Kalgoorlie Gold Mining (ASX: KAL) has all the makings of a great Australian gold story. The company’s flagship Pinjin Project is shaping up to be a blockbuster discovery at grades up to 13.65g/t in the Laverton Tectonic Zone (LTZ), home to over 30Moz of discoveries right near Kalgoorlie in one of Western Australia’s most prolific gold regions – as the precious metal continues to trade around US$3,300/oz.
Assays are imminently due from a recently completed 4,730m, 99 drillhole campaign that tested a possible extension of the orogenic gold mineralisation system across 2.5km of strike – which would further bolster the multi-million ounce potential for the KAL-generated greenfield discovery.
In February this year, KAL made a groundbreaking discovery at its Lighthorse Prospect, where the company hit 17m at 4.81 g/t Au from 48 m, including 8m at 9.21 g/t Au from 52m – and with the hole ending in mineralisation. KAL already has a 76.4koz at 1g/t resource at Pinjin, so these outstanding grades and the prospect of the company having found an incredible system at the project is extremely exciting.
A follow up 16 RC drill holes across 2,446m were completed to an average depth of 153m, and at 100m x 80m spacing. This confirmed that the initial discovery did in fact hit a supergene blanket that was formed as a result of a primary orogenic gold system, which extends beyond the footprint of the initial confirmatory program and spells out significant size potential at and around Lighthorse.
One hole hit 9m at 3.52g/t Au from 58m, including 2m at 3.65 g/t Au from 58m, and then much further down hit 3m at 5.52 g/t Au from 133m, including 2m at 7.92 g/t Au from 133m. Another standout assay recorded 8m at 1.54 g/t Au from 56m, including 2m at 3.19 g/t Au from 56m.
Armed with a stronger understanding of Lighthorse’s mineralisation style, KAL recently completed a total of 4,730m across 99 aircore drillholes, which were designed to test strike extensions more than 1,400m to the north and over 1,000m to the south. If the same set up is seen, being an orogenic gold system beneath a supergene that is hidden under a veneer of transported cover, KAL could very well be seeing the early signs of a monster gold system.
What’s more, Pinjin is just 37km from Northern Star’s Carosue Dam mine that is operating at 73.5% capacity, 22km away from Ramelius Resources’ Rebecca project which is scheduled to go into production in 2027, and 12km from the Anglo Saxon mine that has an open pit resource of 157koz at 6.1g/t.
KAL controls over 22km of strike between Anglo Saxon and Rebecca – amongst a total 60km of strike in the southern LTZ – and the company recently hit their farm-in milestones that saw it complete the acquisition of a 75% interest in the key tenements at Pinjin.
KAL has also recently applied for five new exploration licenses that all fall within or sit adjacent to the southern part of the LTZ, which if granted would increase the company’s strike length from 60km to 115km and project size from 355km2 to 483.5km2.
KAL’s initial Lighthorse discovery hole catapulted the company to a $27 million market cap at $0.099/share, and it was able to complete a strongly supported $4 million placement at $0.06/share – cornerstoned by $1.5 million from one of Australia’s best fund managers – Regal Funds Management, increasing their ownership of KAL to 14.4%.
Regal were early investors in De Grey Mining (ASX: DEG) when the company was at just $1 million market cap – and were still shareholders when Northern Star snapped up DEG for $5 billion.
Despite proving that there is a high-grade, primary gold mineralisation system beneath the supergene, which is open in all directions and at depth – KAL has re-traced back to a $14.5 million market cap at $0.037/share, providing a compellingly discounted entry price relative to the placement and at a key value creation point.
We can see some of the standout hits from the project below, which show both the aircore discovery holes that hit the supergene, and confirmatory RC holes that hit the underlying primary mineralisation, as well as the planned aircore holes that KAL recently completed. It also highlights where the existing 76.4koz Pinjin resource is contained, at the Kirgella Gift and Providence prospects:
Source: KAL
At Lighthorse, gold mineralisation is associated with classic orogenic features, including quartz-carbonate veining, siliceous and sericitic alteration, sulphides, extensive bleaching, and strong supergene enrichment.
KAL also recently completed a high-resolution SubAudio Magnetic (SAM) geophysical survey across key sites across 9.5km2 of the Pinjin Project, which will deliver high-quality geophysical information that will help define gold mineralisation and anomalism trends. It’s a method employed by many major miners in the region to define high confidence targets.
A couple of cross sections below show the structure of the supergene, and the steeply westward dipping mineralisation style. It also displays the layer of cover that hides the deposit, which KAL was able to generate a brilliant plan that drilled right through it to make the discovery:
Source: KAL
A Classic Gold M&A Play for the Majors
Ramelius Resources (ASX: RMS) aggressively cemented its position in this region with the 2021 bidding war against Gold Road Resources (ASX: GOR). The takeover saw RMS acquire Apollo Consolidated (ASX: AOP) for it’s 1.1Moz at 1.2g/t Lake Rebecca Gold project for $181 million ($146 million enterprise value), implying a $132/oz acquisition price when the gold price was US$1,850/oz.
With the gold price at US$3,300/oz, and many major miners producing strong cash flow, even with underutilised assets – the gold M&A boom is likely just getting started.
Northern Star Resources’ (ASX: NST) Carosue Dam Operations (CDO) is home to a 4Mtpa conventional CIL plant that could certainly do with additional ore supply. It processed 2.94Mt of ore in the past 12 months, 2.905Mt the previous year – and 2.74Mt the year before that.
Almost half of this ore supply comes from open pit mining at grades that have varied between 0.8g/t-1.2g/t over the past year, and a significant amount of overall supply is sourced 45km north of the CDO processing plant – while Pinjin sits just 33km away. NST is also investing in the project’s long term infrastructure, having recently constructed an 8MW solar farm operation.
NST is debatably Australia’s most prolific player in gold M&A, and deposits of just a few hundred thousand ounces are enough to become an acquisition target for the mining major – especially in WA.
In June 2023, when gold was US$1,925/oz, NST paid more than $60 million ($41 million in cash and 1.5 million NST shares) for Strickland Metals’ (ASX: STK) Millrose deposit, which contained a 346koz resource at 1.8g/t Au.
The project is 30km away from NST’s Jundee Mill in Western Australia, which was acquired by NST in 2014. The mine was operating at just 60% capacity at the time of this acquisition, sourcing around 1.8Mt of underground ore to process through their mill that has a 3Mtpa capacity.
The transaction saw STK capped around $65 million after the deal was announced, but by November 2023, the company had risen to a $309M market cap as the market got excited about what management could do with the capital generated by the Millrose sale – especially seeing as they had another 257koz @ 1.4g/t across two other resources that were less than 60km away from Jundee. STK spent a total of $26 million on the Millrose project, which implies a discovery cost of $75/oz, around 18x KAL’s current discovery cost of $4.18/oz for Pinjin.
Given KAL’s market cap of just $15 million with a $6.4 million cash balance, and that a whole raft of assays from the high-grade Lighthorse discovery are yet to be factored into Pinjin’s 76.5koz @ 1g/t resource – a subsequent resource upgrade that makes the company an M&A target to the likes of NST would likely see the market re-rate KAL significantly higher – especially seeing as the management team have been internally generating their targets and making greenfield discoveries.
As the market keenly awaits the aircore drilling assays, as well as the SAM survey results – both of which will strongly inform KAL’s resource definition drilling plans – it’s worthwhile pondering the myriad of value-creating scenarios that could eventuate for Pinjin.
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