Welcome to Ten Bagger, where Lowell Resources Fund chief investment officer John Forwood gives us his take on a sector of the ASX resources market full of value.

This month, John tells us which slept on WA gold explorers could be ripe for the picking.


Gold is unloved. It’s a common theme across the market at the moment, where battery metals like lithium and rare earths have become the market darlings the precious metal was three or four years ago.

While prices in Aussie dollar terms are skirting around record highs of $3000 an ounce, enough to suggest producers should be making margins in the $1000/oz range, investors are currently giving the industry, and especially exploration plays, little attention.

“The explorers have been really unloved. What we saw last week was, in fact, a couple of explorers put out high grade results and got sold off over the day, which is pretty devastating to be destroying value with high grade drill results,” Forwood told Stockhead.

But it doesn’t need to be that way. One of the biggest concerns facing gold explorers, Forwood believes, is the capital hurdle which has seen developers experience cost overruns to get into production.

“I think Red 5 did three or four raisings during its development and commissioning (of King of the Hills), equity raisings at lower and lower prices so the market obviously hates that,” Forwood said.

“And when they see a new little company say ‘I think we’re getting close towards feasibility, thinking about development, we can do a standalone we’re looking at a couple hundred million to $300 million worth of capex,’ the market gets rather scared about that.”

But it doesn’t have to be that way. Forwood says value is emerging for companies in WA’s Goldfields with the scale and quality of resource to attract outside interest.


A premium example

The best example of that is Musgrave Minerals, one of Lowell’s investments, which attracted a $201 million takeover by mid-tier gold supremo Ramelius Resources (ASX:RMS) and left the boards of the ASX at 39c, a 457% rise over the past five years.

The bid came in at a 54% premium to the 60-day VWAP of Musgrave of 22.1c ahead of a previous offer from competitor Westgold Resources (ASX:WGX).

The prize for Ramelius was the 927,000oz Cue gold project and especially its 327,000oz, 10.4g/t Break of Day deposit, all within trucking distance of RMS’ hungry Mt Magnet mill.

As at June 30, Musgrave was the Lowell Resource Fund’s second largest holding at 6.7% after lithium darling Azure Minerals (ASX:AZS) (12.8%).

“If there’s a path for a company to avoid that big capital hurdle and blowing up the share register I think the market likes that,” Forwood said.

“Ramelius have been very acquisitive, they’ve done some really good acquisitions over the last few years and a lot of them have been acquiring ounces to feed their existing operations.

“And Musgrave is a classic example. I think it’s about 40km away, very, very truckable.

“Musgrave had high grade ounces, they’d just put out a PFS on a standalone operation, and then that triggered the takeover offer from Westgold but then Ramelius came in over the top, sweetened the offer by 10% and put a bit of cash in as well.”

Forwood said talking to Ramelius management, the hope is to be producing from Cue within 12 months.

“Which is really quick, much quicker than Musgrave could have done,” he said.

“That’s a really good example I think of how you can generate value and avoid this capital hurdle.

“Obviously Musgrave spent millions of dollars on drilling it out and they found high grade gold close to surface, which always helps.”


Four more

Musgrave is a great example of how value can be found where the rest of the market is not looking.

Lithium may be the hot play right now, but the Ramelius bid secured 50% upside and has made shareholders like Lowell significant investors in one of Australia’s top gold stocks.

“It’s definitely not sexy like lithium is at the moment, gold in the Goldields, but there’s value there,” he said.

“And gold price aside, it’s relatively low risk, even though a lot of these companies that we’re involved in still have a lot of exploration upside.”

Lowell has around 30% of its fund in the gold space and Forwood has picked out four more investments within its portfolio with the potential to make similar waves.



The first stock on Forwood’s radar is Astral Resources, owner of the Mandilla project near Kambalda in the heart of the WA Goldfields.

Significantly, the junior released a scoping study on its Mandilla open pit last Thursday and has since seen its shares pop around 15%.

“They’ve got a $70 million market cap, and pre tax NPV8 of $440 million based on their scoping study, and that’s a $2750/oz Aussie dollar gold price,” Forwood said.

“If you put in $3000 Aussie dollar gold that NPV pre-tax rises to about $580 million.

“Scoping studies can be pretty rubbery, (but) the Astral one I think has got a lot of good hard data in it and it’s probably more on the PFS side of a scoping study than the back of the envelope side.”

With Musgrave, Forwood notes, the takeover action was triggered after the PFS. Astral is in a good location. Not only is it close to the major mining hub of Kalgoorlie, it sits on the margins of South African giant’s Gold Fields St Ives operation where open pit ore has been dwindling in recent years.

“Austral have got 1.3 million ounces of resources. Most of them are at Mandilla, there’s about 100,000 ounces of resources a little bit further north at a little project called Feysville,” Forwood said.

“It’s very close to Gold Fields St Ives. And at the moment what we can see at St Ives is that they would definitely be interested in additional open pit ore.

“At Invincible, Gold Fields is transitioning from not much open pit ore for their mill to mainly underground ore. Getting the production out of underground it’s always harder than getting it out of an open pit.

