• Black Cat Syndicate boss Gareth Solly says the junior is focused on drilling to validate the resources at its newly acquired Paulsens and Coyote gold projects
  • The company deferred a decision to build a mill at its Kal East gold project this year due to WA’s tight labour market
  • With the $44.5 million purchase off Northern Star, BC8 now has 2Moz of gold in resource

Want a microcosm of the lack of enthusiasm for gold stocks on the ASX? Look no further than $77 million capped juniorBlack Cat Syndicate (ASX:BC8).

It could not be said Black Cat’s 2022 has been uneventful.

The explorer, founded by some of the names that put Silver Lake Resources (ASX:SLR) on the map, has added two development options and boosted its resource base by 55% to 2Moz at 2.5g/t by paying $44.5 million to Northern Star Resources (ASX:NST) for its non-core Paulsens and Coyote mines.

On the flipside, after reporting a 302,000oz reserve for its Kal East gold project 30km from Kalgoorlie-Boulder, Black Cat deferred a decision to invest in a new processing facility in the centre of the Goldfields due to WA’s overheated labour and construction market.

Despite adding $140 million of installed infrastructure and 706,000oz, much of it at high grades, BC8 shares are down 38.14% year to date, ensnared in malaise caused by rising interest rates and lower gold prices despite the high levels of global inflation suggest the safe haven commodity should be supported by.

Paulsens in the Pilbara, notably, was the mine Northern Star made its name on, and Black Cat boss Gareth Solly is confident the old NST assets can provide a launchpad for a second junior.

Drilling at the high grade (54,000oz at 7.4g/t) Speedy deposit at Coyote, where BC8 wants to resume open pit mining, has already begun to validate its resource, with hits like 3m at 29.43g/t from 82m.

Diamond drilling has also been completed at the even higher grade Kavanagh deposit at Coyote, located on the WA side of the Tanami Desert, which includes 77,000oz at 13.5g/t.

Stockhead caught up with Solly to talk about the Paulsens and Tanami acquisitions and issues operating in WA’s current mining labour market.

 

Black Cat Syndicate (ASX:BC8) share price today:


 

You have the first drill results out from the Tanami project, pretty much lining up with what you expected. What does it mean for a company like yourselves to get as I guess, such a high grade deposit in your hands with a history behind it?

“All of our projects are high grade, so Kal East even has some high grade. And the reason we went after Kal East originally was focused in on when we IPO that old Queen Margaret gold mine, because it was historically very nuggety and high grade.

“And both Paulsens and Coyote are high grade, so we’re now validating that grade with our own drilling which is fantastic. And for us, it’s about the validation, growing the resource, proving it up, so we can get our studies out there and show that we can can turn it back on again.”

 

You had the reserve come out for Kal East just a little while ago, about 300,000 ounces. But at the same time you put a pause on the idea of developing that straight away. How difficult is the construction market for companies at your level at the moment?

“It is difficult, primarily because of the labour issues in WA. There’s cost inflation absolutely, but importantly, in and around Kalgoorlie, in particular, we were noticing the labour market just wasn’t there for getting construction up and going from the ground up.

“That is primarily the reason we’ve deferred and we’ve got options with the other two projects. They are less capital intensive, and they just need less people, therefore easier to manage in this type of labor market.

“So that’s where we’re going. That’s what we see is the benefit of these other projects with installed infrastructure already there.”

 

How long do you think you’re going to need to be drilling at Paulsen’s and Coyote to make a decision to refurbish the mills?

“So Coyote already has a half million ounces, five grams per tonne, so it’s a high grade and plenty of gold in the ground. We’re doing the work at the moment with the drilling to prove that up, but within what’s already there, there would be enough to start.

“So it’s about validation of that and getting that into a mine plan, converting enough to indicated and putting some growth potential in there.

“Paulsens again, we want to 1) validate what we’ve got, we’ve been doing a lot of work on the resource so we’re going to be testing theories and testing the potential for repeat targets there.

“So if that comes off, that would be a no brainer to restart pretty quickly. Otherwise, we’ll do the work on the existing resource to prove that up. So I think both of them have the potential in the next couple of years to be started. I wouldn’t want to do both at the same time, in this labour market, but certainly we’ll start one of those.

“Kalgoorlie also, we have potential and we’ve got options there to start. We don’t want to build a mill from scratch, but we can potentially toll treat there so we can still start off mining and start some cash flow. So all of our project give us options, we’ve got flexibility to get into production.

 

The Paulsen’s mine was one that Northern Star held for several years before first making decision to sell it. They seemed to be looking for that one new big discovery that could revitalise the operation. Is there potential there?

“I think you do want to make a discovery there at Paulsen’s. There’s certainly economic mineralisation already in the ground, they’ve left 200,000 ounces in the regional package.

“Under half of that is actually in the mine, but there’s a lot of growth potential there. So we will be testing that and growing that over the next six months while we’re drilling.

“We’ll also start the regional work and start probing for additional discoveries in the area. In terms of needing it, you could go and start it, but really, you would want to make a discovery early so that you can maintain that and keep it going.”

 

Gold has been a bit on the nose the last couple of years with investors. I’m sure you’ve felt that as well, that gold prices are pretty good, but at the same time gold equities are falling away. Do you think that we’re close to the trough in sentiment for gold miners?

“It’s a good question, Josh and I’m not sure I know the answer and I don’t know if anyone does. I think there is potential that hopefully we have got to that trough position.

“There’s certainly some light at the end of the tunnel, I think, and, for us, if we can generate strong news flow, and some really nice numbers out of our drilling, I think that will excite the market.

“Certainly, there’s been some positive sentiment towards some of the other gold players that have produced some good results recently. If we can get some of that, then we’ve got a long way to climb out of the trough.”

 

In general inflation is still very high, there’s obviously the issue with interest rates rising, but do you get the sense that the outlook is pretty positive for gold as a store of value?

“Absolutely and gold has always been a store of value. So in times of inflation, it’ll hold its value. And then I think if there’s more cash flow around, people will invest back into it as well.

“I think there’s always strong support for gold. I don’t think there’s much risk on the downside in price, I think there’s a bit of pressure on the upside. So I’m quite positive on it.”

The mill at the Paulsens gold mine, recently acquired by Black Cat Syndicate
The Paulsens mill carries a replacement value in the tens of millions. Pic: Black Cat Syndicate

 

Are there any other assets that could turn companies like yourselves from juniors into that mid tier because there’s a bigger gap now than there was a few years ago between the top few gold miners and the next leg down?

“So the opportunities do come up but they’re kind of rare. Gold’s rare anyway, right? So then getting a company to actually strategically make the decision that they’re going to upgrade themselves and pass on some of the projects that they started on (is tough).

“The big guys hold a lot of ground, they hold a lot of projects. For us these assets that Northern Star passed on, they’ve outgrown them, but they’re perfect for us as a junior.

“We’ll work them hard, we’ll go in with an exploration focus, we’ll make discoveries, and we can get them turned back on, I’m sure.”

 

How long were you in discussions with Northern Star over those assets?

“We looked at them for about a four-month period at the start of this year. So that was our period of DD. For us, absolutely there’s value there in the infrastructure, both of them have good infrastructure. Both of them have high grade resources, and we see potential.

“We’ve done our own models, we’ve had a look at them, and we’ve put our own mining shapes around things. So now it’s about validating what we’ve done and and proving up the value is there like we believe.”

 

What’s your replacement cost on the infrastructure?

“In this climate it’s probably a lot more. But at face value, I would say about $140 million to replace the infrastructure.”

“That’s the infrastructure, let alone the fact that’s a high grade resource, there’s likely to be more gold found in the area, it’s very difficult to actually define a high grade resource and the assets that have produced and made money in the past.

“That value is not really considered. If you value on resource, we paid about $60 an ounce and that’s good buying any day of the week. That’s counting nothing on the infrastructure and given what we know, and our experience when it comes to building things these days, yeah, there’d be a lot more value in them if you had to actually build them right now.

 

The toll treatment at Kal East, where are you at? Northern Star just announced they would shut the Jubilee Mill down, is that an option?

“Any of the mills could process our ore we’re in a great position being only 30km out of town, or 25km out of town for the likes of Myrhee.

“To be able to haul it to any of the regional mills, we can do that. There’s toll treatment options because there is capacity in the mills and there will be I think for some time yet.

“So look, we’re in discussions (with mill owners) and once we can we will disclose what we’re doing there.”

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