KAU completes strategic review of A1 mine
Our gold producing Investment Kaiser Reef (ASX: KAU) just completed a strategic review of its A1 mine.
KAU made the decision to halt production at A1, but did mention that drilling assays were pending and that further decisions would be made once those results came in…
It will be interesting to see what KAU does next with A1, typically when a company starts to strategically review a project it means the company could look to potentially sell the asset and allocate valuable resources to higher potential assets on their books.
Which may be why KAU recently started drilling at its Maldon project which has historically produced ~1.74M ounce of gold at average grades of ~28g/t.
With this round of drilling KAU is targeting a “reef” that was responsible for ~491,000 ounces of that production...
With another Victorian gold explorer re-rating ~10x in the last two months (Falcon Resources) - we are looking forward to seeing results from Maldon…
Drilling started a week ago. We covered it here: KAU kicks off drilling at Victorian gold exploration asset
KAU’s production base now firmly from its Tasmanian asset
From a production perspective for KAU its all about the Tasmanian asset now.
KAU acquired the Henty mine in Tasmania from $2BN Catalyst Metals on the 15th of May within the April to June quarter reporting period and produced ~4,069 ounces.
In the first 45 days of ownership for KAU, Henty exceeded its 12-month production run rate of ~25k ounces…
(Catalyst also came into KAU as a major shareholder with a 19.9% stake in KAU).
The Henty asset was a big part of KAU’s ~$10M positive operating cashflow in the recent quarterly cashflow report:
(Source)
We note net cashflows were a lot lower than that operating cashflow number as KAU had to complete the acquisition of Henty and had development costs at its Vic assets.
We will probably see a cleaner quarterly number from Henty in the upcoming September quarterly - which we hope adds a bunch of cash to KAU’s balance sheet (no guarantees of course, negative surprises can and do happen. KAU also has $7.5M debt as of 31 July on its balance sheet).
Henty also has >$100M in project infrastructure (at replacement value) which is why we think it more than backstops KAU’s current market cap at $133M.
What’s next for 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.
BUT at the same time we are looking forward to exploration drill results from the project.
KAU is currently drilling at Henty and has already hit a “108m intersection of strong alteration, indicating that the Henty style alteration extends 600m from the current known mineralisation”.
The main target for the drilling is to find extensions to the “Darwin Zone” which is where Henty has produced over 655k ounces of gold at average gold grades of 8.4g/t.
If we get big extensions to the south of that area and show that those numbers could be repeated into the future we think that will be a big win for KAU.
Here is a visual of where KAU is drilling (note those chequered sections “Darwin target zone” and “Darwin South”:
(Source)
Exploration program at Maldon 🔄
Now with KAU drilling at Maldon, we want to see the results from drilling.
Because KAU is drilling with a diamond rig, we could see early visuals with visible gold in drillcores (which is usually a good sign the company is hitting the right rocks).
The reason we think exploration success at Maldon could be material for KAU is because of how close it is to KAU’s operating processing plant AND because Maldon was previously home to Australia’s highest grade gold mine - Nuggety Reef - which produced ~301k ounces of gold at ~187g/t gold grades.
Although not guaranteed, a major discovery at Maldon (even 1/10th of the grades Nuggety produced at) could be a game changer for KAU primarily because of the proximity to a mill which is currently operating at 20% of its capacity:
