Latest news with #Ausgold
Herald Sun
4 days ago
- Business
- Herald Sun
Barry FitzGerald: Katanning ticks all the boxes for an Ausgold re-rate
'Garimpeiro' columnist Barry FitzGerald has covered the resources industry for 35 years. Now he's sharing the benefits of his experience with Stockhead readers. After its dramatic rise in the opening months of the year to record levels, the Aussie gold price has settled into a bit of a groove around the $5,200/oz level. Nothing wrong with that. It's a fantastic price and delivers fat margins to even our highest cost gold mines. And it is not to suggest that gold can't take off again and set new highs or fall significantly for that matter. The observation is that for the last six weeks or so the Aussie price has been as steady as it could be in these turbulent times. It means that share prices of ASX-listed gold producers and developers have also gone into a sideways trading pattern. Need to differentiate So more than has been the case in recent times when gold took off to record levels, the producers and developers now need to differentiate themselves from the pack with strong newsflow of the re-rating inducing type. It means that if the gold price continues to trade sideways, the stock involved has a reason to go higher. Alternatively, if the gold price heads south, the damage to the stock could be more limited than it would have been otherwise. Taking all that on board, Garimpeiro had a look at his calendar during the week to find which of the gold producers/developers have re-rating event(s) on the horizon. Ausgold stands out Ausgold (ASX:AUC) stood out for the pending release this month of a definitive feasibility study (DFS) into the development of its Katanning gold project, a three-hour drive from Perth in WA's southwest Yilgarn region. Katanning is one of the biggest undeveloped gold deposits in the country at 3.04 million ounces and has previously been scoped as having the potential to produce 136,000 ounces annually from open-cut ore sources for more than 10 years. All-in sustaining costs were put at $A1,549 and preproduction capital costs weighed in at just under $300m. But those are 2023 figures and things will have changed, including the reserve component of the resource thanks to infill drilling work. Gold prices have increased dramatically since those 2023 figures but so have construction costs. Having said that, the expectation is that the DFS will confirm Katanning as a very robust project with a super quick capex payback capability. Take that and the scale of the project – production in the early years will be higher still because initial higher grade ores - and Ausgold's $240 million market cap at 67c share looks to be on the mean side of things. The company has the lowest resource ounce valuation metric of its peer group for no apparent reason, except perhaps the project has been in the works since 2010 under Ausgold ownership. So the story of the resource growth since, and the pending release of the DFS leading into a development decision by year end, has been overlooked to a large degree by the market on a fatigue basis alone. Katanning momentum Momentum for Katanning is now the order of the day under John Dorward, Ausgold's executive chairman who arrived on the scene in May last year. A can-do sort of guy, Dorward was the former president and CEO of TSX-listed Roxgold, a West African gold group acquired by fellow Canadian Fortuna Silver Mines in an all-scrip deal worth $US884 million in 2021. Two weeks in the job at Ausgold and Dorward put Katanning on the development pathway by pulling in $38 million in equity, including $1m from his own pocket. That is being spent getting to the DFS stage and on a three-pronged strategy of establishing a bigger mining reserve component in the mineral resource estimate, extending the scale of the resource and making regional gold discoveries. Morgans' 94c target Morgans' veteran analyst Chris Brown has a 12-month price target on the stock of 94c. 'Our expectation is that delivery of a DFS broadly confirming or improving on the preliminary feasibility study, and employing a higher gold price, should prove positive for the share price,' Brown said. He also flagged that a final investment decision on a project development – expected by the end of the year - should also prove positive depending on the terms of the project's financing package. ''Our valuation will likely lift with the delivery of the DFS, and again when the final investment decision is taken,'' Brown said. The views, information, or opinions expressed in this article are solely those of the columnist and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article. Originally published as Barry FitzGerald: Katanning ticks all the boxes for an Ausgold re-rate
News.com.au
4 days ago
- Business
- News.com.au
Barry FitzGerald: Katanning ticks all the boxes for an Ausgold re-rate
'Garimpeiro' columnist Barry FitzGerald has covered the resources industry for 35 years. Now he's sharing the benefits of his experience with Stockhead readers. After its dramatic rise in the opening months of the year to record levels, the Aussie gold price has settled into a bit of a groove around the $5,200/oz level. Nothing wrong with that. It's a fantastic price and delivers fat margins to even our highest cost gold mines. And it is not to suggest that gold can't take off again and set new highs or fall significantly for that matter. The observation is that for the last six weeks or so the Aussie price has been as steady as it could be in these turbulent times. It means that share prices of ASX-listed gold producers and developers have also gone into a sideways trading pattern. Need to differentiate So more than has been the case in recent times when gold took off to record levels, the producers and developers now need to differentiate themselves from the pack with strong newsflow of the re-rating inducing type. It means that if the gold price continues to trade sideways, the stock involved has a reason to go higher. Alternatively, if the gold price heads south, the damage to the stock could be more limited than it would have been otherwise. Taking all that on board, Garimpeiro had a look at his calendar during the week to find which of the gold producers/developers have re-rating event(s) on the horizon. Ausgold stands out Ausgold (ASX:AUC) stood out for the pending