With the gold price holding above US$2,000 an ounce – which corresponds to an Australian dollar price above $3,000 – the Australian gold sector is holding up well as an investment proposition, despite constant pressure on costs. Here is a look at what I think are three of the most promising companies in the gold area.
1. Spartan Resources (SPR, 46.5 cents)
Market capitalisation: $449 million
12-months total return: 178.1%
Three-year total return: 1.1% a year
Estimated FY25 yield: no dividend expected
Estimated FY25 price/earnings ratio: 46.5 times earnings
Analysts’ consensus price target: 75 cents (Stock Doctor/Refinitiv, 1 analyst)
Created from the merger of Gascoyne Resources and Firefly Resources last year, Spartan Resources is rejuvenating Gascoyne’s Dalgaranga mine north-west of Mt Magnet in Western Australia. Dalgaranga, which Gascoyne put into “care and maintenance” in November 2022, is a low-grade mine overall, with a mineral resource that stands at 21.15 million tonnes at a grade of 2.49 grams of gold per tonne (g/t) of ore, for 1.7 million ounces of gold.
But of the two deposits that comprise Dalgaranga, the Never Never deposit – discovered in early 2022 – does qualify as high-grade, with a resource of 5.16 million tonnes at 5.74g/t for 952,900 ounces, while the other, Gilbey’s Complex, has 15.99 million tonnes at 1.45 g/t, for 739,800 ounces.
Never Never is one of the most exciting newer gold deposits in Australia, not least because it is located less than one kilometre from Spartan’s existing 2.5-million-tonnes-a-year processing facility and the main open pit at Dalgaranga.
Never Never was discovered immediately north of the Gilbey’s open pit at Dalgaranga. Drilling is on-going at Never Never, high-grade intercepts continue to come – in November, it reported a set of drilling hits that went as high as a staggering 1,093 g/t – and there is visible gold below the current resource. It is highly likely that the resource will only grow. The operation will be mined both underground and open pit. The combination positions Spartan as a reasonably low-risk, high-grade gold producer with existing production infrastructure, which is a good set of attributes.
Spartan is also ramping-up the exploration around the Gilbey’s Complex open-pit in other directions, looking particularly at the Four Pillars and West Winds targets on the western side of the pit, and Sly Fox to the south. High-grade hits were reported from Four Pillars and Sly Fox earlier this month.
The company has told shareholders that it has “just scratched the surface” of the potential that could exist at Dalgaranga. Given our growing understanding of the mineralising systems and the larger potential we were beginning to see at depth at several key deposits as 2023 drew to a close, in 2024 it is keeping its strategy simple: “drill and de-risk.”
2. Black Cat Syndicate (BC8, 19.5 cents)
Market capitalisation: $60 million
12-months total return: –49.4%
Three-year total return: –34.1% a year
Estimated FY25 yield: no dividend expected
Estimated FY25 price/earnings ratio: 9.7 times earnings
Analysts’ consensus price target: 74 cents (Stock Doctor/Refinitiv, 1 analyst)
Listed on the ASX in 2018, Black Cat Syndicate holds a portfolio of three high-grade gold resources in the prime Western Australian gold regions of Eastern Goldfields, Eastern Pilbara, and the Tanami. The company is aiming to become a multi-operation gold mining company.
Black Cat started out in speculative style, listing to explore and develop a ground package it had built around the high-grade Bulong gold field, located just 25 kilometres east of Kalgoorlie in Western Australia. That ground is now part of the company’s wholly owned Kalgoorlie East gold project (Kal East), which contains a pipeline of projects including exploration targets and historic workings; most notably the Queen Margaret mine, which was closed in 1913 because of water – certainly not because it ran out of gold – and has not been mined since. Queen Margaret advanced ore reserves. was mined down to about 240 metres and produced about 96,000 ounces of gold at a grade – common for the time, but huge by current standards – of more than 1 ounce per tonne, or in modern terms, 31.1 grams per tonne.
But in April 2022, the company put a rocket under its ambition of becoming a mid-tier gold producer when it announced that it had bought two mothballed gold mines from sector heavyweight Northern Star Resources. Black Cat bought the Coyote and Paulsens gold operations in Western Australia for a down payment of $14.5 million, and $39.5 million in total.
The Coyote mine is located in the Tanami gold region, near the WA-Northern Territory border, which is host to several multi-million-ounce gold deposits including Callie (14 million ounces), the Tanami goldfield (3 million ounces), and Groundrush (1.7 million ounces). Since first production in 2006, the Coyote operation has recovered 211,220 ounces at a grade of 4.9 g/t of gold, from open pits and underground, for an average of about 35,000 ounces a year. Coyote was placed on care and maintenance in 2013.
