The AusGold Limited (ASX:AUC) Katanning gold project, on paper, should be on the radar of ASX investors, but it appears that there has not been too much chatter. The gold price has recently had a fall, but on a long-term basis, there do not appear to be any events that could make me think that a bearish curve is approaching.
The AusGold Limited narrative has captivated me for quite some time, as it has been around for a long period. Since 2019, I've repeatedly reached out to the company to discuss it on Coffee with Samso, but they appear to decline the invitation. At first glance, the Katanning gold project possesses all the essential elements to be a successful gold miner, yet I'm somewhat puzzled by the company's current position despite the excellent gold prices (Figure 1).
Figure 1: Gold price in AUD as of 10th March 2025. (source: Goldprice.org)
The gold price for Australian miners has never been this good. With an average AISC (All In Sustaining Cost) of AUD 1,400 in a recent report, it makes good sense to be digging for gold.
One of the key parameters that has intrigued me enough now to do a review is the arrival of new management. The changes in the Board and Management were made effective in an ASX release on the 11th of November 2024 (Board and Management Team Update).
Whether the Ausgold Limited dilemma is a management or a technical issue will have to be played out now. I am sure existing shareholders must be waiting for the resources to be converted to gold bars, and they must be feeling that the current gold price environment will make the most marginal project viable.
For those who want to skip to the parts of the review, please use the list below.
1.0 Ausgold Limited - 2025
Ausgold Limited currently has a market capitalisation of AUD $173.80M, and its share price is sitting at AUD $0.48 as of 11th March 2025 (Figure 2). There are approximately 356M shares on issue with AUD $19M cash in the bank. As we mentioned, management changed in November following a large placement of AUD $38M in August (Ausgold completes $38M Institutional Placement).
Figure 2: The Ausgold Limited share price as of 11th March 2025. (source: Commsec)
I believe that the introduction of new funds and management will significantly impact this situation. While a market valuation of AUD $173 million might appear out of reach for some investors, it remains an attractive margin when compared to a near gold miner like Meeka Metals Limited (ASX: MEK), which is close to starting operations with a market capitalization of AUD $306 million.
The cash in the bank is a good indication that funding will carry all the necessary studies required for a decision to mine. The next hurdle would be the upcoming DFS (Definitive Feasibility Study), which is supposed to be ready in the second quarter of 2025. That is just round the corner, and I would pretty much say that a positive outcome is predicted. Nobody goes out and does a 19,000 m drilling program and feels wobbly about their DFS.
2.0 The Journey—The Katanning Gold Project
Ausgold Limited joined the ASX on December 14, 2009, with seven projects located in Western Australia, Queensland, and New South Wales (Figure 3). One of these projects, Boddington South, would later become the foundation for the Katanning Gold Project in 2025.
If I recall correctly, the IPO environment wasn't ideal at that time, with the gold price hovering above USD $900. There had been steady growth since 2007 after it had dropped to around USD $240 in 1999.
Figure 3: The Ausgold Limited project locations at the 2009 IPO. (source: Ausgold Limited).
The beginnings of the Katanning project came on the 10th of August 2010 with the introduction of the Boddington South Farm In Agreement with the project, which came with a 241,800-ounce JORC gold resource. It was touted as a potential repetition of the Boddington Gold Mine, which had a resource of 26M ounces at that time.
A further consolidation of the area came in 2011 when another Farm-In Agreement was signed with Dominion Mining Limited to acquire a 60% interest in their Bullock Pool and Nanicup Bridge prospects, which were adjacent to the Boddington South Project (Figure 4).
Figure 4: Location of Bullock Pool and Nanicup Bridge prospects in relation to Ausgold's Boddington South Gold Project. (source: Ausgold Limited).
A resource upgrade was announced in August 2017, moving the global Katanning Gold Project to 785,800 ounces of gold with a resource of 20.98 Mt at 1.17 g/t gold. The main resource centered at the Jinkas South area, which has been the focus of the company's work.
Currently, the project has a Probable Resource of 1,280,000 ounces at 1.25 g/t and a Total Resource of 3,040,000 ounces at 1.06 g/t. Figure 5 below is taken from the latest presentation (February 2025). A complete description of the mineral resource is listed in an ASX release on the 4th of September 2023.
Figure 5: The total resource for the Katanning Gold Project. (source: AusGold Presentation).
