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- We look at every advanced gold project in Australia...
We look at every advanced gold project in Australia...
Forget the producers. Today we're going down the value chain
Gold junior developers? Are we crazy?
There’s no surer way to lose your pants speculating in this industry than dabbling in junior gold stocks.
But with the precious metal effectively at all-time highs, it’s time to explore the universe of ASX gold developers and ask whether there is any value out there?
And to Respeculator’s point, is McPhillamys really as good as it gets when it comes to Aussie gold development assets now?
Aussie gold developers have seriously underperformed their producer peers in the last year.
At some stage in most commodity rallies, speculative money enters. And it goes further down the risk curve than the producers, as it always does. And maybe that’s why some of the sharp fund managers positioned in small-cap juniors are anticipating a re-rate.
There is a long way to go before smaller gold companies are priced at what we believe is an appropriate price given the value of the underlying commodity
So together, let’s assess the junior ASX gold universe. Because if it’s a useful exercise to us, it just might be helpful for you too.
Narrowing the search space
Starting with a CapIQ screen, our GoldCo criteria is:
Is listed on the ASX;
Has a development asset in Australia;
Has published a study on this asset any time since 2020;
Where the development project is the company’s core focus
And yes, some interesting companies get excluded from this refinement, we’ll get to that later. But here’s the numbers that matter.
AU Gold Development Projects - ASX-Listed
We have better things to do than fact-check every S&P error so there might be some inaccuracies, but let’s move on from that.
Some quick observations:
Look at the distribution of market capitalisation here. De Grey is literally 10x the second largest and it falls fast from there too
There’s a lot of crap and nuance here so we feel the need to provide commentary on each of the 23 entrants. Lucky you, hey?
The Nitty Gritty
The premier undeveloped gold project in Australia. Hence its market cap is in another universe vs any of the peers in this list.
We’ve talked about De Grey plenty on the podcast and since this article is about the more “bite size” opportunities, we’ll move down the food chain promptly.
De Grey’s underperformance vs producers has been noticeable - its share price has been flat for 3 years. As the gold price soars, any commissioning hiccups De Grey may encounter will have a lot more margin for error. As other market commentators have discussed, it remains a takeout risk, meeting the ‘Tier 1’ definition of some of the major gold miners.
Magnetic Resources (MAU) | Lady Julie
A relatively new entrant to the +1Moz WA gold juniors club, plus a shiny new PFS released earlier this year. 87kozpa open pit feed at nearly 2g/t Au over 9 years with some underground potential looks interesting.
The $93m pre-production capex for a 1.8Mtpa plant (and the rest!) looks extremely light on, but it likely doesn’t matter much given Lady Julie is within 10-35km of Genesis’ Mt Morgans (<1 year from restart), AngloGold’s Sunrise Dam and Gold Fields’ Granny Smith (running ~50% below capacity) mills. All three of whom are rumoured to be in a data room which strangely doesn’t have an end date.
The pre-tax NPV8 of $690m at $3,100/oz gold price may be hard for these Laverton miners to ignore. It’s a curious register with plenty of representation from Chinese shareholders so we hope the asset doesn’t simply end up land-banked (like Focus’ down the road…)
An interesting portfolio of development assets:
Paulsens: Restarting the ex-Northern Star “company maker” is the primary focus. Mill refurbishment is underway and a plan different to that of the last operator including airleg stoping for some of the development. Some in the market have concerns with the continuity of the high-grade Gabbro veins. Selective mining has commenced.
Kal East: An innovative way to kick-off production at Myhree without needing to contribute anything towards upfront funding. The downside risk worn by the contractor, MMS, who should have more confidence in their costs than anyone. Opportunity to roll-out the model across other pits in the project if successful, sharing the upside but protecting downside.
Coyote: Tanami restart project but the lowest priority in the pecking order.
Debt facility up to $30m expected imminently. While a ‘modest’ debt quantum, we’d feel more comfortable without it in the capital structure but that has implications for equity holders too.
By all accounts this company screens “cheap.” But like most things that screen cheap, there are usually good reasons why.
In Ausgold’s case, the company announced a strategic review last year (aka sale process?). We’re surprised a free milling, open pit gold asset of this size (+3Moz) in WA has yet to have any corporate action.
Why? That’s anyone's guess. There’s still some big boxes to be ticked that could be the difference between there ever being a gold mine in Katanning. The DFS has also been delayed a number of times, initially earmarked for Q4 CY2023, now H1 CY2025. That’s a bizarre delay when you think about it.
We’re not convinced that Ausgold has agreements with all the farmers to secure the freehold land it needs and there are rumours of holdout farmers that won’t budge. Hopefully the board refresh can move the dial where others haven’t been successful and there’s a Warden’s court should things get messy.
Brightstar (BTR) | Menzies & Laverton and Jasper Hills
Brightstar is one of the most active consolidators in the small-cap space and in the current equity environment, we think it’s a worthy strategy. Rovira has consolidated Kingswest’s Menzies project and more recently Linden Gold’s Laverton assets into the company. And as of today, consolidating both Alto and Gateway’s ground in the Sandstone region as well.
The existing studies on Menzies & Laverton and newly acquired Jasper Hills have a relatively low combined pre-production capex of +$30m for pre-tax NPV8 +$200m at A$3,000/oz gold price. At spot gold there’s torque.
Brightstar have an old plant at Laverton, but aren’t too far from Genesis’ Mt Morgans and Gwalia mill either. Menzies is also right in the vicinity of Ora Banda’s Sand King mine, which may prove a handy option for Ora Banda to fill the mill while developing Sand King.
While at an earlier stage, we find the Sandstone portfolio more interesting than the other projects and under new hands, hopefully Sandstone can advance at a faster pace too.
The classic +1Moz resource, producing ~100kozpa at ~1g/t Au for almost 10 years. Snooze? We’re not so sure.
The majority of the Mandilla mining inventory is located in one large open pit called Theia which keeps the mining logistics simple. And simplicity in mining should not be underestimated because complexity = unexpected costs. The resource at Mandilla has doubled in the last 2 years too.
But do we really need another processing plant in the Kambalda region? Mandilla is in St Ives (Goldfields) and Higginsville (previously Karora, now Westgold) mill territory, ~20km and ~50km away respectively.
Given its a ~1g/t Au orebody, it’ll depend on the cost of trucking + toll treatment over the life of mine (perhaps at <2.5Mtpa) to a local mill vs. cost of building a standalone, fit-for-purpose mill (albeit longer approval timelines etc.)
It is interesting that Gold Fields bid for Karora (as revealed in the transaction docs with Westgold) which may suggest a willingness to acquire nearby inventory to feed their St Ives mill.
Youanmi is one of those projects that has been around forever. “Refractory” Rob’s PFS is the latest study to hit the wires.
Its a sizeable refractory orebody, with the PFS outlining a 103kozpa production profile at +4g/t Au over ~8 years. Rox have opted for a gold-concentrate flotation circuit followed by CIL treatment of the float tail to produce gold doré (the prior study considered selling a gold con).
Despite all this, the post-tax NPV / capex ratio even at spot gold is still ~2x. The company reckons they’ll be able to get 50 - 65% of capex debt funded, which means they’ll need to raise >2x their current market cap in equity. We think it’s tough to see a sensible funding pathway for this one in the near term (absent a rocketing spot gold price). And there’s an eerily similar feel to the financing mountain at Rox to Rob’s last company, Bardoc.
London-based private equity group, Hawkes Point, is a 10% shareholder. Their patience in Ora Banda is finally paying off. Hopefully Rox will in time too.
If you didn’t already see Simon Lawson’s gold price updates on LinkedIn, Barton MD Alex Scanlon is also a reliable contributor... Just in case you need reminding.
Barton is not the only aspiring gold junior that has drawn comparisons to Capricorn’s Karlawinda project in a dedicated slide in its investor presentation (*cough* Ausgold *cough*).
Jokes aside, Barton’s Tunkillia in South Australia is one of the most recent studies to drop, and they were sure to essentially use spot gold as their base case gold price assumption!
The 130kozpa production profile for +6 years requires $434m in pre-production capex and pre-strip, with an NPV / capex ratio of ~1x at spot gold prices. We think more mining inventory to offset the chunky capex is needed to make this project a more realistic medium-term development.
In the vicinity of Westgold and Catalyst but the Davidsons are not waiting for a corporate action. Meeka is charging ahead on its own to get the 1.2Moz Murchison project into production.
The recent DFS contemplates a 44kozpa production profile over 9 years, with a restart of the Andy Well mill reducing initial capex to <$50m. Recent purchases of camp infrastructure and a ball mill to expand processing capacity at a fraction of DFS costs is good footy.
The restart won’t be without its challenges, and the mill feed will be coming from a number of (majority underground) deposits across Meeka’s tenure. Growth in open pit mining inventory at St Anne’s and Turnberry would be useful here.
Saturn (STN) | Apollo Hill
On the face of it, a 0.54g/t Au resource doesn’t tend to excite many, but again, at today’s gold price of +A$3,600/oz (almost A$1,000/oz more than what Saturn’s PEA was done at), it’s worth looking at Apollo Hill with fresh eyes.
A 10Mtpa heap leach processing facility is without precedence in WA and won’t be without its costs (+$300m capex) however with an NPV7 of ~$650m at A$3,000/oz gold price, this could make the spend more palatable.
Lion Selection recently chucked in another 5 bucks to take their holding to +19%.
Antipa (AZY) | Minyari Dome
Almost 2Moz of mid 1g/t Au dirt in the Paterson region ~50km from Newmont’s Telfer and Newmont / Greatland Gold’s Havieron, with Newmont also holding an 8.6% stake in the gold junior.
Given Newmont has put Telfer and its Havieron stake up for sale, this takes a bit of wind out of Antipa’s sails in the near term and raises questions on what Newmont will do with their Antipa equity interest in the long run (noting they exercised top-up rights in July though).
Should Telfer and Haverion land in the hands of a motivated, right-sized miner, then consolidation with Antipa could start to make a lot of sense so its worth keeping a close eye on that sale process.
The economics from the 2022 scoping study are modest, another ~1x NPV / capex ratio exercise (but at US$1,750/oz). We’re interested to see where the economics will land 2 years on with a higher gold price, more inventory (albeit higher costs as well) in the updated study expected later this quarter. If you remove the 3Mtpa plant and feed Telfer then obviously the capital intensity is a lot healthier.
Horizon merged with (saved?) Greenstone Resources earlier this year. As a result, they now have ~1.8Moz spread over +15 deposits across Kalgoorlie / Coolgardie, but the main reason for their inclusion is the recently released study on their biggest deposit, Boorara, which hosts 428koz at low 1’s gold grade.
This isn’t the first time they’ve done small toll milling campaigns from Boorara. The current opportunity is to produce ~50koz in just over a year, to be processed at the nearby Paddington mill. The study suggests they’ll pick up ~$20m free cash flow at A$3,300/oz, with FID announced this week and mining expected to commence later this quarter.
A timely cash grab to help fund similar style exercises across their portfolio. Perhaps not as interesting as developing one big +1Moz mine (vs. lots of smaller, scattered deposits) but hey, at this gold price, cash is cash.
Also of interest, Horizon has a 200kt allocation at FMR’s mill near Coolgardie for 8 months commencing in the December quarter signposted to treat their Cannon ore.
On to the “other” Horizon. Another (just shy of) 100kozpa at ~1g/t Au for ~10 years prospective producer with +$230m capex. Mining from over a dozen different open pits to get ~1g/t Au dirt seems like a lot of hard work for only a ~2x NPV / capex ratio at close to spot gold prices.
All operating mills are +100km away and ~1g/t Au dirt wouldn’t be able to economically truck that far away anyway.
The most reasonable scenario to us (prior to Brightstar’s corporate action) would’ve been to merge with nearby Alto Metals who has +1Moz at 1.4g/t Au in resource (unconstrained) to beef up the scale at a prospective consolidated standalone operation. It should be noted that some of Gum Creek’s resource is refractory which complicates things.
