How to evaluate “nearology” investments

Published 09-MAR-2022 12:15 P.M.

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2 minute read

When evaluating an exploration investment “nearology” will often form part of the investment thesis.

Nearology is the idea that the exploration ground (where a company is looking for minerals) is in close proximity to a discovery made by another company.

Hence the term ‘nearology’.

However, not all nearology is equal, and just being geographically close by does not necessarily increase the chances of a discovery.

Over the years we have established our internal “nearology scale” with four clearly defined tiers of nearology, which we will explain in detail below.

1. "Entry level” nearology - geographically close - almost irrelevant

If two projects are geographically close but have different geology - it's almost irrelevant.

These companies will often claim “we are 40km away from the world’s biggest deposit therefore our grounds should also hold a world-class deposit”.

This rarely works out.

2. “Better” nearology - geographically close AND same geological structures

This is when two projects have the same geological structures below the ground, but no supporting data - or drilling that has de-risked it to date.

This is a good starting point for an explorer, with the grounds most likely being unexplored.

There is still a lot of risk with plays like this but the potential upside is high.

Generally, we manage to pick these types of explorers up at fairly low enterprise values.

3. “Even Better” nearology - geographically close AND same geological structures AND supporting exploration work

This is when two projects have the same geology and structures WITH supporting drilling data/geochemistry and/or geophysics.

With these, we like to see either some drill intercepts showing something is where the company thinks it is, or rock chips in the area pointing at something, or geophysics showing massive EM targets that need to be drilled.

4. “Best” nearology - geographically close AND same geological structures AND supporting exploration work AND confirmation same deposit extends

This is when there is an extension of the same deposit.

This is fairly straightforward, sometimes deposits extend out from the imaginary lines set by “tenements” and straight into grounds held by other companies.

These situations are fairly easy to spot and are the best type of nearology plays.

In Summary

Entry level nearology: The exploration ground is in close proximity to a known deposit

Better nearology: The exploration ground is sitting on similar geological structures to the known deposit

Even better nearology: The exploration ground has supporting exploration work to indicate mineralisation exists

Best nearology: The known deposit extends into exploration ground



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S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

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