The orebody does look a bit more coherent with the indication that there is a recovery of 90% with a CIL plant and an anticipation of a 10-year mine life. Looking at the one slide in the most recent presentation (BMO Global Metals, Mining & Critical Minerals Conference), the Katanning Overview page below in Figure 6 does give an impression that there is a coherent mineralisation.
Figure 6: The Katanning Gold Project mineralisation overview. (source: Ausgold Limited).
3.0 The Plan Ahead in 2025
The presentation in February 2025 (BMO GLOBAL METALS CONFERENCE, INVESTOR PRESENTATION) has stated a To Do List, which I feel is a fantastic way to gauge the potential hurdles and milestones (Figure 7). In some way, an investor's tick list of what is required to make the Katanning Gold Project work is ultimately in this list.
There are some big hurdles, and a good understanding of the magnitude of what will work and what will take a long time is important here. Timing is very important for projects such as Ausgold because the rising gold price will attract increasing costs and competition for attention from funding and market appreciation.
Figure 7: The Things To Do list for Ausgold to get the go-ahead for the Katanning Gold Mine. (source: Ausgold Limited).
3.1 Definitive Feasibility Study
This is probably the easiest box to tick. As I have mentioned, most companies that go down this route will have a good idea of a positive outcome; otherwise, they would never commit to the cost of the exercise.
3.2 Permitting
The permitting process is one that has uncertainty clauses written all over the wall. The best example is the Bird In Hand Gold Project in South Australia, which is operated by Terramin Limited (ASX:TZN), and the McPhillamys project in New South Wales being operated by Regis Resources Limited (ASX:RRL). These are two projects that were refused approval by the government at the last hurdle after being encouraged by all stakeholders to proceed. It is safe to say that a lot of money was spent with the knowledge that it was a project supported at all levels of the government.
Figure 8: Permitting milestones for Ausgold as part of the approval requirements for the Katanning Gold Mine. (source: Ausgold Limited).
The process outlined by Ausgold in the presentation (Figure 8) has some items that may be open to a long lead time for the start of the project. For me, the Traditional Owner Engagement is the most critical. As I have not followed the story in detail, I do not have any idea how sensitive the area is. In addition to the traditional owners, if there are environmental concerns from the government side, that will be critical as well.
If I were to take a guess that the area looks like a farming history, the issues would not be too critical. However, as I have pointed out earlier, these matters are not so straightforward these days, so this would require a close watch over the period.
The other points highlighted in Figure 8 look to be straightforward, and it should be just a matter of ticking the boxes and keeping the community informed. I am sure that the residents in general will be happy for operations to occur, as it will bring a lot of commercial activities to the local area.
3.3 Land Access
I am a bit surprised that this is still an issue. At this stage, I would be thinking that the vendor holding out this long will be having a big smile on his face. One of the difficulties of a project of this nature, being so close to civilisation, is the dealings you will have with private landowners. In Western Australia, these issues tend to be less frequent, as most of the projects tend to be more remote.
I think the slide in the presentation makes its point, and my main concern is on the "Land access negotiations for balance of freehold land covering granted Mining Leases are ongoing" and the last point, "Plaints lodged with Mining Warden's Court for a determination on compensation payable to landholders for land covered by a majority of granted Mining Leases."
3.4 Resource Growth and Delivery
I think this part, Resource Growth and Delivery from Figure 7, is the least problematic for the company. I don't mean that this is a trivial issue; however, if the permitting and land access agreements do not get their boxes ticked, that is a deal maker. There is enough work on the resource to allow the mining and processing parts to begin, and the process of delivering the final solution is a well-trodden path that will be easily managed.
The BMO presentation has several slides to show the potential growth of the resource, which looks credible, but as I alluded to earlier, the critical part for Ausgold is now all about being able to break ground.
4.0 Financing the Katanning Gold Project
In this current market of a rising gold price and a world that is inflationary, this would be the easiest part of the process. If all the above issues are resolved, the money is already in the bank. In my previous post on the changing mood of the market, "2025 - The Year of The Golden Snake - Has The Market Catalyst Surge Its Head?", even with the turbulence created by President Trump, there is definitely more appetite to raise money, especially in the gold sector.
