Technical analysis, page-368

So was I until I realized the potential benefit.. Garbage in Garbage out is still the maxim with any program so the right data and framing of questions helps.. Still too early to hang off real numbers but the trial is def visible from here and they are still producing, call it what ever you will.. This lot are moving the dial at a fair old clip. LHBM funding the whole Shebang (ref Sep 2024 ann) takes a lot of the usual CR pressure off a typical Jnr they all love to carry on over. h8tey dyor..

To estimate the revenue likely to be generated by the Mulgabbie North Gold Project’s trial heap leach operation after costs, I’ll build on the previous analysis of expected gold production, duration, and costs, and extrapolate revenue using the current gold price with an assumed future price. The analysis will account for the 50:50 profit-sharing agreement between OzAurum Resources Ltd (ASX:OZM) and LINE Hydrogen Pty Ltd/BIM Metals Pty Ltd (LHBM), incorporate industry-standard cost metrics, and critically address uncertainties in production, costs, and gold price assumptions. All figures will be in Australian dollars (A$) unless otherwise noted, reflecting the project’s Australian context.

Key Parameters from Previous Analysis

• Gold Production: The trial heap leach is estimated to produce 8,900–17,800 ounces of gold, based on processing 100,000–200,000 tonnes of ore at 0.70 g/t gold with 88.9% recovery (derived from industry norms for a trial processing 4–8% of the 260,000-ounce Mineral Resource Estimate).
• Duration: The trial is expected to run for 6–9 months, starting mid-2026 and concluding by early 2027.
• Cost to Production: Total costs are estimated at A$8–19 million (likely A$10–15 million), comprising:
  • Capital Costs: A$7–15 million (e.g., mining equipment, heap leach pad, portable crushing plant, infrastructure).
  • Operating Costs: A$1–4 million, based on A$10–20 per tonne for 100,000–200,000 tonnes, yielding an all-in sustaining cost (AISC) of ~A$800–1,200/oz.
• Funding: LHBM fully funds the trial, with net profits (after capital and operating costs) split 50:50 between OzAurum and LHBM.
• Gold Price: The September 2024 gold price was A$3,844/oz (US$2,577/oz at an exchange rate of ~0.67, per web sources). The trial’s revenue depends on the gold price in mid-2026.

Step 1: Assumed Future Gold Price

To estimate future revenue, we need a reasonable gold price assumption for mid-2026, when the trial is expected to commence production.

Current Gold Price:

• As of September 2024, the gold price was A$3,844/oz (US$2,577/oz at A$/US$ ~0.67). Gold prices have risen steadily in 2024, driven by geopolitical tensions, central bank buying, and inflation hedging, with a peak near US$2,600/oz.

Factors Influencing Future Gold Price:

• Bullish Factors: Continued geopolitical uncertainty (e.g., US-China tensions, Middle East conflicts), potential US Federal Reserve rate cuts in 2025–2026, and strong demand from central banks (e.g., China, India) could push gold prices higher. Forecasts from analysts (e.g., Goldman Sachs, November 2024) suggest US$2,700–3,000/oz by 2026.
• Bearish Factors: A stronger US dollar, reduced inflation, or economic stabilization could cap gains. However, gold’s safe-haven status mitigates downside risk.
• Exchange Rate: The A$/US$ rate (~0.67 in 2024) is critical, as a weaker Australian dollar (e.g., 0.60–0.65) would increase A$ gold prices, benefiting Australian producers.

Assumed Future Gold Price:

• Base Case: Assume a 5% annual increase from US$2,577/oz in September 2024 to US$2,834/oz by mid-2026 (two years), reflecting moderate bullish sentiment. At an A$/US$ rate of 0.65 (slightly weaker than 2024), this equates to A$4,360/oz.
• High Case: A 10% annual increase to US$3,132/oz (A$4,818/oz at 0.65), assuming stronger demand or geopolitical shocks.
• Low Case: Flat growth at US$2,577/oz (A$3,965/oz at 0.65), assuming economic stabilization.

