With the gold price heading into record territory recently – especially in Australian dollar terms – it’s time to look promising small gold producers. Here are two that look to be good buying opportunities for investors who are comfortable with the potential vagaries of resource stocks.
- Kingsgate Consolidated (KCN, $1.47)
Market capitalisation: $379 million
12-month total return: 29.5%
3-year total return: –4.8% a year
Analysts’ consensus target price: $3.40 (Stock Doctor/Refinitiv, one analyst)
Kingsgate Consolidated is a poster child for sovereign risk on the ASX, after a bruising decade. Back in December 2016, Kingsgate was happily mining gold at its world-class Chatree gold mine, an open-cut operation 280 kilometres north of Bangkok in Thailand, when the military regime that was the national government at the time ordered the shutdown of the country’s gold mining and exploration industry, including Chatree, over disputed claims of environmental damage. Chatree had produced 1.8 million ounces of gold and 10 million ounces of silver, from 2001 to 2016.
There followed years of separate legal battles between Kingsgate and the Thai government, and Kingsgate and its insurers, that were eventually settled. Kingsgate was allowed to resume processing operations in 2023, and the mine was officially re-opened in March 2023, with initial work focusing on Chatree’s substantial ore stockpiles, and refurbishing the two processing plants. Mining operations began again in October 2023, with initial work about 40,000 tonnes of ore that could be mined without blasting.
By May 2024, the plant refurbishment was completed, and mining operations restarted.
The company wants to restore Chatree to its annual production of 100,000–120,000 ounces. The two plants there are capable of processing 5 million tonnes a year, and the reserve (the part of the 3.4-million-ounce resource that can be mined economically), at 1.3 million ounces, can support nine years of production. Kingsgate has reasonable expectation of extending that, given that it is looking at more than 1,200 square kilometres of exploration potential across 17 active tenements within 20 kilometres of Chatree. Exploration so far has confirmed that the A Pit and surrounding area contain pockets of high-grade ore.
An updated resource estimate for the Chatree A pit area and surrounds is currently being developed and is expected to be published in the current quarter; in 2025, Kingsgate says it will conduct an updated resource estimate for the remaining Chatree ore body and near-mine prospects.
In the first quarter, to the end of September, Kingsgate produced 9,671 ounces of gold and 112,734 ounces of silver. Kingsgate’s production is unhedged, and fully exposed to the prevailing record gold prices.
Kingsgate also owns an advanced gold/silver development project, Nueva Esperanza, in the highly prospective Maricunga gold/silver belt in Chile. Nueva Esperanza is a feasibility-stage development program with a resource base (including ore reserves) of approximately 490,000 ounces of gold and 83.4 million ounces of silver, which qualifies it was the world’s sixth-largest undeveloped silver deposit.
Kingsgate has guidance in the market for production of 80,000–90,000 ounces in the current financial year (FY25), lifting that to 95,000–120,000 ounces a year in FY26–FY28. Given silver production of 500,000–600,000 ounces in FY25, rising to 550,000–750,000 ounces a year in FY26–FY28, the figure in gold-equivalent production is 86,000–97,000 ounces in FY25, increasing to 102,000–130,000 ounces a year in FY26–FY28. Kingsgate’s guidance on its all-in sustaining cost (AISC) of production is US$1,650 an ounce–US$1,800 an ounce ($2,462 an ounce–$2,686 an ounce at the current exchange rate of 67 Australian cents per dollar), coming down to US$1,400 an ounce–US$1,600 an ounce ($2,089 an ounce–$2,388 an ounce in FY26–FY28. That compares favourably to the current gold price of US$2,648 ($3,952) 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, including operating expenses, sustaining capital expenditures, and exploration expenses.)
- Black Cat Syndicate (BC8, 54 cents)
Market capitalisation: $240 million
12-month total return: 151%
3-year total return: 0.6% a year
Analysts’ consensus target price: 86 cents (Stock Doctor/Refinitiv, one analyst)
I wrote about Black Cat Syndicate in February, when the stock was trading at 19 cents, and it’s had a great year since then 3 small gold stocks – Switzer Report But Black Cat looks like it is only just getting started, with first ore mined at Kal East ahead of schedule, in July, and first gold doré (a semi-pure alloy of gold and silver usually created at the site of a mine, and then transported to a refinery for further purification) poured in October, also ahead of schedule.
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.
First, Black Cat planned 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 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.
In April 2022, the company 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. Black Cat 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 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.
But the first gold was targeted from Kal East, and specifically from the first of four mining centres there, namely Myhree, Fingals, Majestic, and Trojan. These formed the basis of Black Cat’s feasibility study, with life-of-mine production estimated at 4.8 million tonnes at a grade of 1.9 grams per tonne (g/t) of gold, for 302,000 ounces. In July, Black Cat announced that it had commenced ore mining at the Myhree open pit, part of the Kal East, achieving first ore ahead of schedule, and pouring first gold in October.
Black Cat says its three operations will be low-cost, high-margin producers, with estimated AISC figures of $1,724 an ounce for Kal East; $1,613 an ounce for Coyote; and $1,882 an ounce for Paulsens.
Financial information site Wallmine gives an analysts’ consensus 12-month price target of $1.00 for BC8 but does not give the number of analysts that contributed to that figure.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.