“We think that there’s a pretty good synergy between Astral’s Mandilla and possibly Feysville, where they’re getting some really nice high grade results as well and St Ives.”


Astral Resources (ASX:AAR) share price today



Lefroy Exploration drew some serious interest from the market a couple years ago with its Burns porphyry discovery, a large low grade deposit unusual for the WA Goldfields that contains 58,000t of copper and around 500,000oz of gold.

It already has Gold Fields on board as a major shareholder, with a JV to boot over ground around the Lake Lefroy and Lake Randall area.

But of potentially greater interest is the recently acquired Location 45 project near Kalgoorlie from international royalty giant Franco Nevada Corporation.

Forwood describes it as a “quite amazing deal”. The project was held by Australia’s second biggest gold miner Northern Star Resources (ASX:NST) after it bought Westgold’s (ASX:WGX) South Kalgoorlie Operations in 2018.

“Dioro had it back in the 2000s. They had it under license from Franco Nevada (and Australian Mines) and then it ended up with Northern Star under a 10 year licensing deal, where Northern Star basically agreed to pay Franco Nevada a 1% royalty and that was it,” he said.

“But Northern Star had been distracted by all sorts of other things and then the 10 years came up and Franco said oh look if you want to renew this for another 10 years, that’d be great but we want to take the royalty from 1% to 4%.

“Four per cent sounds like a lot, but the unusual thing about this project is it’s actually on freehold land with private mineral rights, so there’s no state royalty.

“So that means most other projects in Western Australia pay a 2.5% gold royalty. This project pays zero to the government but it’ll pay 4% to Franco Nevada.”

In one part of Location 45 is the Goodyear nickel deposit, containing ~15,000t of nickel metal at 3.8% Ni, described by Forwood as “potentially another Carnilya Hill”, referencing a 3% plus nickel deposit in the Kambalda region which historically produced around 50,000t of nickel metal.

But the gold bounty — 500,000oz at 1.8g/t gold — may be even more impressive.

Gold Fields’ presence on the Lefroy register adds another layer of excitement.

“Their major shareholder is Gold Fields, which we understand needs ore.

“For a $30-odd million dollar market cap — Lefroy have just raised six million bucks — we think that looks pretty interesting.

“There’s no economics around it at the moment, but there’s a very clear route to monetising and quite quickly monetising it.

“You can drill tomorrow, because it’s on this freehold land so you’re not subject to the Mining Act.”


Lefroy Exploration (ASX:LEX) share price today




Carnavale Resources is drilling north of Kalgoorlie near historic Kookynie, a ghost town known for its remote pub and the watering hole’s resident ex-racehorse Willie.

Flying under the radar, it has made some stellar high grade hits at the McTavish East prospect near the historically mined Cosmopolitan gold mine, which between 1895 and 1922 produced 331,000oz at 15g/t.

Carnavale’s plan is to truck that ore to a nearby processing plant, and as Forwood points out there are plenty of options, with Genesis Minerals’ (ASX:GMD) Gwalia and Mount Morgans plants the obvious options.

“There’s three or four hungry mills in that area and Carnavale have drilled these high grade hits, three to six metres at plus 50 grams a tonne,” Forwood said.

“And it looks like it’s developing into a shoot that potentially has a couple of hundred thousands ounces of super high grade in it.”

If it hits a grade of over 10g/t like Musgrave’s Break of Day or Spectrum Metals’ Penny discovery, both now in the hands of Ramelius, Forwood says the potential ore can go pretty much anywhere in WA.

“We saw with Penny West and Spectrum, another takeover by Ramelius, they got taken over for something like $500 bucks an ounce of resource because they had high grade, around 300,000 ounces at 13 or 15 grams,” he said.

“That’s in production now and Ramelius are saying that’s just going to churn out cash.”

Among the best hits Forwood has seen from Carnavale include 6m at 79g/t, 4m at 78g/t and 5m at 24g/t.

“So you could definitely see a resource there potentially being north of 10 grams.”


Carnavale Resources (ASX:CAV) share price today



Saturn Metals (ASX:STN)

A slightly different prospect, Saturn Metals boasts the Apollo Hill gold project, a low grade open pit resource comprising 1.8Moz at about 0.6g/t.

Despite those low grades, Forwood says there are high grade zones at Apollo Hill, with Saturn having run the numbers on a heap leach operation, a processing method only sparingly employed in the WA gold space these days.

But Forwood says the metallurgy “is excellent”, while the high grade zones could appeal to other companies with mills in the region.

“For a market cap of $23 million at Saturn they put out a scoping study recently with an NPV7 pre-tax of $600 million, but they’ve got a big capital hurdle, like $300 million to get that big heap leach into production,” he said.

“But they’ve talked about a small scale pilot of 1-2 million tonnes, but also we think just being in the right area there’s some really nice exploration potential as well.

“There are other opportunities rather than the big project standalone that could happen out there.”


Saturn Metals (ASX:STN) share price today

The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.