Horizon actually picked up ~8% of Alto over a year ago, so they’ve already got a head start. The logic for this deal is not new, so we suspect valuation, egos or self-preservation (or a combination of all three) have stalled this tie-up to date.
Brightstar’s move on Alto and acquisition of the gold rights at Gateway’s Montague East announced today now puts a big dampener on this enlarged standalone option. We’re not sure where this leaves Horizon unless they decide to add some competitive tension into the mix (but their own market cap will be a limiting factor here)…
Laverton is probably a decent project at A$3,500/oz. How many 4Moz resources at 1.7g/t Au are sitting out there in WA? There’s even a 1.45Mtpa mill out there that was refurbished in 2008 but has gathered a lot of rust since.
Unfortunately, FML (great ticker) is untouchable equity given Shandong owns 63% of the company and has lent Focus a further $100m more to prop up negative cash flow over the years - they restarted mining in Coolgardie, poorly.
For the entrepreneurial gold deal-makers, it’s sadly impossible to do a deal with the company too. Publicly, Horizon Minerals tried to buy Coolgardie in 2019 and Theta tried acquiring the company in 2021. Neither succeeded and plenty of others have attempted privately too. Maybe one day.
Superior (SPQ) | Steam Engine
A small, high-grade open-pit mining operation in Queensland, producing 70koz at 2.3g/t Au at a +5x NPV / capex ratio (at A$2,200/oz gold price).
At today’s spot gold price the ratio should be even better. Is it too good to be true? Maybe, the 2021 scoping study is based on a toll-treating basis only. And the details on a potential toll treatment partners are pretty light on: “a number of potential toll treatment plants exist in QLD that could accept the ore”.
We’d prefer to see the operation being able to work on its own first, with toll treatment being an upside scenario… which is why we’re pleased to see Superior is revising the study to include recent mining and met studies, updated financial inputs and evaluate a standalone processing scenario.
A good rule-of thumb to keep in mind: any study with a toll-treating base case is a ‘for sale’ sign on the company. For Superior, it’s been three years and no buyer so you’ve got to wonder why.
Medallion Metals (MM8) | Ravensthorpe
Another +1Moz gold junior whose share price has copped a bit of a beating the last couple years. The twist with Medallion is they’ve got a higher (majority open pit) gold grade compared to their peers, plus some copper and silver credits, with an orebody supposedly analogous to Silver Lake’s Deflector.
The recent gold price run makes the post-tax NPV7 of $547m at US$2,300/oz gold vs pre-production capex spend of $163m interesting.
Taking advantage of the recently closed Mt Cattlin lithium and Ravensthorpe nickel mines (both <25km away) to pick up some cheap infrastructure to repurpose for gold processing could add some spice to this story.
You would think that 881koz at 1.47g/t would be interesting. Unfortunately, Aurumin’s Sandstone resource is not a very friendly mining shape.
The study was done by the project’s previous owners, Middle Island in 2021. And you know the results are bad when the second bullet point on the announcement reads “The stand-alone FS economic outcome is marginal”.
Middle Island tried desperately to merge with their neighbour Alto but there was no interest from them. Aurumin picked up the project and maybe they’ll have more luck consolidating now that Brightstar will have Alto’s package.
Were you forwarded this email by someone else?
The <$15m market cap tail
Carnavale (CAV) | Kookynie (80%): very small but high-grade project that should be of interest to mid-tier miners in the region to add some “sugar” to their mills. Gwalia is the closest, Genesis has been plucking their share of regional projects lately. Ora Banda should do it but haven’t had any rope to do M&A yet. Brightstar might be a more likely acquirer given their apparent deal appetite
Matsa (MAT) | Devon: going mining at Devon (south of Laverton) later this year to try produce ~39koz for ~$50m FCF at A$3,000/oz. Also have Fortitude and ex-Saracen Red October assets in the pipeline
Vertex (VTX) | Reward: small-scale mine but low capex too, secured a US$10m prepay so they’re serious about producing. It’s gravity gold with no cyanide so a big tick there. Hopefully their cost projections are accurate and they make decent money but small scale comes with risk
Alice Queen (AQX) | Horn Island (84.5%): frequently appears in our ‘Name and Shame’ segment for last-minute quarterlies. Don’t even bother looking at the gold project, it takes real skill to oversee share price decline of 99.95% over 4 years...
