‘Garimpeiro’ columnist Barry FitzGerald has covered the resources industry for +35 years.
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It is gold’s time to shine now that US interest rates will begin to backpedal in the new year. And as for lithium, exposure to quality exploration projects can still be the biggest value generator in town, even if prices for the battery metal are remain in search of a bottom.
Taking all that in, Garimpeiro went hunting during the week for a small cap junior that offered exposure to both gold and lithium exploration. He wanted the best of both worlds. He settled on a little thing called Ausgold (ASX:AUC).
It was trading mid-week at 2.8c a share for a market cap of $64 million. That might not put it in the small cap category. But it certainly puts it in the modest market cap camp given the scale of its flagship Katanning gold project in WA’s wheatbelt.
Assume the advanced gold project more than justifies Ausgold’s market cap, and the soon to kick off lithium exploration journey on the company’s big land position in the southern portion of the prolific Yilgarn craton can be seen to come for less than free.
Ausgold has been quietly plugging away at building the gold resource base at Katanning in recent years. It now stands as one of the biggest undeveloped open-cut gold deposits in Australia thanks to a 3.04 million ounce resource grading 1.06g/t gold.
Currently 2.42 million ounces is the higher confidence measured and indicated categories which has allowed Ausgold to get working on a potential project producing at an annual life-of-mine average of 136,000 ounces, with higher grade shoots in the first six years boosting annual output to 155,000 ounces.
The suggested internal rate of return is 46% and capital payback has been put at 20 months. The numbers are impressive for a $64m market cap company when viewed against the fancy valuations peer ASX gold companies are commanding.
It is a happening thing too with a definitive feasibility study (DFS) in to a development expected to land in the coming March quarter, meaning its release could dovetail nicely with the expectations of a rising gold market (UBS is tipping an average of $US2,085 in 2024, and $US2,200 in 2025).
Ahead of the gold DFS being released, Ausgold is introducing a near-term rev factor to its story by checking out the lithium potential of its major ground position in the southern Yilgarn, with the world’s biggest spodumene mine Greenbushes (Albemarle/Tianqi/IGO) off in the distance to the west, and Allkem’s Mt Cattlin off to the east.
Managing director Matthew Greentree fleshed out the new lithium leg story at the recent Resources Rising Stars Summer Series conference in the Eastern states.
“If you look at this region you’ve got the world’s largest lithium project at Greenbushes and Mt Cattlin to the east side.”
“There is some real prospectivity and what we are seeing is a gap. It is a knowledge gap, it’s not a geological gap in the mineralisation,” Greentree said.
“So we’ve gone out and mapped 2,500 sq km of greenstones and we engaged RSC consultants to help us with this (prospect) generative process. We have got 14 high priority areas and we have seen the rocks that are looking very prospective.’’
“The next step is to put in some drill holes,’’ Greentree said. An announcement to the ASX on the planned drilling program, likely late this year/early next year, can’t be far off now given Greentree’s comments.
It is one to watch out for given the potential for lithium exploration to create serious value in a hurry, as the success with the drill bit this year in the Pilbara by the likes of Azure (ASX:AZS) and Wildcat (ASX:WC8) has shown.
There is no suggestion of success in Ausgold’s upcoming lithium exploration program. But given the program is essentially a free ride on gold-backed scrip, it will be one to watch.
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.
