Kristie Batten: Theta moves towards gold production in South Africa

News.com.au

13-07-2025

One of Australia's top mining journalists, Kristie Batten, writes for Stockhead every week in her regular column placing a watchful eye on the movers and shakers of the small cap resources scene.
June was an important month for Theta Gold Mines (ASX:TGM), as it put all the pieces in place to build South Africa's next gold operation.
Theta owns 74% of the 6.1 million ounce TGME brownfields project, 370km northeast of Johannesburg, which is where South Africa's gold mining industry began almost 130 years ago.
The company ticked off a number of milestones last month on its path to production.
It received a credit-approved loan facility agreement and indicative funding terms for up to US$35 million from the Industrial Development Corporation of South Africa, which will form part of the funding for the TGME underground mine.
Specialist South African firm Moore Debt Advisory has been appointed to support the company through the process to secure commercial co-lenders.
Theta also made a decision to mine and raised US$4 million via a private placement to existing shareholder Hong Kong Ruihua Green Development, which will allow early works.
A report released by RaaS Research Group earlier this month pointed out that Theta traded below the average and median on an enterprise value per ounce basis when measured against 22 ASX developer peers.
'This suggests that the market capitalisation of Theta can materially re-rate should the company successfully enter production,' it said.
Also this month, veteran analyst Warwick Grigor, of Far East Capital, suggested Theta represented 'sound value'.
'Better and better'
Theta released a feasibility study for TGME in 2022 and an update is due in the current quarter.
It's unusual for a company to make a decision to mine before the release of the feasibility study, but Theta chairman Bill Guy told Stockhead the project was profitable at a much lower gold price than today.
The 2022 study covered the first four mines, Beta, CDM, Frankfort and Rietfontein, for a 12.9-year mine life to produce 1.24 million ounces of gold.
The peak funding requirement was forecast at US$77 million.
The 2022 study used a gold price of US$1642 an ounce and returned a pre-tax net present value of US$324 million and internal rate of return of 65%.
'Basically, we expect most of those numbers to improve by between 50% and 100%,' Guy said.
'We probably expect the all-in costs to go up a little bit, because South Africa has a sliding scale for royalties, and the peak capex will probably go up over US$80 million.
'There's no issue with profitability. It's just gotten better and better, so the project's very profitable. It has strong cashflow. Even at US$1642 it's going to make, over US$500 million in free cash, post-tax. We know that's even higher now.'
Site work underway
'We've just finished decommissioning the old plant site, getting ready for our bulk earthworks and civil, so we really want to start that next couple of weeks,' Guy said.
Equipment has been delivered to site and the quoting process for the engineering work and plant is underway.
Guy expects the earthworks to be completed by the end of the year.
'Once we've done that, then we're really only 12 months away from a gold bar,' he said.
Guy described the full-scale development process as 'plug and play'.
'Everything is built in the factory, inspected, dismantled and put back on the truck and trucked to site, so we don't have a big civil camp. We don't have all those extra costs,' he said.
Being a brownfields site, the existing infrastructure including roads, power and water, keeps capital costs down.
'Roads are incredibly expensive. Tailings dams are incredibly expensive,' Guy said.
'We have no office administration buildings. We have housing.'
Licence to operate
Last month, the company locked in a 13-year renewal of Mining Right 83 through to 2038, accounting for more than three quarters of the mine schedule under the 2022 study.
As per South Africa's Mining Charter, 26% of the project is owned by Black Economic Empowerment entities, comprising local community trusts, an employee trust and a strategic entrepreneurial partner.
'We spend a lot of time and energy on that social licence in the community – the community are our shareholders. They are part of the project as well,' Guy said.
'I think what Theta has done, which is quite unique, it really has built that social licence from the ground up, and that's how we really fight through the paperwork and everything else.'
The company quickly got the support of the provincial government.
'Because the community went out and asked for the mine. They signed petitions for the mine,' Guys said.
'They call it their mine, because they will actually benefit … so I think that's made a big difference.'