Why Carnavale is ready to party with high-grade WA gold development

• Carnavale Resources has set its sights on becoming a gold producer at its high-grade Kookynie gold project in WA
• Mine plan includes 93,000oz at 3.1g/t, with a high-grade zone of 55,000oz at a mind-boggling 28.3g/t
• At current gold price, mine could spit out ~$300m in free cash 

Gold’s run beyond US$4000/oz has shone a light on dozens of small-cap stories that previously received little airtime.

As the price of the commodity has risen beyond $6500/oz, small gold plays once thought stranded have now been reborn as money-spinners that can generate outsized cash flows, preventing dilution and funding growth at the small end of town.

Developers are now the top-performing class of gold stocks, and another is set to emerge in short order in the overlooked Kookynie gold district, north of Kalgoorlie in WA’s rich Eastern Goldfields.

Earlier this month, Carnavale Resources (ASX:CAV) put out an updated scoping study on its 80%-owned Kookynie gold project, laying out a mine with a five year life producing 93,000oz at an average 3.1g/t gold at all in sustaining costs averaging $2466/oz.

That’s impressive enough before considering a portion of that is a “bonanza” zone that includes 55,000oz in just 60,000t of ore at a quite extraordinary 28.3g/t.

The scoping study lifted the undiscounted free cash flow expected from the project 126% to $237 million, with a 106% lift in IRR to 165%.

To put that into perspective, majors typically sign off on projects with an IRR of just 15%, albeit larger in scale and mine life.

That’s all at a gold prices of $5500/oz, long since surpassed.

“At the end of the day, when you put out the numbers, the economics, it’s extremely valuable,” Carnavale managing director Humphrey Hale said.

“It produces today – bloody hell – at six and a half thousand (dollar gold) over $300 million free cash, and the pits themselves are $150 million without the underground, so it’s a strong project for sure.”

Future proofed

Carnavale shares dipped on Wednesday in line with a crash in gold equities after the largest one day sell off in the gold price since 2020.

But it’s worth noting prices remain near record highs, and the superior grade of much of Carnavale’s Kookynie resource means it would make significant cash flows even if gold were to be cut in half.

“This project would really work in a $3000 Aussie price environment because of the grade,” Hale said.

“You can’t take away from the fact that it’s 55,000 ounces at 28 grams. You could drive that to Kalgoorlie in the car.

“So it’s robust in a low price environment but it obviously makes lots of money in a high price environment.”

Located 60km south of Leonora, where Raleigh Finlayson’s Genesis Minerals (ASX:GMD) has built a fortress around two key gold processing hubs at Gwalia and Mount Morgans, Carnavale’s Kookynie is a two-pronged project including open pit mine developments at Swiftsure and Tiptoe and the underground beneath the Swiftsure pit.

Unlike larger developments in the region, it comes with a modest capital bill of just $3m, with a maximum capital drawdown of $21m in the first nine months of operations.

Once those costs are paid back in month 14 it’s all gravy.

The future development has been aided by the rising gold price, which makes haulage and toll treatment much more attractive for junior miners, and the development of a contracting sector specifically dedicated to getting small gold operations off the ground.

“We’ve got opportunities to do build your own team and contract mine it and then raise the capital that you need before you get profit happening,” Hale said.

“On the flip side, of course, there’s BML ventures. There’s MEGA. There’s MMS. There’s any number of mining contractors out there who are keen to joint venture where they lend their balance sheet.

“They supply everything from … the mining fleet to the technical staff to run it and we stand back and let them go.

“Our project is profitable so we could get a good outcome and balance it against the fact we could do it ourselves anyway.”

Optionality

Surrounding Carnavale and its 117,000oz at 4.1g/t resource is a host of active mills that are short on ore, or would benefit greatly from running its ultra-high grade material through their plants.

The most obvious are the two plants owned by Genesis – its Ulysses deposit too is just 10km up the road from Carnavale.

