BPM announces new gold intercepts on BOTH sides of discovery hole - time to go deeper.

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 4,335,000 BPM Shares and 850,000 BPM Options at the time of publishing this article. Some shares are subject to shareholder approval. The Company has been engaged by BPM to share our commentary on the progress of our Investment in BPM over time.

Gold hit another all time high today...

Overtaking the all time high that it set only a few days ago... which beat the previous all time high only a few days before that...

An excellent time to be drilling for and making new gold discoveries...

Our $7.1M capped (with ~$3.85M pro forma cash) gold exploration Investment BPM Minerals (ASX:BPM) announced a new gold discovery only a few weeks ago.

The market reacted strongly - BPM’s share price was up ~215% at its peak post-discovery, hitting a high of 14.5c.

Until yesterday, the BPM share price had been holding firm above 11c per share - as the market waited on assay results from a few remaining holes from the current campaign that had a chance to be “incredible”...

Those results came out yesterday and gold was intercepted in the two new air core drill holes done on BOTH sides of the discovery hole.

BPM isn’t wasting any time and is moving toward a follow-up 2,500m RC drill campaign that will test ~ 20km of strike in the coming weeks.

Following yesterday’s results, BPM now has plenty of deeper structure to target with deeper RC drilling - now that we know the discovery hole wasn’t just a once off “fluke”.

When a company makes a great first discovery hole, the market often gets worked up and excited.

Speculators bet that the company might be onto a monster, and want to see EVEN BETTER follow up results that exceed the discovery hole.

These lofty expectations weren't met yesterday.

BPM’s share price ended the day down 29% to spend most of the day at 8.5c - despite what we thought were pretty good follow up results.

Speculators and day to day trading aside, there is now more and deeper drilling scheduled in the coming months.

Going into these results we wanted to see BPM hit more gold to either side of its discovery hole and show us that there is potential for its discovery to get bigger along strike.

And it did, “sandwiching” its discovery hole between two new holes either side with more gold mineralisation:

Enough of a reason for BPM to keep drilling out the discovery.

But the speculators entering the stock before these results probably wanted to see both new holes either side of the discovery hole to be BIGGER and BETTER than the discovery hole itself:

Which was not the case and led to a sell off on results.

Even though BPM did deliver gold intercepts on both sides of the discovery hole:

In yesterday’s announcement, BPM also said that planning for a 2,500m RC drill program testing for extensions at depth would be next.

With that next round of drilling BPM will be testing to see if its discovery is getting bigger and does this:

OR if it's not as big as we would have liked and does this:

BPM expects that round of drilling to start “later in the quarter” - that’s when we will get a much better idea of just how big BPM’s discovery really is.

So why the share price reaction yesterday?

Share price reactions to newsflow is a function of expectations vs reality.

In BPM’s case, the market may have started pricing in better results than BPM had delivered with the initial discovery hole.

Usually beating an initial discovery hole doesn’t happen, but speculators will pile in before the result “just in case” it does, pushing up the share price.

In that case, anything that wasn't a clear and obvious improvement on that first hole would have disappointed the speculators and anything that exceeded that discovery hole would have been a win.

BPM results were good, but they didn't deliver results better than that initial discovery hole which is what the hot money wanted right now.

A pretty regular occurrence when drilling out new discoveries.

We think the real test of the discovery’s potential will be when BPM brings in the RC rig and drills for extensions at depth in the next couple of months.

In other words, “we need to go deeper”:

(apologies to anyone over the age of 25 - our junior analysts assure us the above obscure image is a relevant and meaningful reference to something)

Deeper drilling is when we get to see whether or not BPM has a repeat of the type of deposits that make up its neighbour $2.4BN Capricorn’s 3.24M ounce Mount Gibson project.

BPM’s project sits right next door to Capricorn Metal’s 3.24M @ 0.8 g/tonne ounce gold development project.

Capricorn is a $2.7BN gold producer and Mt Gibson is slated as its next major development in the pipeline.

Capricorn’s 3.24M ounces isn't one giant deposit, it's several smaller deposits coming together to form the larger JORC resource.

Because of BPM’s close proximity to Capricorn - literally next door - the exploration theory that is being tested is:

Do these pocket style mineralisation occurrences extend into BPM’s ground and beyond?

We also noticed BPM picked up more ground which adds ~20km of additional strike for BPM to test.

