Closer drill spacing and SAM geophysics have led Kalgoorlie Gold Mining (ASX: KAL) to hit high grades at the Northern Lighthorse section of its flagship Pinjin Gold Project, with the prospect recording 22m at 1.58g/t Au from 145m, including 3m at 9.01g/t Au from 145m. This standout hole is around 450m north of the original Lighthorse discovery section and forms part of an excellent program where 15 of 19 holes returned significant gold mineralisation. There are numerous other assays that have hit the grades we were hoping to see from this campaign, such as 6m at 4.86g/t Au from 54m, including 3m at 8.82g/t Au from 55m, and 12m at 1.96g/t Au from 94m, including 8m at 2.27g/t Au from 94m. The recently completed 225 aircore hole campaign drilled 7,212m across the high priority, never-before tested Laverton Tectonic Zone Flexure to the east with 320m x 80m spacing, and while it is designed to drill through transported cover and detect anomalism – it is the same type of step-out program that hit supergene mineralisation in the original Lighthorse discovery hole of 17m at 4.81g/t Au from 48m, which catapulted KAL up over 400% to reach a $27 million market cap in February last year. It retraced to $14.5 million when we initiated that July while gold was US$3,300/oz, and ran to $36 million in October as KAL geared up to drill below the supergene during the hunt for high grade primary mineralisation. The company has just bolstered that goal and is currently aiming to do it again by continuing its program of drilling previously untested areas while doubling down and following up on the new high-grade hits – and it is trading at $0.022/share for a $10 million market cap. Pinjin is less than 25km away from Ramelius Resources’ (ASX: RMS) 1.4Moz at 1.3g/t Au Rebecca project, which lay dormant for decades with anomalous gold and shallow intercepts of 11m at 0.66g/t Au – that turned out to be right above a massive lode with outstanding hits such as 50m at 4.05g/t Au that was encased in an envelope as low as 0.2g/t Au. Gold appears to be decoupling from its inverse relationship to real yields, with potentially considerable upside from its already strong US$4,450/oz price if some of the long talked about drivers of demand continue to play out on a global scale.
Our last KAL article explained that the 19 holes would tighten drilling from the previous 100-150m x 80m spacing to as close as 50m x 40m, targeting the higher-grade structures feeding Lighthorse’s broad lower-grade zones, stronger grades at depth and further extensions north of the 1.1km of confirmed primary mineralisation. The program has now found high-grade primary gold at depth at several sections, strengthened the correlation between gold and geophysics and opened substantial new down-dip targets, while the next northern step-outs can be aimed directly at an east-shifted conductor that the two northernmost holes appear to have missed. All of our KAL coverage can be read here.
Gold’s inverse relationship with real yields has typically reflected the opportunity cost of holding an asset that pays no income, with higher inflation-adjusted bond returns normally drawing capital away from bullion. UBS recently noted that this relationship weakened after Russia’s foreign reserves were frozen in 2022, which prompted reserve managers to prioritise control of their assets over interest income. Central banks in emerging markets and sovereign funds have since increased gold allocations from 5-7% of reserves to 11%, which has acted as a significant driver of demand and positive price action despite higher real rates. Gold gained 7% while US five-year real yields rose more than four percentage points between March 2022 and October 2023, against a 55% decline implied by the earlier relationship. UBS argues that deteriorating US public finances and less reliable bond hedges have reinforced this shift, with fiscal concerns supporting gold even as they push borrowing costs higher. Falling real yields remain supportive, but rising yields no longer consistently outweigh demand for protection against sovereign risk, and the gigantic US$40 trillion American debt problem could turn into the disaster that many corners of the market have been claiming it is for many years.
This round of drilling’s repeated gold-bearing veining and shearing through very broad volumes of altered rock have led KAL to draw resemblance to the dispersed mineralised zones around the periphery of large gold deposits. Critical to finding what is hopefully a larger orebody is KAL’s new structural interpretation, with current sections now favouring steep easterly to vertical mineralisation parallel to the ultramafic contact rather than the previously interpreted steep westerly dip, creating more coherent targets beneath both northern Lighthorse and the southern discovery section. This is a paradigm shift that could be the key to unlocking the higher grade sections that KAL has been getting glimpses of.
Key mineralisation associations have also again been correlated to geophysics by demonstrating that the zones of strongest mineralisation are characterised by conductivity highs and contrasting magnetic lows. This was also shown during the last program even with the broad, lower grade hits, where it was also confirmed that the intensity of anomalism and gold mineralisation drops in areas of diminished conductivity. This is the case for both the northern and central sections of Lighthorse. Sub-Audio Magnetics (SAM) geophysics has an extensive history of being successfully used by major miners and explorers to discover gold mineralisation beneath cover, and the high resolution Total Magnetic Intensity (TMI) and Magnetometric Conductivity (MMC) datasets have formed critical parts of KAL’s exploration model. SAM has even been applied to much of the gigantic 9.5Mtpa, 10Moz Tropicana Gold Mine – further northeast past Pinjin – helping identify additional mineralised zones within the district. SAM has specific utility for mapping shear zones and sulphides tied to orogenic gold under cover, which is exactly what Pinjin hosts.
The latest results place high grade primary gold mineralisation on multiple sections across roughly 840m of Lighthorse and can be seen below, along with the magnetometric conductivity imagery that shows the main north-south ridge and its apparent eastward offset beyond current drilling:
Source: KAL
The high grade shoot inside a broad mineralised halo that KAL recently intersected can be seen below. It is hosted beside the contact of intermediate volcano-sedimentary rocks and an interpreted ultramafic unit with strong silica-sericite alteration, extensive quartz-pyrite-chalcopyrite veining and disseminated pyrite. The intercept remains open beneath current drilling and gives KAL a precise target to test whether the high-grade core strengthens, widens or repeats down-dip:
Source: KAL
Apollo Consolidated formed a solid understanding of how to find thick and high grade mineralisation by tracing shallow aircore hits, through to the RC drill holes below that contained anomalous gold because they had clipped the outskirts of primary mineralisation. A cross section of one part of Rebecca’s Jennifer Lode can be seen below, which shows transported cover akin to Pinjin on top of an oxide layer, and anomalous gold as low as 0.20g/t right outside an intercept of 50m at 4.05g/t Au:
Source: AOP
The scatter plot chart below shows the monthly gold price against US five-year real yields, with the red observations from March 2022 onwards showing gold trading well above prices previously associated with comparable US five-year real yields, illustrating the breakdown in that earlier relationship:
Source: Financial Times, Bhanu Baweja
With assays from the aircore program due over the coming weeks and KAL planning to immediately follow up its highly refined targets at Lighthorse, which have potential to not only record wider intercepts but also intersect some sort of main mineralised zone in an ideal orientation – there is a solid set of catalysts that should get the market’s attention.
Subscribe here to receive all of our coverage
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.