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Noricum Gold – Initiating coverage with a recommendation of Speculative Buy at 4.875p with an 8.9p target price

Noricum Gold is a mineral exploration vehicle focused on Austria – a country with a rich metals history and clear potential. It has an active mining industry and is the tenth largest world producers of graphite and talc. It is politically stable, has good infrastructure and no royalties plus a standard company tax similar to the UK. Exploration licences are granted for an initial 5 year period and are renewable. Licence fees are nominal and there is no minimum annual spend. There are numerous examples of exploration licences being turned into mining licences. The south of the country is highly prospective for gold and that is where Noricum has acquired a total of 518 licences covering 165 square kilometres, lying in five key groups which have all been the subject of mining activity in the past. These licence areas are not in national parks and well away from tourist areas.

The Rotgülden and Kliening projects are Noricum’s top priorities for exploration. Rotgülden is a high grade, narrow vein gold deposit with grades of up to 40g/t. If the veins were not attractive enough in their own right, there are also pockets of high grade massive sulphide which are in fact chalcopyrite caverns that run at 400g/t gold and 80-90 ounces per tonne silver. These caverns are about the size of a large room and could possibly contain substantial amounts of gold. Between 2005 and 2007, the previous licence holder Alpine Metals spent approximately £3.2 million at Rotgülden mainly on extensive underground development and 1,500 metre underground drilling programme at the Friedrich adit in the old mine. The budget for the current season will fund down-hole electromagnetic and magnetic work to define massive sulphide drill targets; to be tested by 3,000 metres of underground drilling in the disused mine in the second half of the year. This old mine produced arsenic and gold as a credit; but there is obviously tremendous potential in these licences with Alpine Metals suggesting a potential resource of 4 million ounces of gold.

Kliening offers a real chance of early cash flow generation. The area contains numerous small stockpiles of tailings which are the remnants of gold mining activity in the 1800s. Sampling by others in the recent past has revealed a grade of between 5- 10g/t which sort of shows that half the original gold content remains available to be extracted by modern methods. The plan is to sample and survey these dumps in May 2011 assaying for gold, silver and copper. The team will be putting together a composite sample in order to determine the leaching characteristics of the material because there is an opportunity here for early cash flow. Already the material in the dumps has been ground and there may be the potential to provide a significant amount of material to be processed using standard carbon-in-leach technology by bringing a modular processing plant. It has been estimated that the tailings dumps might contain 100,000t of material. Noricum’s exploration programme will consist of systematic sampling and auguring to work towards a maiden JORC resource.

At Kliening there are two targets, as along with the tailings dumps there is also lode style mineralisation at Buchbauer-Bischofeck. Old records show that the mineralisation in the area consists of steeply dipping veins ranging in thickness from 0.5 – 2.5 metres which seem to occur in parallel vein swarms with individual veins some 25 metres apart. Previous work included the cutting of two trenches, one of which exhibited gold grades between 11.8 – 23.6g/t. In total, the Directors are talking of up to 5,000 metres of a combination Reverse Circulation and diamond drilling at the Buchbauer-Bischofeck which is expected to begin in the second half of 2011 which will be systematically investigated to determine the potential of these vein swarms. A series of holes is planned over the central section of this 5 kilometre alongside ground magnetic work. It seems likely that before the year is out, Noricum could be announcing drilling results which would be a precursor to a maiden JORC compliant resource.

Noricum presents investors with the opportunity to back a high growth exploration and development business concentrating on gold, silver and copper. The management is highly experienced in high grade narrow vein gold mining and is fast tracking the Rotgülden and Kliening projects which both seem to offer the potential for near term production. Following an extensive evaluation of the results of previous exploration work, the company has a well-planned exploration programme which could help begin to define an economic JORC-compliant resource at both these projects. This year will see a total of 6,000 to 8,000 metres of drilling on the Rotgülden and Kliening projects. This work is already fully funded which should not only generate a healthy newsflow but more importantly could rapidly accelerate a thorough understanding of the opportunities. Noricum sensibly will be seeking to consolidate its land holding by acquiring adjacent licences. We initiate coverage of Noricum Gold with the shares standing at 4.875p as a Speculative Buy with a target price of 8.9p.

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