Melbourne investment banker Bruce Parncutt calls his latest plaything a “gold discovery company”.
Neither an explorer nor a miner, the ASX-listed DGO Gold — of which Mr Parncutt has been an executive director for the past year — is looking to carve out a unique niche in the Australian gold sector.
Its game plan is to make strategic equity investments in West Australian brownfield gold discoveries, bankroll them with additional capital and combine them with its own pursuit of largely-ignored exploration opportunities.
Mr Parncutt said he hopes DGO has created a model that can reinvigorate gold exploration in Australia.
“Gold is our fourth largest export so the industry is pretty important for the nation. We do the mining part well but I’m not so sure we do the exploration part well. Especially the brownfields guys who need to get their resource to some scale,” he said.
“Most junior explorers find a piece of ground and they raise the capital and explore. We think we are adding intelligent value to that process.”
DGO is also a unique human story, combining the skills of a career investment banker and former boss of McIntosh Securities in Mr Parncutt, with the exploration expertise of one of the resource sector’s most famed geologists, Ed Eshuys.
As Joseph Gutnick’s exploration director in the late 1980s and early 1990s, Mr Eshuys led the teams that discovered the Plutonic, Bronzewing and Jundee gold deposits and the Cawse nickel deposit. Before those triumphs, Mr Eshuys also had involvement in the Maggie Hays and Mariners nickel discoveries in the 1970s.
He is now DGO Gold’s executive chairman and is working closely with Mr Parncutt — who has been on the board since 2018 — and DGO’s management team to develop two sizeable WA gold resources and to explore for more.
“We do bring together a unique set of skills. It is all very well to have the money but to apply that you need the technical skills” Mr Eshuys said.
“Bruce and I do debate between ourselves our respective points of view and invariably come up with a consensus. That has led us to a disciplined approach to take DGO from where it was to where it is now.”
DGO Gold initially evaluated 100 gold explorers and their projects. Ten ASX juniors made the shortlist before DGO narrowed it down to two, taking strategic stakes in booming Pilbara gold explorer De Grey Mining and Leonora gold explorer NTM Gold.
DGO has a string of major greenfield exploration projects of its own being drilled, including on prime South Australian ground owned by junior explorer Investigator Resources as the first stage to earning an 80 per cent stake in the latter’s Pernatty copper project. DGO also has a 40 per cent interest in Yilgarn Exploration Ventures, which is drilling in the Leonora district of Western Australia.
“One of the critical things we found when we were talking to all the juniors was that they didn’t understand the need to have at least 3 million ounces to have something of meaningful scale,”Mr Eshuys said.
“Part of our discussions with these companies was about raising sufficient funds to do the job properly. That is where De Grey came to the party. They did understand they needed to raise more money and they did that.”
The strategy has seen DGO Gold shares soar from just 17c four years ago, and $1.70 last year when Mr Parncutt became an executive, to close on Friday at $3.63.
They soared over $4 in September last year on the back of the coronavirus-fuelled surge in the gold price, which saw it spike to $US2056 per ounce last August.
While gold prices have trended lower since the start of 2021 amid rising US Treasury yields and an increasingly positive outlook for the global economic recovery, the DGO share price has held up.
DGO now owns 16 per cent of De Grey, which is drilling out a significant Pilbara gold discovery.
It also has board representation and has supported De Grey’s capital raisings, including a $25m round last September.
“De Grey is in a unique position in terms of its Pilbara land position. That is one of our key elements when we invest and explore,” Mr Eshuys said.
Following the merger late last year of NTM Gold with Dacian Gold, DGO will now emerge with a 10 per cent stake in Dacian.
Of the $25m raised last September, $8m was also pegged for greenfield exploration.
The value of DGO’s stake in De Grey covers its $225m market capitalisation, meaning the market is currently attributing no value to DGO’s substantial exploration interests.
DGO has attracted some big name investors, including stockbroking veteran Tom Klinger, one of Christopher Skase’s biggest backers through the 1980s and another former McIntosh managing director. Others are former stockbroking resources turned private equity fund adviser Peter
Woodford, the rich-lister Costa family member Robert Costa and Regal Funds Management.
DAMON KITNEY, VICTORIAN BUSINESS EDITOR
Damon Kitney has spent two decades in financial journalism, including 16 years at The
Australian Financial Review in a variety of writing and editing roles in Sydney, Melbourne,
Canberra and Perth.