BMG: WA gold drilling started. Gold price rises after global chaos ensues?

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 29,123,810 BMG Shares and the company’s staff own 10,476,191 BMG Shares at the time of publishing this article. The Company has been engaged by BMG to share our commentary on the progress of our Investment in BMG over time. This information is general in nature about a speculative investment and does not constitute personal advice. It does not consider your objectives, financial situation, or needs. Any forward-looking statements are uncertain and not a guaranteed outcome.

USA launched attacks on Iran 36 hours ago.

Iran is retaliating by launching missile and drone attacks on US linked assets in several Gulf countries.

Chaos like this creates a flight to safe havens like gold and silver.

Gold is up 1.7% to US$5,320 per ounce in the first couple of minutes of trading this morning - just as we are pressing send on this email.

(The centuries-old “insurance” vehicle for market volatility proving itself yet again)

We are now in a gold market where the major gold producers are making record free cash, looking to acquire mid size producers or gold development projects...

And the market is finally prepared to re-rate the juniors with defined resources and exploration upside.

Our Investment, BMG Resources (ASX:BMG), owns 100% of a 518K ounce gold resource in WA’s Northern Goldfields region.

...amongst multi-million ounce mega deposits and two processing plants owned by majors.

And today, BMG kicked off a 10,000m drill program - the first major drill program on the deposit since the maiden resource back in 2023.

(source)

The previous drill results made us do a double-take - we think anything remotely close to those old results could bring a lot more market interest into BMG:

(especially that first one 57.5m at 5.73g/t gold from just 80m)

(source)

BMG’s drilling with the moonshot exploration theory to turn its existing resource into a discovery similar to the 2.1M ounce “Never Never” discovery made by Spartan Resources (taken over for $2.5BN).

(more details on the drilling program later in today’s note)

While drilling is ongoing, BMG is already thinking about production as well, with a “Scoping Study into a potential low-capex, fast payback mining proposal” due this quarter.

With gold at ~A$7,530 per ounce - “fast to production” seems to be a strategy working right now, especially in WA.

One ASX listed company, New Murchison Gold, started mining its ~280k ounce resource and is selling ore to $7BN Westgold Resources for processing at their plant ~36km away.

In October, from ore sales alone, New Murchison generated ~$41.6M in revenue...

New Murchison today is capped at $717M.

(source)

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

BMG’s project sits within trucking distance of two mills.

The closest is ~20km away and the owner, Wiluna Mining, is planning a $400M return to the ASX where the management team have publicly stated they are looking at “growth initiatives, and/or corporate transactions”. (source)(source)

Wiluna Mining has already signed an MoU to toll treat BMG’s 518k ounce resource. (source)

(source)

So in the coming weeks, on BMG’s Abercromby project alone, we will see:

1. Drilling results - drilling in and around the current resource, where grades look like they are increasing at depth. IF we see a few solid hits at depth, it could be game on for the “Never Never” ductile gold deposit theory BMG has for the project.
2. A scoping study - outlining the potential economics of getting the project into production quickly.

Delivering on BMG’s strategy is a team that is incentivised to grow/develop the asset:

• CEO Ben Pollard - who just purchased $500K in stock at 2c (exercising 25M options at 2c) and is incentivised to grow the resource to 1M ounces. (source) (source)
• New appointment this week (Gareth McArthur) - whose performance rights are heavily based around “Commencement by the Company of mining operations at the Abercromby Gold Project by 31 December 2027”. (source).

While all of that happens, things are heating up for BMG’s other project in WA (another one of the reasons we Invested in BMG).

BMG’s other asset is next door to $1.6BN Minerals 260.

Breaking news for BMG’s other project last Monday

The world’s leading gold-focused royalty and streaming company, the $77BN Franco Nevada, has done a $220M deal with BMG’s neighbour, ASX listed Minerals 260.

(source)

The $220M coming Minerals 260’s way is under a Strategic funding Agreement that will see Franco-Nevada:

• pay $170M in exchange for increasing its total royalty over the project to 2.45% (currently a 1.00% royalty exists over certain tenements)
• invest $50M in direct equity into Minerals 260.

This is the same Minerals 260 that, in its own announcements is interpreting mineralisation at its 4.5Moz gold deposit is trending directly into BMG’s ground:

In fact, Minerals 260’s announcement from the 16th of February returned a few more strong assays on that western border AND showed the next few planned holes were edging closer to the boundary with BMG:

(source)

Coming back to that two part Franco Nevada deal - while it invested $50M directly into Minerals 260, the standout to us was the $170M royalty deal.

We see that royalty deal as explicit backing from Franco Nevada, to get Minerals 260’s project developed and into production (so they can see a return on that $170M royalty).

The big kicker for our Investment BMG is that now, Minerals 260 has a major shareholder (and royalty holder) who will:

1. Want to see the project get developed and put into production first and foremost, AND
2. Want Minerals 260 to go as hard as possible on exploration to make the project produce gold well beyond its existing 4.5M ounce gold resource.

Today’s deal reminds us of a podcast we listened to where Pierre Lassonde (mining royalty & a Franco Nevada founder) talked about how they turned a $2M royalty into over $1BN.

You can watch the full interview below.

Pierre tells the story of how the first royalty Franco Nevada did was on Barrick’s Goldstrike deposit in Nevada, USA.

When that deal was done initially, the deposit was small BUT had plenty of exploration upside.

Decades later, with a lot of exploration luck, it is the centrepiece asset of the $120BN Barrick’s gold business.

(Barrick picked up the Goldstrike asset in 1986 when it had 680,000 ounces of gold. 25+ years on and that project has produced over 44M ounces of gold.)