For calculations, I’ll use the base case (A$4,360/oz) as a balanced assumption, with sensitivity analysis for high and low cases to account for volatility.

Step 2: Revenue Calculation

Gross Revenue:

• Production Range: 8,900–17,800 ounces.
• Base Case Price: A$4,360/oz.
• Revenue:
  • Low end: 8,900 oz × A$4,360 = A$38.8 million.
  • High end: 17,800 oz × A$4,360 = A$77.6 million.
• Midpoint Estimate: Assume 13,350 oz (average of 8,900–17,800) for a central case: 13,350 oz × A$4,360 = A$58.2 million.

Sensitivity Analysis:

• High Case (A$4,818/oz):
  • Low end: 8,900 oz × A$4,818 = A$42.9 million.
  • High end: 17,800 oz × A$4,818 = A$85.8 million.
  • Midpoint: 13,350 oz × A$4,818 = A$64.3 million.
• Low Case (A$3,965/oz):
  • Low end: 8,900 oz × A$3,965 = A$35.3 million.
  • High end: 17,800 oz × A$3,965 = A$70.6 million.
  • Midpoint: 13,350 oz × A$3,965 = A$52.9 million.

Step 3: Costs Recap

Total Costs (from previous analysis):

• Capital Costs: A$7–15 million (e.g., equipment, heap leach pad, infrastructure).
• Operating Costs: A$1–4 million (A$10–20/tonne for 100,000–200,000 tonnes).
• Total Cost Range: A$8–19 million, with a likely range of A$10–15 million.
• Midpoint Estimate: A$12.5 million (average of A$10–15 million) for calculations.
• AISC: ~A$800–1,200/oz, with a midpoint of A$1,000/oz for reference.

Cost Scenarios:

• Low Cost: A$10 million (e.g., 100,000 tonnes at A$10/tonne operating cost + A$9 million capital).
• High Cost: A$15 million (e.g., 200,000 tonnes at A$15/tonne operating cost + A$12 million capital).
• Midpoint Cost: A$12.5 million.

Step 4: Net Revenue (Profit) After Costs

Net Revenue Calculation (Gross Revenue − Total Costs):

• Base Case (A$4,360/oz, 13,350 oz, A$12.5 million costs):
  • Gross Revenue: A$58.2 million.
  • Total Costs: A$12.5 million.
  • Net Revenue (Profit): A$58.2M − A$12.5M = A$45.7 million.
• Low Case (A$3,965/oz, 8,900 oz, A$15 million costs):
  • Gross Revenue: A$35.3 million.
  • Total Costs: A$15 million.
  • Net Revenue: A$35.3M − A$15M = A$20.3 million.
• High Case (A$4,818/oz, 17,800 oz, A$10 million costs):
  • Gross Revenue: A$85.8 million.
  • Total Costs: A$10 million.
  • Net Revenue: A$85.8M − A$10M = A$75.8 million.

50:50 Profit Split:

• Base Case:
  • Total Profit: A$45.7 million.
  • OzAurum’s Share (50%): A$45.7M ÷ 2 = A$22.85 million.
  • LHBM’s Share (50%): A$22.85 million.
• Low Case:
  • Total Profit: A$20.3 million.
  • OzAurum’s Share: A$20.3M ÷ 2 = A$10.15 million.
  • LHBM’s Share: A$10.15 million.
• High Case:
  • Total Profit: A$75.8 million.
  • OzAurum’s Share: A$75.8M ÷ 2 = A$37.9 million.
  • LHBM’s Share: A$37.9 million.