Cavalier (CVR) | Crawford: a small heap leach processing exercise with ~30koz <1g/t Au reserve. Quoting a pre-capex undiscounted cashflow on the front page of the PFS is stretching the friendship a bit…
Adelong (ADG) | Adelong: been living hand-to-mouth for a while now, but with spot gold ~A$1,000/oz above what was used in the study, this micro cap could have some torque for a relatively low capex plant refurb
Special Mentions
We limited our screen to projects with a recent study. There are plenty of earlier-stage projects with a gold resource that were filtered out. Of the earlier stage gold projects in Australia, these are the projects we are keeping our eyes on.
Alto Metals (AME) | Sandstone: +1Moz (unconstrained) near surface ounces which have progressed pretty slowly until now. The company is in play as part of a broader Sandstone region tie up by Brightstar and was previously the subject of a flurry of corporate interest (Goldsea, Middle Island, Adaman from 2019 - 2020)
Emmerson (ERM) | Tennant Creek: up in the top end of Oz, their JV partner is constructing an 840ktpa CIL plant to unlock some jointly owned small, high grade deposits, first production expected in late 2025
Gateway Mining (GML) | Montague: +500koz that abuts Horizon Gold tenure and ~50km from Alto’s Sandstone asset. Brightstar is acquiring the gold rights at East Montague, along with Alto as part of a Sandstone region roll up
Great Boulder (GBR) | Side Well: ~670koz in the Murchison, close to lots of gold mills. Mulga Bill has multiple lodes at different orientations spread across +1km, Ironbark smaller, but +3g/t dirt near surface
Great Southern (GSN) | Duketon: right next door to Regis’ mine of the same name in the Eastern Goldfields. There’s no resource on the Duketon project as yet, but some decent hits close to surface so far
Kairos (KAI) | Mt York: ~1.4Moz at ~1g/t Au in the Pilbara (not far from De Grey), scoping study expected this quarter. Sold some non-core ground at the project to Pilbara for $20m today
Kin Mining (KIN) | Cardinia: sold a big chunk of its Cardinia deposits to Genesis and did the most random merger with PNX Metals. Let’s see if they do anything interesting with +$80m cash and Genesis shares
Lefroy (LEX) | Mt Martin: big land package in the Kalgoorlie-Kambalda region, in St Ives and Beta Hunt territory. Acquired mineral rights to Mt Martin from Franco-Nevada project last year, +500koz at 1.8g/t Au
Maximus (MXR) | Spargoville: +300koz near Gold Fields’ St Ives gold camp, drilling hard at Wattle Dam with near-term production under review. Also a couple km’s from Astral’s Mandila…
Odyssey Gold (ODY) | Tuckanarra: another Murchison hopeful, 80/20 JV with Monument Mining on ~400koz at 2.5g/t Au. Ounces are spread across half a dozen pits but lots of processing optionality in the region
Ora Gold (OAU) | Garden Gully: small, high-grade, open pit in the heart of the Murchison, strategic alliance secured with Westgold earlier this year to process the ore at Bluebird
Pacgold (PGO) | Alice River: high grade gold in northern QLD with a surprising amount of insto backing for a micro cap. MD resigned last month to “move onto new challenges”, maiden resource due this quarter
Prodigy Gold (PRX) | Tanami North, Twin Bonanza: almost 1Moz in the Tanami region in NT, doing more drilling to increase gold inventory and further met testwork
Rumble Resources (RTR) | Western Queen: a self annointed “Never Never lookalike” a stone’s throw away from Spartan. The ability to feed into a neighbour’s mill is TBD given its differing geology
Southern Cross Gold (SXG) | Sunday Creek: big high grade gold-antimony project in Victoria, with an exploration target of 1-1.6Moz AuEq at 7.2 - 9.7g/t AuEq, drilling 60km from now till Sep’ 2025
Spartan (SPR) | Dalgaranga: Never Never and Pepper alone stand at 1.87Moz at 8.65g/t, one of the largest, high-grade WA gold assets since Bellevue. Ramelius holds ~18% of Spartan as a “strategic investment”
Strickland (STK) | Yandal: primary focus on newly acquired Rogozna project in Serbia, but still spending time and 20,000m drill program on Yandal, ~250koz resource within 50km Northern Star’s Jundee
Tanami Gold (TAM) | Tanami (50%): they actually released a scoping study last year, but later retracted due to not complying with ASX Listing Rules…50% JV partner with Northern Star and APAC holds 49%
Warreidar (WA8) | Golden Range & Fields Find: ex-Minjar assets in the south of the Murchison being given a revamp under new ownership. Going hammer and tong at the drill bit
Yandal (YRL) | Ironstone Well - Barwidgee, Mt McLure: almost 500koz on granted MLs between Northern Star’s Jundee and Bronzewing mines. Gold Road also a major shareholder (17%)
Takeaways
It’s slim pickings. How many of the advanced development projects excite us? Truthfully, it’s slim pickings. There’s no Gruyere or Tropicana or Garden Well here. If developed, these projects will all carry at least as much risk as Warawoona or Norseman or KOTH did through commissioning. And only one of those has become a (mostly) success story so far.
