KAU advancing toward 35k ounce per annum gold production

Our gold producing Investment Kaiser Reef (ASX: KAU) provided an update on its company strategy earlier this week.

KAU has two hubs where it owns assets:

1. In Tasmania where KAU owns the Henty gold mine - where KAU is currently producing gold (6,946k ounces in the last quarter) and is looking to increase that production rate to 35k ounces per annum by FY Q4 27 (April 2027).
2. In Victoria where KAU owns a 200ktpa operational processing plant and the old Maldon gold mine - The Maldon asset is ~4km away from that processing plant which is running well below capacity and KAU has previously put out a mine restart study for that project.

(source)

Combined, the two assets generated ~$13.7M in positive cash flow for KAU in the last quarter.

KAU now has a market cap of $197M and a cash balance of $43.1M.

Here are some of our key takeaways from KAU’s announcement earlier in the week and the recent presentation the company put out here.

KAU’s Henty gold mine (Tasmania)

There was a timeline on the Henty side of things given:

(source)

The update has increased the Tasmanian Henty Gold Mine production target to 35,000 ounces of gold per year, from late FY '27 (around 12 months time)...

This is a nice bump up on the current last 2 quarters production of 6,946oz and 8,115oz of gold for a combined half year of 15,061oz, which was already above our inital expectations.

At the current gold price of near A$7000/oz and an additional 5,000oz of gold produced, that would increase the annual revenue by ~A$35M from Henty alone.

This isn’t factoring in silver which we noticed Henty produced 6,526oz of last quarter which annualised at A$100/oz is currently adding over $2.6M also.

This added production is going to also be achieved by increasing the aggregate development to open up more stopes (stopes are the empty spaces created by mining out material).

There is also a plan to get back to exploration drilling near the mine in H1 next year and then further away from the mine in H2 looking to add ounces to the resource and mine plan.

Currently the mine life sits at more than 6 years.

KAU has plenty of targets away from the mine too - so we think there is plenty of scope to grow that mine life with exploration (the known resource is the red area):

(source)

KAU’s Maldon gold project (Victoria)

At Maldon, the gold project is advancing with a systematic strategy to unlock district-scale potential which is ongoing through data compiling/review and target generation.

In the near term there is a plan to commence on-ground target generation with soil sampling at North Maldon.

Also to progress permitting for surface drilling at Nuggetty into the existing waste dumps which KAU recently confirmed it is going to process some of these existing waste dumps on site.

Recently KAU announced it is re-establishing the Union Hill services for rehabilitation and drill position development, which has been further confirmed here.

The culmination of all of this is that KAU expects ore development (mining) at Union Hill to commence H2 in FY '27 (around 9 months time) in parallel with rehabilitation work and exploration drilling.

KAU included a timeline of the plan here:

(source)

What we want to see next from KAU

Cost optimisation and exploration at Tasmanian project (Henty) 🔄

The main thing we want to see at Henty is for KAU to increase production rates and optimise costs.

Recently the company confirmed that upgrades to the plant are mostly in place with trials having been done and further refinement on the processing side in the works.

(source)

Today’s update has confirmed that the plan is to get Henty to 35koz/year from late FY 2027 (around 12 months from now), with a gradual increase toward that target until then.

(source)

Exploration program at Maldon 🔄

With KAU’s drilling at Maldon complete and results released, we want to see follow up drilling on the results announced here recently.

KAU has today confirmed that works to re-access and rehabilitate the underground decline are now in progress. So we are looking forward to seeing KAU drill new areas of Maldon from underground as these works also include additional drill position development. (source)

Also today KAU confirmed that the Maldon Strategic Plan will be released shortly. (source)

Update on potential for waste dump processing 🔄

KAU processed ~3,234t of ore at an average grade of 1.61g/t gold with 90.7% recoveries in January.

All of that came from stockpiled ore at the Union-Hill mine.

We want to see KAU increase those processing rates by blending in the waste dumps from the project (where the resource defined from recent waste dump drilling sits).

IF KAU can get the waste dumps processed and capacity up at the plant, we think it could improve the cashflow of the company’s Victorian operations significantly - a good result for us would be to see the Victorian operations being cashflow breakeven.