The Paulsens underground mine is located in the Ashburton Basin in the Eastern Pilbara region. Since first production in 2005, Paulsens mine has recovered 907,344 ounces at a grade of 7.3 grams per tonne (g/t) of gold, for an average of about 75,000 ounces a year. Paulsens was placed on care and maintenance in 2017. BlackCat has lifted the Paulsens resource to 406,000 ounces at a grade of 9.5 g/t of gold (76% in the measured and indicated categories), which would make it one of the highest-grade gold deposits in Australia.
The Coyote resource currently totals 645,000 ounces at 5.5g/t of gold (including the Coyote Central resource of 430,000 ounces at 8.5 g/t of gold – also qualifying in the high-grade category.
Both Coyote and Paulsens come with gold processing facilities: The Paulsens plant is the only gold processing facility in the Ashburton region – and the only gold plant in a 400-kilometre radius – while the Coyote plant is the only gold processing facility in the Western Tanami region. This means both plants could potentially process ore for nearby discoveries.
In addition, Black Cat plans to construct a central processing facility near the Majestic deposit, about 50 kilometres east of Kalgoorlie. This plant would be used for Black Cat’s Resources as well as milling ore for third parties in the Kalgoorlie area.
In total, Black Cat has a gold resource of 2.5 million ounces at 2.9 g/t of gold, with a potential pathway to producing 150,000 ounces a year; and a milling capacity of 1.55 million tonnes a year, which the company says it could expand to 2 million tonnes a year. The plan that is being rolled-out is for a Paulsens restart in 2025 and a Coyote restart in 2026.
3. Westgold Resources (WGX, $1.86)
Market capitalisation: $881 million
12-months total return: 94.8%
Three-year total return: –4% a year
Estimated FY25 yield: 1.6% unfranked
Estimated FY25 price/earnings ratio: 6.1 times earnings
Analysts’ consensus price target: $2.63 (Stock Doctor/Refinitiv, 2 analysts)
Westgold Resources is the largest of the three companies – and the only one that is mining, making a profit and expected to pay a dividend this year. Westgold currently operates six underground mines, several open pits and three processing plants, in the Murchison region of Western Australia.
From those operations, in FY23 Westgold produced 257,000 ounces of gold at an All-In Sustaining Cost (AISC) of $1,999 an ounce, meeting the top end of its FY23 production guidance of 240,000 ounces–260,000 ounces, and at the midpoint of its FY23 AISC guidance of between $1,900 an ounce–$2,100 an ounce. (AISC is a figure that incorporates not only the “cash cost” of production but all the costs that allow production to be sustained.) The Murchison operations, which incorporate the Tuckabianna and Bluebird processing hubs, produced almost 80% of the gold total, accounting for 203,000 ounces, at an AISC of $1,971 an ounce.
Westgold mines two of Western Australia’s most famous past producers, the Big Bell mine (which has yielded 2.6 million ounces) and the Great Fingall mine (1.2 million ounces). In November last year, Westgold extended the life of Big Bell to 16, years after the board approved an expanded new model for the operation. The company says the expanded mine will provide baseload feed for the Tuckabianna and Bluebird processing hubs, while its ore will be supplemented with high-grade product from the Bluebird and Great Fingall mines that it is bringing onstream.
Westgold expects to extract 15.7 million tonnes of ore from the upgraded Big Bell for 1.5 million gold ounces, while grades are predicted to lift from 2.5 g/t gold to 3 g/t. First ore is set for the first half of the 2025 financial year.
Late last year, an operational reset at its Starlight deposit in WA’s Mid-West region was also a success, with more gold ounces than expected, and drilling recording a 10.1-metre hit at a hefty 443.74 g/t of gold. But an intercept from the Nightfall orebody – which sits adjacent to the Starlight lodes – put that in the shade, with a 0.27m intercept registering an astonishing 16,031g/t of gold. Nightfall should boost current production levels, although the extent of that increase is not yet fully clear.
In FY23, Westgold swung from a $111 million loss in FY22 to a $10 million profit and announced a formal dividend policy to pay out a maximum 30% of net profit, after clearing its hedge book to capture strong gold prices. Analysts expect strong profit growth in both the current financial year and FY25, to help this expected dividend flow. The company says it is debt-free, with cash, bullion, and liquid assets at $238 million at December 2023; further, it is unhedged and on track to deliver FY24 production guidance of 245,000 ounces–265,000 ounces. Analysts see healthy scope for share price growth.
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