release this month of a definitive feasibility study (DFS) into the development of its Katanning gold project, a three-hour drive from Perth in WA's southwest Yilgarn region. Katanning is one of the biggest undeveloped gold deposits in the country at 3.04 million ounces and has previously been scoped as having the potential to produce 136,000 ounces annually from open-cut ore sources for more than 10 years. All-in sustaining costs were put at $A1,549 and preproduction capital costs weighed in at just under $300m. But those are 2023 figures and things will have changed, including the reserve component of the resource thanks to infill drilling work. Gold prices have increased dramatically since those 2023 figures but so have construction costs. Having said that, the expectation is that the DFS will confirm Katanning as a very robust project with a super quick capex payback capability. Take that and the scale of the project – production in the early years will be higher still because initial higher grade ores - and Ausgold's $240 million market cap at 67c share looks to be on the mean side of things. The company has the lowest resource ounce valuation metric of its peer group for no apparent reason, except perhaps the project has been in the works since 2010 under Ausgold ownership. So the story of the resource growth since, and the pending release of the DFS leading into a development decision by year end, has been overlooked to a large degree by the market on a fatigue basis alone. Katanning momentum Momentum for Katanning is now the order of the day under John Dorward, Ausgold's executive chairman who arrived on the scene in May last year. A can-do sort of guy, Dorward was the former president and CEO of TSX-listed Roxgold, a West African gold group acquired by fellow Canadian Fortuna Silver Mines in an all-scrip deal worth $US884 million in 2021. Two weeks in the job at Ausgold and Dorward put Katanning on the development pathway by pulling in $38 million in equity, including $1m from his own pocket. That is being spent getting to the DFS stage and on a three-pronged strategy of establishing a bigger mining reserve component in the mineral resource estimate, extending the scale of the resource and making regional gold discoveries. Morgans' 94c target Morgans' veteran analyst Chris Brown has a 12-month price target on the stock of 94c. 'Our expectation is that delivery of a DFS broadly confirming or improving on the preliminary feasibility study, and employing a higher gold price, should prove positive for the share price,' Brown said. He also flagged that a final investment decision on a project development – expected by the end of the year - should also prove positive depending on the terms of the project's financing package. ''Our valuation will likely lift with the delivery of the DFS, and again when the final investment decision is taken,'' Brown said. The views, information, or opinions expressed in this article are solely those of the columnist and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.
Yahoo
25-02-2025
- Business
- Yahoo
Is Ausgold (ASX:AUC) In A Good Position To Deliver On Growth Plans?
There's no doubt that money can be made by owning shares of unprofitable businesses. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. But while the successes are well known, investors should not ignore the very many unprofitable companies that simply burn through all their cash and collapse. So, the natural question for Ausgold (ASX:AUC) shareholders is whether they should be concerned by its rate of cash burn. For the purposes of this article, cash burn is the annual rate at which an unprofitable company spends cash to fund its growth; its negative free cash flow. Let's start with an examination of the business' cash, relative to its cash burn. View our latest analysis for Ausgold You can calculate a company's cash runway by dividing the amount of cash it has by the rate at which it is spending that cash. When Ausgold last reported its December 2024 balance sheet in February 2025, it had zero debt and cash worth AU$19m. In the last year, its cash burn was AU$20m. So it had a cash runway of approximately 11 months from December 2024. That's quite a short cash runway, indicating the company must either reduce its annual cash burn or replenish its cash. You can see how its cash balance has changed over time in the image below. Although Ausgold reported revenue of AU$225k last year, it didn't actually have any revenue from operations. That means we consider it a pre-revenue business, and we will focus our growth analysis on cash burn, for now. Over the last year its cash burn actually increased by 32%, which suggests that management are increasing investment in future growth, but not too quickly. However, the company's true cash runway will therefore be shorter than suggested above, if spending continues to increase. Admittedly, we're a bit cautious of Ausgold due to its lack of significant operating revenues. We prefer most of the stocks on this list of stocks that analysts expect to grow. Since its cash burn is moving in the wrong direction, Ausgold shareholders may wish to think ahead to when the company may need to raise more cash. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. Many companies end up issuing new shares to fund future growth. By comparing a company's annual cash burn to its total market capitalisation, we can estimate roughly how many shares it would have to issue in order to run the company for another year (at the same burn rate). Ausgold has a market capitalisation of AU$162m and burnt through AU$20m last year, which is 12% of the company's market value. Given that situation, it's fair to say the company wouldn't have much trouble raising more cash for growth, but shareholders would be somewhat diluted. On this analysis of Ausgold's cash burn, we think its cash burn relative to its market cap was reassuring, while its increasing cash burn has us a bit worried. We don't think its cash burn is particularly problematic, but after considering the range of factors in this article, we do think shareholders should be monitoring how it changes over time. Taking an in-depth view of risks, we've identified 4 warning signs for Ausgold that you should be aware of before investing. Of course Ausgold may not be the best stock to buy. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