It’s been tough going for explorers and developers the last two years, being ignored by corporates, the equity markets as a result, and many operating hand-to-mouth. BUT, the established miners can’t ignore them forever as their reserves deplete
For some undeveloped assets, we think value is yet to be attributed to projects with economic ounces that are on the near term pathway to producing cash. Think processing optionality, grade, met, strip ratio, approval pathways etc.
If you can’t truck, you’re f*cked. Perhaps this is a bit dramatic, but a gold resource is worth a hell of a lot more when it can feed existing, underutilised milling infrastructure. If the ounces are economic, the deal will eventually come. Until then, expect more toll milling and JVs as companies need to advance things. And it’s a valid point that this strategy has never really proven to be knock-out…
We think the failure of Calidus has changed the project finance landscape for the foreseeable future. Will Macquarie do another project finance gold deal in WA? This may leave only non-bank lenders (who can't hedge), which means companies will need to use more equity (appetite for which is struggling). All to say the barriers to fund a big capex bill on mediocre financial metrics got much harder…
If an asset has still got a post-tax NPV / capex ratio of 1-2x at current spot gold, park your near-term development hopes until the next cycle. It’s just a call option until then
Take study numbers with a grain (or in some cases, fistful) of salt. Get more confidence with less complex mining methods. Small-scale production (~40kozpa) is notoriously hard to execute profitably
To cap it off, there’s a lot of gold juniors that probably shouldn’t exist. Slow progress with mediocre assets will kill shareholder value one dilutive capital raise at a time…
Everyone is too scared of investing in Africa. But the average African gold development assets are in a different league and M&A outcomes are healthy (China can buy there still!). So it’s a trade-off between marginal projects in Australia (elevated execution risk) vs healthy projects in Africa (government rug-pull risk)…
Perhaps we’ll head over the ditch in a future note.
Disclaimer
Some of the stocks included in this note are held by members of the Money of Mine team. At the time of publication, Ally GC holds shares in Ausgold (AUC), De Grey Mining (DEG), Genesis Minerals (GMD) and Ora Gold (OAU). JD holds shares in Spartan (SPR).
All information in this newsletter is for education and entertainment purposes only and is of general nature only. The hosts of Money of Mine are not financial professionals. Money of Mine are not aware of your personal financial circumstances. Before making any investment decision, you should consult a licensed financial, legal or tax professional, along with considering any relevant Product Disclosure Statement. Money of Mine does not operate under an Australian financial services licence and relies on the exemption available under the Corporations Act 2001 (Cth) in respect of any information or advice given. Money of Mine strives to ensure the accuracy and currency of the information contained in this newsletter but we do not make any representation or warranty that it is accurate, reliable or up to date. Any views expressed by the hosts of Money of Mine are their opinion only and may contain forward looking statements that may not eventuate. Money of Mine will not accept any liability whatsoever for any direct, indirect, consequential or other loss arising from any use of information in this newsletter.
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