Here is Pierre Lassonde talking about the experience here:

(Watch Video - this link takes you to the section where he talks about the Goldstrike story)

Our view is that now with Franco Nevada involved, Minerals 260 will be encouraged to turn over every single rock possible in and around its deposit.

Which we think makes BMG’s ground surrounding Minerals 206’s deposit a lot more valuable now.

(source)

More on BMG’s (now started) drilling at Abercromby

BMG will be drilling in and around the existing 518K ounce gold resource, where some of the previous holes have had some seriously strong hits:

(source)

Importantly though, BMG confirmed the diamond holes would test for extensions at depth - which IF they come in could add more weight to the whole “Never Never” style ductile gold exploration upside on the project.

For some context, “Never Never” was the 2.1M ounce discovery Spartan Resources made that led to its $2.5BN takeover only 2.5 years after discovery.

It may take a few drilling programs to find out, but we should definitely know a lot more about that potential after this round of drilling is over.

Here is where BMG is planning to drill relative to its resource - what we will be looking out for is if the gold extends at depth:

(source)

BMG also confirmed that some of the drill program would be going into testing extensions to the south of the existing resource.

So we could see BMG add size/scale to its already large resource after this round of drilling is done.

Here is an image we marked up showing where those targets to the south sit:

(source)

BMG Resources
ASX:BMG

10 reasons why we Invested in BMG

We put out our initiation note on the 3rd of February.

Here are the 10 reasons why we Invested in BMG from that note:

1. BMG has an existing 518K ounce gold resource
2. Blue sky exploration upside on the existing resource
3. Existing resource sits on a granted Mining Lease
4. Nearby plant operator is planning to complete a $400M relisting on the ASX
5. BMG’s other project is next door to a 4.5M ounce gold deposit
6. We are backing John Prineas from St George Mining
7. The ASX likes WA gold companies
8. We are Investing alongside Tribeca Investment Partners
9. Gold price is trading near its all time highs
10. New experienced CEO appointed to drive the business forward

What’s next for BMG?

🔄 Drilling at the 518k ounce Abercromby project

This is now the first time Abercromby has had a large (10,000m) drill program on it since the maiden resource on the project back in 2023. (source)

We are hoping to see BMG hit extensions to the existing resource.

Here are the milestones we will be tracking:

✅ Drilling started

🔲 Assay results

🔲 Resource upgrade

🔄 Scoping study for the Abercromby resource

BMG also has a “Scoping study into a potential low-capex, fast payback mining proposal” due this quarter on its 518k ounce gold resource at Abercromby.

We are hoping to see the results from this fairly soon.

We note there is a previous study on the project from 2024 using a gold price of A$3,500 per ounce that showed ~$150M in cashflow over 14 quarters (~3 years).

We are hoping to see a material upgrade to those numbers now with gold opening at ~$7,300 per ounce.

We also note that was on just 120K ounces of production - IF BMG finds more gold OR brings more of its resource into the mine plan then the numbers could increase again...

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

🔄 Geophysics on Bullabulling project (next door to Minerals 260)

In the recent presentation BMG put out, BMG said it plans to run geophysics and have it completed before finalising drill targets for Q2 this year (source).

What could go wrong?

Now that drilling is underway, the main risk for BMG is around “exploration risk”.

There is no guarantee that BMG finds any economic extensions to its existing resource.

There is also a risk that the new drilling data fails to deliver similar results to the old drilling - which could come in below the markets expectations from this round of drilling.

Any negative drill results could re-rate BMG’s share price lower.

Exploration risk

BMG’s exploration upside is based on geological theories, specifically that the Abercromby resource hosts a "Never Never" style high-grade system at depth, and that the Minerals 260 deposit extends into BMG’s Bullabulling ground. These theories have not yet been proven by BMG’s own drilling. If upcoming drill programs fail to validate these models, the market could re-rate the stock lower.

Source: “What could go wrong?” - BMG Investment Memo 03 February 2026

Other risks

Like any small cap exploration and development company, BMG carries significant risk, here we aim to identify a few more risks.

The company’s near term development strategy relies heavily on an MoU with Wiluna Mining for toll treatment.

There is no guarantee that this MoU will convert into a binding commercial agreement, or that Wiluna’s mill will be available when BMG is ready to mine. If Wiluna prioritises its own ore, BMG may be left without a nearby processing solution.

BMG’s exploration upside is based on geological theories, specifically that the Abercromby resource hosts a "Never Never" style high-grade system at depth, and that the Minerals 260 deposit extends into BMG’s Bullabulling ground.

These theories have not yet been proven by BMG’s own drilling. If upcoming drill programs fail to validate these models, the market could re-rate the stock lower.

As a pre-revenue company, BMG is reliant on capital markets to fund its aggressive exploration and scoping studies. While the recent $2.5M raise provides runway, any future capital raisings could dilute existing shareholders, especially if conducted at a discount.

Finally, BMG is highly leveraged to the gold price, which is currently trading near all-time highs. Any correction in the gold price could disproportionately affect the valuation of junior developers like BMG, particularly those with higher-cost or lower-grade ounces.

Investors should consider these risks carefully and seek professional advice tailored to their personal circumstances before investing.

Our BMG Investment Memo

You can read our BMG Investment Memo in the link below.

We use this memo to track the progress of all our Investments over time.

Our BMG Investment Memo covers:

• What does BMG do?
• The macro theme for BMG
• Our BMG Big Bet
• What we want to see BMG achieve
• Why we are Invested in BMG
• The key risks to our Investment Thesis
• Our Investment Plan