some exploration for Black Cat Syndicate and help get those guys up and going. And then jumped across and did some work with Spectrum Metals and was a part of the discovery team for Penny West. And that was an amazing 12-month window, quite a circus from discovery through racehorse drill out and litigation. And so, we got to see a whole gamut of the exploration side of things. But an amazing deposit and really lucky to be a part of a couple of these nice discoveries. And then we basically…family reasons, my better half wanted to move back to the Sunny State, and so we went out and put some time away, found some fantastic projects to get started on with Sunshine. And here we are today.

Stuart: Well, it’s good to be back. I mean, any dummy can find something in the Yilgarn. It takes a bit of talent to redevelop some of the fields that we’ve been talking about today, so well done on the move back.

Dr. Keys: Yeah. Thanks, mate. Well, hopefully, I’m not the dummy on the East Coast, but no. It’s a great part of the world and we think Queensland is significantly underdone from an exploration perspective. So, I think I’ll put a slide up at [inaudible 00:16:49] a couple of years ago, and demonstrated there was about seven and a half times the exploration spent in WA to Queensland. And yet Queensland has produced an extraordinary amount of gold in its own right and been prolific in that regard. And certainly, with the base metals side of things, you know, there’s a lot to be done in Queensland still. And we just see the opportunities, we’ve got a pretty much a blank canvas, and highly prospective on that, and it’s up to us to make the next discovery.

Stuart: Damien Keys, thanks for joining “Stock Down Under.”