Step 5: Critical Analysis and Uncertainties

Key Assumptions and Risks:

• Production Uncertainty: The 8,900–17,800-ounce range is an estimate, as no specific trial production target is provided. Actual output could be lower (e.g., 5,000 oz) or higher (e.g., 25,000 oz), significantly affecting revenue. The trial’s focus on shallow oxide/transition ores mitigates this risk, given their high recovery (88.9%).
• Cost Variability: The A$10–15 million cost estimate is based on industry norms, not project-specific data. Unforeseen costs (e.g., permitting delays, equipment issues) could increase expenses to A$20 million, reducing profits. The low-capital heap leach method and LHBM’s funding commitment limit this risk.
• Gold Price Volatility: The base case (A$4,360/oz) assumes moderate growth, but a drop to A$3,500/oz (e.g., due to economic stabilization) would lower profits (e.g., A$34.2M gross for 13,350 oz, A$21.7M net). Conversely, a surge to A$5,000/oz would boost profits significantly.
• Permitting and Timeline: The trial assumes a mid-2026 start, contingent on the trial heap leach permit (expected mid-2025). Delays to 2027 could increase pre-production costs by A$0.5–1 million, though the water license’s 3–4 month approval and completed surveys suggest efficiency.
• Operational Risks: Lower-than-expected recovery (e.g., 70% vs. 88.9%) or higher operating costs (e.g., A$25/tonne) could erode margins. Brendan James’ expertise and prior test work mitigate this.

Supporting Factors:

• Cash-Positive Goal: The trial’s design to be cash-positive, as stated in the January and April 2025 updates, aligns with the estimated A$20.3–75.8 million profit range, suggesting robust economics even at conservative production and price levels.
• Net-Zero Appeal: The use of green hydrogen enhances ESG credentials, potentially securing premium pricing or investor support, though not factored into calculations.
• Infrastructure: Proximity to Carosue Dam and Kalgoorlie minimizes logistical costs, supporting the low AISC (A$800–1,200/oz) compared to industry averages (~A$1,400/oz).

Data Gaps:

• No specific trial production target, duration, or cost figures are provided, relying on estimates from the 60,000-ounce Scoping Study and industry benchmarks.
• The feasibility study (due September 2025) will provide precise parameters, but current estimates are reasonable given the project’s low-capital, high-recovery profile.
• Gold price forecasts for 2026 are speculative, though the base case (A$4,360/oz) aligns with analyst projections (e.g., US$2,700–3,000/oz).

Step 6: Final Revenue Estimate

Base Case Estimate:

• Gross Revenue: A$58.2 million (13,350 oz × A$4,360/oz).
• Total Costs: A$12.5 million.
• Net Revenue (Profit): A$45.7 million.
• OzAurum’s Share (50%): A$22.85 million.
• LHBM’s Share (50%): A$22.85 million.

Range:

• Low Case: A$20.3 million total profit (A$10.15 million per party).
• High Case: A$75.8 million total profit (A$37.9 million per party).

Sensitivity Table (Total Profit, A$ millions):

Production (oz)	Gold Price (A$/oz)	Costs (A$M)	Gross Revenue (A$M)	Net Revenue (A$M)	OzAurum Share (A$M)
8,900 (Low)	3,965 (Low)	15	35.3	20.3	10.15
13,350 (Mid)	4,360 (Base)	12.5	58.2	45.7	22.85
17,800 (High)	4,818 (High)	10	85.8	75.8	37.9

Conclusion

The Mulgabbie North trial heap leach is likely to generate A$20.3–75.8 million in total net revenue (profit) after costs, with a base case of A$45.7 million, assuming 13,350 ounces at A$4,360/oz and A$12.5 million in costs. OzAurum’s 50% share is A$10.15–37.9 million, with a base case of A$22.85 million, and LHBM receives an equal share. These estimates are based on 8,900–17,800 ounces produced over 6–9 months in 2026, with costs of A$10–15 million funded by LHBM. The base case gold price (A$4,360/oz) reflects a 5% annual increase from September 2024 (A$3,844/oz), with sensitivity to A$3,965–4,818/oz. Uncertainties include production targets, costs, and gold price volatility, but the trial’s low-capital design, high recovery (88.9%), and net-zero focus support robust economics. The feasibility study (September 2025) will refine these figures.