Anything could happen across that 20km and this has added some decent blue sky exploration upside to BPM given its current ~$7M market cap.

Ultimately, because of how close BPM is to Capricorn, we think that:

• IF BPM is able to discover and define a gold resource,
• THEN Capricorn could be interested in taking out BPM as a cheaper option than exploring and extending their own gold resource.

That could happen off the back of one drill hit before a maiden resource estimate OR it could happen years later when BPM has defined a JORC resource.

And of course - this is all speculation and high risk exploration - it might never happen.

BPM has also flagged an AC drilling program to test the shallow sections between its two prospects, which is 2.5km of untested strike.

BPM is well funded for the next drilling program, completing a $1.675M capital raise recently at 10 cents per share, which we Invested in.

But like many exploration companies it is two steps forward, one step backwards this week - but hopefully another leap forward with the next round of drilling.

Our BPM Big Bet:

“BPM will return 10x by making a discovery and defining a deposit significant enough to move into development studies.

NOTE: our “Big Bet” is what we HOPE the ultimate success scenario looks like for this particular Investment over the long term (3+ years). There is a lot of work to be done, many risks involved - just some of which we list in our BPM Investment memo. Success will require a significant amount of luck. There is no guarantee that our Big Bet will ever come true.

What we learnt, and are expectations now low for BPM?

Our main takeaway from yesterday’s drill results was that the real prize will be to see if the mineralisation extends at depth.

We know at the very least that there is gold on either side of the discovery hole - but that the mineralisation does look like it is thinning out.

Looking at the drill results from another angle you can see how the system is getting thinner from east to west. Ideally the system would have been getting thicker - as we show in the images below:

Given the share price reaction yesterday to BPM’s results, we think that the company will be going into the next round of drilling from a lower expectation base (which is good for future share price rerates):

With gold prices at an all time high, we still think that there is plenty of upside for BPM to re-rate on another high grade gold discovery.

Particularly, if BPM can take all of the valuable data and learnings from this second round of drilling.

What will the next round of drilling look like for BPM?

As we pointed out above:

• BPM’s project sits right next door to Capricorn Metal’s 3.24M ounce gold @ 0.8 g/tonne resource.
• Capricorn’s Mount Gibson project has pockets of high-grade gold mineralisation that are almost like mini deposits.
• Tracking the strike of Capricorn’s mini deposits, mineralisation could extend directly into BPM’s ground, the company just needs to work out where it is.

For the next round of exploration, BPM will take a three pronged approach:

1. RC drilling to test area of known mineralisation at depth
2. Aircore drilling over the untested strike between BPM’s two key prospects
3. Geophysics over the 20km of untested ground to the south

How does yesterday’s news impact our BPM Investment Memo?

For BPM, exploration risk materialised.

Although BPM did publish results that showed gold mineralisation, the market was hoping for the high-grade discovery hole to extend more than was reported.

Exploration Risk

BPM's projects are at a very early stage, most are yet to have high-priority drill targets identified, any drilling programs done in the near-term could return no mineralisation.

Source: BPM Investment Memo 2022

What could go wrong?

Now that drilling has been completed, the key risk for BPM is permitting and delay risk.

BPM is awaiting permits to drill and agreements for its soil sampling program.

Although these should be relatively straightforward, any delays will delay the anticipated drilling program.

Delay / Permitting Risk

There is always a risk with exploration projects that the necessary approvals or agreements like land access, heritage and native title agreements are not reached and permits can go un-granted.

Source: BPM Investment Memo 2022

What’s next for BPM?

With all of the results published our attention now turns to BPM’s third RC drilling program which is set to start in December and the AC program set for 2025.

RC Drill Campaign at Claw

🔲 Drilling commenced
🔲 Drilling complete

🔲 Assay Results

AC Drill Campaign at Claw (2.5km of untested strike)

🔲 Drilling commenced
🔲 Drilling complete

🔲 Assay Results

Geophysics/Geochem (20km of untested strike)

🔲 Soil Sampling Complete

🔲 Assay Results

🔲 Targets of interest identified

Our BPM Investment Memo

In our BPM Investment Memo, you can find:

• BPM’s macro thematic
• Why we Invested in BPM
• Our BPM “Big Bet” - what we think the upside Investment case for BPM is
• The key objectives we want to see BPM achieve
• The key risks to our Investment thesis
• Our Investment Plan