Then there’s Gold Fields’ Granny Smith, AngloGold’s Sunrise Dam, both known to be hungry. Beacon Minerals (ASX:BCN), Aurenne Group, Brightstar Resources (ASX:BTR) and Black Cat Syndicate (ASX:BC8) are among the smaller players with active or idled milling infrastructure within trucking distance, with Norton Gold Fields’ Paddington plant known to be a toll treater.

Alongside the toll treatment options, that also makes Carnavale potentially a super target for M&A, an outcome that tends to come with a premium attached for shareholders.

Genesis may be an obvious suitor given the proximity of its Ulysses mine, but the region is now teeming with explorers and junior miners hoping to emulate Finlayson’s success as well.

“There’s Ballard Mining (ASX:BM1), there is the Saturn Metals (ASX:STN) Apollo project that might like a bit of extra high grade to … put a CIL plant in there and change their fortune,” Hale said.

“There are quite a few groups that would like to add more … near-term resources to their coffers and improve their outcomes.

“Obviously, Gorilla Gold Mines (ASX:GG8) is a big one as well out there and Alex Hewlett and Kelvin (Flynn) have done a great job in getting their market cap up and having some exploration success.

“We don’t know what might happen in the future with regards to M&A and we have to keep in mind that the best value currently will be moving the project forward within the regulatory framework.

“Get the mining licence sorted, which requires a heritage agreement, do the water, hydro, all those elements and get it shovel ready so that we can either mine it ourselves, JV it, or entertain an M&A outcome.”

While Carnavale is very much a development story now, there are opportunities to add ounces through drilling additional targets along the same structure that hosts its existing resources, and nearby to historic 15g/t orebodies like the +300,000oz Cosmopolitan mine.

“We’ve got multiple other targets at Champions South, Valiant and McTavish North that we haven’t really challenged very much along strike on this major structure that hosts the Swiftsure and the Tiptoe deposits,” Hale said.

“So we’re fairly excited about the opportunity to be able to explore those and maybe add another plunging shoot that could add another 50,000 ounces of very high-grade plus the lower grade halos.”

Top team

The other thing which stands out for Carnavale is the quality of its team.

At CAV for five years, Hale is a well known name in the WA exploration industry, having worked as the exploration manager at Sunrise Dam, before becoming the founding managing director at tungsten play Wolf Minerals.

His board has been strengthened with the move of Andrew Beckwith, former exec director at WA exploration success story De Grey Mining (ASX:DEG), into the position of non-exec chair.

Before leading the 11.2Moz Hemi discovery at De Grey, Beckwith was at Westgold and was also a contemporary of Hale’s at AngloGold, when he played a pivotal role in the Coyote and Roadrunner discoveries in the West Tanami.

Current chair Ron Gajewski is moving to a non-exec director role.

On the ground, the team for the company’s upcoming bankable feasibility study – due in the second half of 2026 – is well stocked.

Key players from the De Grey team who didn’t move to Northern Star Resources (ASX:NST) with its $6bn takeover are on board.

They include ESG and heritage expert Bronwyn Campbell, study manager Rod Smith, Allan Kneeshaw, a key player in the Hemi find, with top flight contractors like Cube Consulting (mining), IMO (metallurgy) and Peter O’Brien (geotech) signed up for the study as well.

“It is really pleasing to be able to push the accelerator and get these people fired up and on the team,” Hale said.

Carnavale recently raised $3m in a placement at 0.35c per share, opening a non-renounceable 1 for 4 pro rata entitlement offer on Tuesday to raise a further $4.09m at 0.4c.

The entitlement offer is underwritten by Canaccord Genuity, with directors Gajewski and Beckwith committing to take up their full entitlement and sub-underwrite for an additional $500,000 each.

The offer can be extended as late as next Tuesday, October 28, to CoB Friday, October 31, with a 15:1 consolidation planned at the company’s AGM on November 27.

Carnavale has a current market cap of around $10m, but its supporter base includes institutions such as significant shareholder Lowell Resources Fund (ASX:LRT).

At Stockhead, we tell it like it is. While Carnavale Resources is a Stockhead advertiser, it did not sponsor this article.