While Black Cat closes in on a restart decision for its Paulsens Gold Operations, it has reminded investors that it has another arrow in its quiver with a compelling update to the PFS for its Kal East gold project.

While some key elements remain unchanged or little changed from its 3 June 2022 Preliminary Feasibility Study – such as the initial production target of 302,000oz at 1.9g/t gold and the forecast average gold production of 56,000oz per annum – Black Cat Syndicate (ASX:BC8) has updated the study for the current cost and gold environment to give a much clearer picture of how the project stacks up.

Suffice to say, Kal East remains an attractive play in its own right.

In the update, forecast all-in sustaining cost ticked up from $1,510/oz to $1,618/oz, which is still firmly in the bottom half of the Australian gold producer cost curve.

The modest rise in pre-production capital from $82.7m to $94.8m (including contingency) would also have been of comfort to investors given the experience of many mining project developers recently where confessions of a +50% increase in capital costs are not uncommon.

When a gold price around current levels of $2,900/oz (up from $2,500/oz in 2022) is applied to the new cost base, it shows a big boost in estimated operating cash flow from $105.9m to $167.9m, which will in turn deliver an attractive internal rate of return of 44%.

This cashflow could go even higher with every $100/oz increase in the gold price above the study level increasing operating cashflow after all capital and before tax by about $27m.

The production estimates come with a high level of certainty given that 80% of the production target is based on very high confidence Ore Reserves of 243,000oz at 2g/t gold as well as the significant potential for quick growth in mine life from the current 5.5 years, as just 46%, or 8.2Mt at 2.3g/t gold for 599,000oz, of the current resource was considered.

Indeed, the company noted that not only were the remaining resources not included in the PFS, the study had focused on open pits with limited consideration of future underground potential.

Further growth could also be delivered by infill and extensional drilling given that the large Fingals Fortune deposit, for example, remained open in all directions and at depth.

“The updated Study demonstrates that Kal East is robust and generates strong cashflow. Attractive metrics are returned from less than half of the current 1.3Moz Resource base. The Resources included in the Study remain open with strong potential for additional Ore Reserves,” managing director Gareth Solly noted.

An emerging multi-operation producer

While the compelling numbers in the Kal East PFS would have a single project company charging ahead on the development path, Black Cat has other priorities when it comes to transitioning into a gold producer in 2024.

At the start of the week the company released the Restart Study for its Paulsens operation in the Pilbara which showed a low capital, low risk pathway to rapidly come back into production early next year.

The company said it expected to announce a potential investment decision on Paulsens “imminently” with its discussions with potential debt providers well advanced.

“Paulsens represents a logical starter operation for the company to build cashflow from a proven project with a short ramp up to gold production. Once Paulsens is up and running, we will turn our attention to building our other regionally strategic processing facilities at Coyote and Kal East potentially using internal cashflows.

“Our ambition to elevate Black Cat into a multi-operation gold producer is rapidly taking shape.”

This sequenced development plan gives Black Cat the ability to use internal cashflow to fund new developments across its portfolio of Paulsens, Kal East and the high-grade Coyote operation in the West Tanami.

Black Cat also noted a final investment decision at Kal East would make more sense when construction and accommodation conditions around Kalgoorlie improve following the recent approvals of the expansion of the Super Pit and Mungari gold mines near the town.

 

 

 

This article was developed in collaboration with Black Cat Syndicate, a Stockhead advertiser at the time of publishing.

 

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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