The recent series of high-grade intercepts from Aureka (ASX: AKA)’s flagship Victorian gold projects, which are all outside current resource estimates and include 1m at 65.37g/t Au from 116.2m, including 0.3m at 109g/t Au from 117.2m, and 10.04m at 1.58g/t Au from 189.68m at St Arnaud, as well as 5m at 6.13g/t Au from 489m at Irvine, have continued to demonstrate the high level of confidence in the company being able to grow its 360koz resource into the 900koz outlined in its JORC exploration target. AKA is also solidly paving the way for a near-term development plan that will capitalise on a US$4,250/oz gold price, by selectively mining high-grade material and transporting it to processing plants in the region that are significantly underutilised – of which there are at least 3 currently operational and within trucking distance, and one that AKA just announced a deal with.
Australia is full of gold mining stories that started off small and turned into incredible operations. The 5.6Moz Ravenswood mine grew from a 250ktpa operation in the 1980s to 5Mtpa today, and has plans to expand to 12Mt, while $760 million market cap Black Cat Syndicate (ASX: BC8)’s Lakewood mill was a 300ktpa operation in 2007 and was upgraded to 600ktpa for $4 million before becoming the 1.2Mtpa toll-treating hub that it is today – which is set to soon grow to 1.5Mtpa. $140 million market cap Dreadnought Resources (ASX: DRE) finally announced its first step towards development with a modest 110ktpa ore processing deal through BC8’s other mill – Paulsens – where mill feed will be transported 330km.
$22 million market cap AKA just inked a deal with Core Prospecting, a group run by Kenneth Bush – the geo who took Southern Cross Gold (ASX: SX2) from a $31 million market cap at IPO to $1.3 billion today – and who is also AKA’s technical advisor. Core recently assembled and commissioned a 42ktpa mill in barely a year, followed by the granting of licenses for toll-treating and a large stack dry-tailings facility – and will now immediately start assessing the best and fastest way to bring St Arnaud into production using its infrastructure.
There is also $154 million market cap Kaiser Reef (ASX: KAU)’s Maldon Processing Plant, a 250ktpa mill that is tragically under capacity and an operation that KAU has declared serious intentions to become Victoria’s preferred toll treating facility. It currently operates at under 10% its nameplate figure, which is prior to any potential expansions that would be rapidly brought into action if more ore was regionally available – and is under 100km away from Comstock.
The closer AKA gets to production and the more it builds on its resource inventory, the more it should be able to keep adding premiums to its current $53/oz EV/Resource valuation, which is based on a $22 million market cap with $2.9 million in cash, equating to a $19.1 million enterprise value. It drops to $21.2/oz when factoring in the exploration target which will bring the Victorian gold portfolio to 900koz.
AKA has perfectly positioned its project portfolio to capitalise on a massive rebound in Victorian gold mining, and there is plenty of infrastructure in place to facilitate it. Wedderburn is currently only utilising a fraction of its capacity by processing material from Core’s Fiddlers Creek underground mine around 80km away, and the group is very keen on St Arnaud as a closer source of ore. Getting your foot in the door of production in the current gold climate can not only produce extraordinary cashflow, but also demonstrate viability that the market would subsequently be very interested in funding the expansion of.
Our last article outlined the thesis behind AKA continuing to drill out Irvine to build up a resource that the nearby Stawell Gold Mine eventually needs to acquire or start toll treating, given that it is just 15km away and operates around 75% capacity, while mining slightly above 2g/t ore from up to 2km underground. Owned by the powerful Victor Smorgon Group, Stawell operates an 850ktpa mill that is primed for expansion, and has historically produced 5.3Moz, of which 1.5Moz was produced from a lode that is almost identical to AKA’s Resolution lode. Irvine’s 304koz at 2.46g/t Au deposit begins at surface and has an exploration target for an additional 280-420koz at 2-3g/t, and the brilliant extensional drilling results that have been hit this year, such as 10m at 12.1g/t Au from 413m – are set to be factored into the upcoming resource update. AKA also just partnered with global gold miner and property investor RDI Mining to purchase $2 million worth of land that Irvine sits on, which will allow for significantly increased land access and drill program efficiency without taking away from exploration expenditure. You can read our initial take on AKA here.
Below is a map of AKA’s projects in relation to nearby processing plants, including St Arnaud being 45km away from Wedderburn and Irvine being 15km away from Stawell, as well as KAU’s Maldon mine:
Source: AKA
Images from the Wedderburn processing facility can be seen below, where Core Prospecting has laid excellent groundwork for expanding an asset that will be a great value extractor for St Arnaud ore:
Source: AKA
Source: AKA
The latest assays from Comstock are represented by a 30-50m wide shear zone with multiple faults, and known mineralisation has been extended by at least another 100m. High-grade drilling intercepts beyond the resource boundary from AKA’s 2025 drilling campaign can be seen below, along with previous standout assays that contribute to Comstock’s current resource:
Source: AKA
Mining St Arnaud Now Could Mean a Big Future
The 56.5koz resource that AKA has defined is an extension of the section that has previously produced an incredible 400koz at 15g/t Au, and serious headways into adding the extra 116koz that sits in its high-integrity exploration target have been made. Standout intercepts from earlier in the year include 6.9m at 4.24g/t Au from 422m including 0.75m at 18.6g/t Au from 422.1m, and 3.2m at 4.71g/t Au from 434.0m including 0.6m at 19.9g/t Au from 435.9m.
With selective vein mining, the 42ktpa capacity at Wedderburn could end up processing a much higher head grade than the stated 1.2g/t Comstock resource grade – and the prospect of upgrading its mill capacity portrays a serious amount of further upside. St Arnaud’s Comstock’s quartz reef systems have super high-grade areas that have recorded relatively thick intercepts over 19g/t Au, which have been present in and associated with a sulphide assemblage of pyrite, chalcopyrite, galena and sphalerite.
The section of St Arnaud that is currently being explored – Comstock – only makes up a tiny portion of the overall project, and the profit AKA could generate from a small development would set up a much broader exploration strategy. When Ravenswood reopened in the 80’s, it was processing high-grade, narrow sulphide vein material through its 250ktpa mill – just like AKA plans on doing – before finding bigger systems at depth that led to the 5Mtpa expansion of the processing plant.
There are all sorts of innovative development solutions that Core may discover during its assessment. The excellent drilling results that AKA continue to produce have both built important high-grade inventory, and bolstered the thorough geological understanding of Comstock – making the next few months a key period of critical news flow where there should be some material value creating announcements.
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Disclaimer: This article is for informational and marketing purposes only, and does not constitute financial advice or a recommendation to invest. All opinions expressed are our own. We may receive fees or other forms of compensation in connection with the publication of this content, and may own shares in any of the mentioned companies. Please do your own research and seek professional advice before making any investment decisions.