NEW Research Article provides unique Geological insights into the genesis of our Katanning Gold Project, page-8

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Ausgold stands out

Ausgold (ASX:AUC) stood out for the pending release this month of a definitive feasibility study (DFS) into the development of its Katanning gold project, a three-hour drive from Perth in WA’s southwest Yilgarn region.

Katanning is one of the biggest undeveloped gold deposits in the country at 3.04 million ounces and has previously been scoped as having the potential to produce 136,000 ounces annually from open-cut ore sources for more than 10 years.

All-in sustaining costs were put at $A1,549 and preproduction capital costs weighed in at just under $300m. But those are 2023 figures and things will have changed, including the reserve component of the resource thanks to infill drilling work.

Gold prices have increased dramatically since those 2023 figures but so have construction costs. Having said that, the expectation is that the DFS will confirm Katanning as a very robust project with a super quick capex payback capability.

Take that and the scale of the project – production in the early years will be higher still because initial higher grade ores – and Ausgold’s $240 million market cap at 67c share looks to be on the mean side of things.

The company has the lowest resource ounce valuation metric of its peer group for no apparent reason, except perhaps the project has been in the works since 2010 under Ausgold ownership.

So the story of the resource growth since, and the pending release of the DFS leading into a development decision by year end, has been overlooked to a large degree by the market on a fatigue basis alone.

Katanning momentum

Momentum for Katanning is now the order of the day under John Dorward, Ausgold’s executive chairman who arrived on the scene in May last year.

A can-do sort of guy, Dorward was the former president and CEO of TSX-listed Roxgold, a West African gold group acquired by fellow Canadian Fortuna Silver Mines in an all-scrip deal worth $US884 million in 2021.

Two weeks in the job at Ausgold and Dorward put Katanning on the development pathway by pulling in $38 million in equity, including $1m from his own pocket.

That is being spent getting to the DFS stage and on a three-pronged strategy of establishing a bigger mining reserve component in the mineral resource estimate, extending the scale of the resource and making regional gold discoveries.

Morgans’ 94c target

Morgans’ veteran analyst Chris Brown has a 12-month price target on the stock of 94c.

“Our expectation is that delivery of a DFS broadly confirming or improving on the preliminary feasibility study, and employing a higher gold price, should prove positive for the share price,” Brown said.

He also flagged that a final investment decision on a project development – expected by the end of the year – should also prove positive depending on the terms of the project’s financing package.

‘’Our valuation will likely lift with the delivery of the DFS, and again when the final investment decision is taken,’’ Brown said.