• Gold explorers have struggled to find favour in a market increasingly obsessed with battery metals despite a strong underlying commodity price
  • Astral Resources MD Marc Ducler thinks the 1.3Moz explorer can break the mould after a positive scoping study on a 100,000ozpa operation at its Mandilla project near Kambalda
  • Ducler says funding will flow back into gold stocks, it’s just a matter of when


Barring a recent drop linked to a strengthening US dollar and high bond yields, gold has spent much of 2023 near record highs.

Yet gold explorers have received a cold shoulder from investors as battery metals, rare earths and curiosities like niobium and gallium have occupied their limited bandwidth.

While the Jetsons-like future portended by investing in commodities of the new world like lithium and all the rest may stoke a fire in the eyes of Musk acolytes, gold mines can still be major money spinners.

It pays investors to remember there is value outside the theme of the day, often well short of the cash that can be extracted out of the ground if access to funding is equal.

Take for instance Astral Resources (ASX:AAR).

The $60 million capped player is up 8.57% this month after the release of a scoping study last week for its Mandilla project in WA’s mining heartland of the Eastern Goldfields.

Located near the historic mining community of Kambalda, the numbers for the 1.3Moz explorer and hopeful developer were nothing to be sneezed at.

While scoping studies are very much early doors when it comes to economic assessments, Mandilla currently looks pretty tasty.

At a pre-production capex of $191 million, Astral plans to build a 2.5Mtpa carbon-in-leach processing plant that would churn out 845,000oz over a little over a decade at all in sustaining costs of $1648/oz on a $2750/oz gold price (currently around $2950/oz).

That includes 100,000ozpa at 1.3g/t from an open pit over a 7.4 year mine life ahead of 41,000ozpa from 0.5g/t stockpiles over the next 3.4 years, generating $740m in free cash flow at a 73% IRR, $442m NPV8 and nine month payback period.


The front of the queue

Many analysts think gold prices have a leg higher to hit as global economic and geopolitical uncertainty persists and gold’s status as a safe haven commodity comes to the fore.

Then there is the — last week cooled — hopes the US Fed will next year shift from rate hikes to cuts in a shift in the global financial playbook that would be beneficial for bullion.

Astral managing director Marc Ducler, who previously built and led high grade gold explorer EganStreet Resources ahead of its $68 million takeover by Silver Lake Resources (ASX:SLR), says it’s only a matter of time before money comes back to the sector.

“I firmly believe that flow of money will return to gold — whether that’s next week, next month, next year, it’s certainly going to happen,” he said.

“All we can do is position ourselves so that we are right at the top of the queue so that we get lifted a lot higher than everyone else.”

Ducler believes gold juniors are falling far behind the valuation metrics they would find in a market with a more optimistic outlook on gold stocks.

“If you describe the market as broken at the moment, as far as gold juniors, before it was broken, when you put out a study, you could expect to be valued at the low-end 20% of your future NPV,” he said.

“It could be around 30-40% of future NPV and then you had some companies that would be valued at 60-70% of their future NPV

“Or if you were Bellevue, you were literally valued above the value of your project.

“So at the moment, I’m valued at about 10-15% of my future value and I think we’ve got a long way to go to close that up and I’m of the view the market’s going to start to see that over time.”


Waiting out the tide

While the scoping study is the first step an explorer will take when they look to progress their resource into something with the hard data to support equity, debt finance and eventually a decision to mine, Ducler won’t put a date yet on when Astral is targeting those milestones.

“The last two mineral resource estimates we’ve been able to demonstrate the ability to add ounces at $17 an ounce just with the drill bit. So we can still generate a lot of value by drilling,” Ducler said.

“We are working on flora, fauna, waste characterisation, tailings characterisation, a lot of those things that can potentially take some time to get done so they are happening at the moment.

“When we look at our ability to add value, the recent results we put out at Kamperman which are just 14km south of Kalgoorlie, we’ve put nine drill holes into that this year but four of them have been better than 50g/m intersections.

“We had like 4m at 95g/t, we had 20m at 4g/t, 35m at 2g/t, a couple of 10m at 10g/t type thing. So there’s some really good results at Kamperman.”

That could mean higher grade feed to bolster the project as it heads towards stockpile processing in its latter stage.

While that’s going on from a corporate perspective, Astral is targeting a transformative next couple of years as well.

It has a largely retail shareholder base, but if Ducler and Co. can get more institutions on board and the market for gold developers flips, it will clear a path for the equity piece critical to funding.

“At 100,000ozpa, we are very confident that we will be able to attract that institutional support to then be able to march towards a DFS,” he said.


For whom the golden bell tolls

While last week’s study has shown Mandilla can be developed as a standalone operation, there are plenty of hungry mills nearby in Kalgoorlie which could do with an injection of fresh ounces.

Notably Evolution Mining (ASX:EVN) and Northern Star Resources (ASX:NST) are collectively spending billions expanding plants near Kalgoorlie.

Northern Star has also mothballed the Jubilee plant at its South Kalgoorlie operations, while private hands control the Lakewood and Greenfields Mills near Coolgardie and Chinese-backed Focus Minerals (ASX:FML) has recently refired its Three Mile Hill plant near Coolgardie.

But even closer to home is South African major Gold Fields, which is understood to be running short of open pit ore to supplement its high grade Invincible underground mine at the St Ives gold operation, the lifeblood of the town of Kambalda.

In a recent note Rawson Lewis Mike Harrowell noted while it is not the only potential partner in the district, a JV with Gold Fields could be an alternative way for Astral to bring Mandilla and its 1Moz Theia deposit into production.

“The plant that has the most spare capacity near to Mandilla is the Gold Fields St Ives plant,” he said.

“The Gold Fields website reports the capacity of the St Ives processing plant at 4.7Mtpa.

“The plant processed 4.817Mt in 2020 and 3.857Mt in 2022, part of which was low grade material from an old heap leach pad.

“In the first half of 2023, the plant was processing at a 4.1Mtpa rate. At face value, there appears to be 800,000tpa to 1Mtpa of spare capacity at St Ives, and more if the low grade reclaim component is replaced.”

Lowell Resources Fund CIO John Forwood also noted the proximity to Gold Fields and its St Ives operation, as he made Astral one of the first picks in our new column Ten Bagger.



Astral Resources (ASX:AAR)