This year of the Snake, 2025, may well be the inflection point for the equity market, with the dust settling from the last two years of a bearish tone. The recent article from Bloomberg, "Gold Climbs as Investors Seek Safety Amid Tariff Flip-Flop," is a good example of the appetite for gold at the moment.
“That’s going to be a tailwind for gold,” said Stephen Jury, global commodity strategist at JPMorgan Private Bank, in an interview. Increasing talk of the possibility of a recession in the US will likely lead to an environment where rates and the dollar may head lower, according to Jury. “That’s going to set up a very constructive scenario for a higher gold price in the second half of this year.” - Bloomberg
The Trump administration's imposing tariffs will just drive up pricing, and it will be interesting to see if productivity increases or decreases over time. Old-school thinking is that the tariffs are a form of subsidies, and that promotes a decrease in productivity.
Former Treasury Secretary Lawrence Summers said Tuesday there’s almost a 50-50 likelihood of the US tipping into a recession this year due to a range of policy steps from the Trump administration that are undermining confidence.
Gold has advanced 11% this year, hitting successive records. The rally has been driven by fears about the disruption caused by the Trump administration, central-bank buying and speculation the Fed may cut interest rates further. Lower borrowing costs tend to benefit non-yielding gold.
Spot gold gained 0.9% at $2,916.17 an ounce at 12:16 p.m. in New York. The Bloomberg Dollar Spot Index slid 0.3%. Silver, palladium and platinum all advanced.
source: Bloomberg
5.0 Samso Concluding Thoughts
While working on this review, my understanding of the Ausgold business began to develop (Figure 9). Throughout my acquaintance with the business, I must admit that I hadn't focused much on the details of the project. I knew they had been drilling for resources for several years, which is a challenging period for shareholders, leading to the narrative of not realizing the value and, rightly or wrongly, blaming management.
I've often mentioned that timing is key, and for Ausgold, 2025 could be the year when the company's value fully matures. In our industry, there's a saying that the initial discoverer rarely reaps the rewards; it's usually the latecomer who receives all the recognition. I believe that the recent rise in gold prices has allowed the current management to benefit from the efforts of those who previously worked on this project.
Figure 9: Aerial view of the Katanning Gold Project. (source: Ausgold).
This is not to say that the new management waltzed in without effort. I am sure current management had to work to make the structure suitable for all concerned. The current size and the potential for resource growth will be the key to success. If all the requirements for moving forward are met, the road is much easier now for Ausgold than, say, two years ago.
At the moment, I see a couple of possibilities for Ausgold. The first is that they continue and progress to mining the Katanning Gold Project. The second is an M&A situation, but I feel that the size of the project may not allow this to be on the shopping list of many of the mid-tier or major players. Looking at the background of the current management, it does feel like the aim of taking Katanning to production would be high on their agenda.
5.1 Why Do I Like Ausgold?
The Ausgold story has been one of consolidation and patience. The journey that started in 2009 has created what the Katanning Gold Project is today. It has been a long journey, but it has been one that has not had any stumbles. The painfully slow generation of resources over the years is very different from some other companies that are trying to make headway in this gold-centric market.
The Ausgold rise to fame is very different from Kairos Minerals Limited (ASX:KAI) with the Mt York Gold Project, which has been an isolated project in the Pilbara for many years. Mt. York is another one of those isolated resources that has been neglected for decades while all the sexy metals made headlines. I am very wary of projects that never had the attention, and when the gold price starts heading up, the narrative is now that this can make money.
There is also the Callidus Resources Limited and the Dalgaranga Gold Mine disaster. I remember looking at these projects in 2019-2020, and I thought it was very marginal at that time, and there were many narratives that pointed to deficiencies in the business. Unfortunately, both these projects went south, and I am sure there are many unhappy shareholders.
A mining project's economic viability will not necessarily get better just because the underlying commodity price has gone up. Let's look at gold. In the 1990s, gold miners were mining happily at USD $450 an ounce, but today, a gold price at that range would not work. A project that failed at that time does not translate automatically to success in the new gold price.
The current gold price of USD $2,900 is still sending companies broke. There are still projects that will not work. Hence, my thinking is that if a project did not work in the past, it may not be a workable project even at today's price.
For those reasons listed above, Ausgold is looking much cleaner and lacks skeletons. As I pointed out, the permitting and land access need to be sorted, and assuming they all come into shape, Ausgold is about to shine. I hope this review will help readers start looking at the company and DYOR.
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