Barry FitzGerald: Why Tim Goyder's Minerals 260 could be the ASX gold market's next Capricorn

News.com.au

25-04-2025

'Garimpeiro' columnist Barry FitzGerald has covered the resources industry for 35 years. Now he's sharing the benefits of his experience with Stockhead readers.
The drill bit is turning again at the Bullabulling gold project near Coolgardie as the new owner of the 2.3 million ounce resource – Minerals 260 (ASX:MI6) – sets out to become a $1 billion-plus company in a hurry.
Last mined by Resolute Mining (ASX:RSG) back in 1998, when the gold price averaged less than $A500/oz, Bullabulling was acquired by MI6 earlier this year for $156.5m plus $10 million in MI6 shares from Zijin subsidiary Norton Gold Fields.
It was a remarkable deal given the Tim Goyder-chaired MI6 was a $30 million explorer at the time.
But the scale and quality of the Bullabulling opportunity – along with a rampant gold price –meant MI6 had no problems raising $220m in equity at 12c a share to settle the deal.
It has been left with about $50m to fund the 80,000m drilling program that has just kicked off (expect strong newsflow in coming months) in an initial push to return Bullabulling to production in the second half of 2028.
On its expanded capital base, MI6 is now a $280m company on Thursday's market price of 13c a share. So it has a long way to go to get in to the $1 billion-plus producers club.
There is no guidance yet on Bullabulling's production capability but analysts point to 120,000-140,000 ounces a year being possible. That would put MI6 and the Bullabulling project in 'Capricorn' territory.
That is a reference to Capricorn Metals (ASX:CMM) – now a $3.6 billion company on the strength of its (expanding) 120,000 ounce a year Karlawinda mine in the Pilbara and its Mr Gibson gold project.
Development work on Karlawinda got going in 2019 and first production was achieved in 2021. In the intervening period, Capricorn's market cap grew from $85m to more than a $1 billion.
Gold's move to record levels since, the expansion of Karlawinda, and the production to come from Mt Gibson, has helped to more than triple Capricorn's market since.
But the point is made – passing through the $1 billion-plus threshold for Capricorn was on the back of it achieving 120,000 ounce a year production of ow-cost production at Karlawinda.
Eveything to play for
So MI6 has everything to play for at Bullabulling, one of the biggest undeveloped gold deposits in Australia. Ahead of what comes from the drilling program – a resource update is expected in December – things have got off to a good start.
M16 paid $72 an ounce for Bullabulling's gold when the gold price was $A4309/oz. The last time Garimpeiro looked, gold was fetching $A5240/oz – an increase of 21%.
The thing is MI6 is confident the current resource of 2.3 million ounces is only the start of the story, given 60% of the holes drilled at the property in the past are only 50m deep or less.
Bridge Street Capital analyst Chris Baker said significant value could be added by the current 80,000m drilling program.
'If the MI6 geologists can expand the Bullabulling resource to over 3Moz, converting say 60% to reserves, an ultimate production target of 150-200kozpa could be envisaged,' he said.
He noted that there are few deposits in the Eastern Goldfields which offer that sort of the opportunity.
'At this size, it will certainly attract the attention of WA's acquisitive mid-cap gold producers,' Baker said.
Argonaut has initiated coverage of the stock, setting a 30c price target. Analyst Hayden Bairstow said the firm's assessment was that a development at Bullabulling could underpin an open pit operation producing about 140,000 a year.
'There is also significant scope for MI6 to materially expand the resource base, both at depth and along strike and this presents upside risk to our base case.'