Broker Upgrades: WA gold developer becomes Canaccord’s latest ‘spec buy’

Canaccord Genuity has initiated on WA gold developer Ausgold with a $1.60 price target, more than double is current price ahead of a DFS.

Ausgold is among the gold developers now on Canaccord's watchlist. Pic: Getty Images

• Canaccord initiates Ausgold with a spec buy, $1.60 price target

• Key DFS due soon for 3Moz Katanning gold project

• Coking coal forecasts clipped by Argonaut

Gold developers are starting to close the gap on miners as prices remain near record highs after a turbulent fortnight in the Middle East.

At ~US$3330/oz, word of a potential ceasefire between Iran and Israel has brought the latest rally for bullion in check.

But at current prices, a new gold mine is likely to be paid off faster and generate returns quicker than at any point since 1980, the last time prices were – on an inflation adjusted basis – in this wheelhouse.

And analysts are not projecting the crash to be anywhere near as severe as it was in dark days of the late '80s.

That's brought a wave of new developers under the watchful eye of expert gold equity analysts.

One of those is Ausgold (ASX:AUC), which owns the 3.04Moz Katanning gold project in WA's Great Southern region, around 275km southeast of Perth.

Katanning is a rare asset, a 3500km2 greenstone belt, effectively under the control of a single explorer, with 2.4Moz in measured and indicated resources.

Canaccord Genuity analysts led by gold expert Tim McCormack have slapped a spec buy rating on the stock with a $1.60 price target.

That's more than double its Tuesday closing price of 76c, itself a 5.5% intraday gain.

The key definitive feasibility study on Ausgold's KGP is yet to be released to the ASX.

But McCormack and his associates have already had a go at modelling the development.

They anticipate Ausgold could come out with a 3.6Mtpa operation producing 118,000ozpa at an AISC of $2326/oz over a 10-year mine life.

Under their modelling, the project will hit its nameplate operating rate in H1 CY28.

The various iterations (of studies) outlined the potential for the asset to support a 3-5Mtpa mining/milling operation, producing 105-136kozpa and have a mine life of up to 10 years," McCormack and Co. said.

"While instructive of the project's potential, a significant management change-out in 2024 has resulted in the project being rebuilt from the ground up, culminating in the upcoming DFS, which we expect to demonstrate KGP as a realistic and deliverable proposition."

That shake-up included the introduction of former Roxgold CEO John Dorward as executive chair, with a string of high ranking international gold executives including Adrian Goldstone (Dundee Corporation), Mark Turner (Resolute Mining) and Paul Weedon (Fortuna Mining) all on board.

Former Telfer general manager Mark Mitchell has been appointed COO, with Ben Stockdale as CFO.

"In our view, the renewed team offers an excellent blend of experience across all the required work streams to bring the KGP to fruition," McCormack and his team said.

More coking coal downgrades from Argonaut

Over at Argonaut, analyst Jon Scholtz is optimistic about the long-term outlook for coking coal.

But he's also downgraded price forecasts out to 2028, chopping his 2025 estimate by 6% to US$190.4/t, 2026 12% to US$231.30/t, 2027 9% to US$250/t and 2028 by 8% to US$258.80/t.

Argonaut's long-term forecast of US$250/t has been left unchanged, with shortages due to the failure to approve new greenfield mines expected to lead to eye-watering price of US$280/t in 2029 and US$289.2/t in 2030, admittedly, well below the highs seen post Ukraine invasion in 2022.

"Coking coal prices have been under pressure in CY25 and remain subdued due to supply being robust and demand being weak," Scholtz told Argonaut clients.

"We have downgraded our near-term coking coal price forecasts, however we maintain our longer-term constructive view on a demand recovery, lack of greenfield supply and, importantly, price support from being well into the cost curve."

It has three stocks under its coverage, preferred pick Whitehaven Coal (ASX:WHC), with a buy rating and $6.50 price target, Stanmore Coal (ASX:SMR) with a buy rating and $3 price target and Coronado Global Resources (ASX:CRN), with a buy rating and 30c price target.

Coronado is the ropiest of those, with its US-Australian coal business sieving cash at current prices, but it has improved its outlook somewhat in recent weeks with moves to shore up liquidity and trim costs.

"We maintain a preference for WHC (thermal coal support, operational leverage and capital management upside) and we highlight CRN’s recent initiatives to provide liquidity and runway for the company in the current low coal price environment," Scholtz said.

Whitehaven was trading at $5.57 a share on Tuesday, with Stanmore at $1.92 and Coronado at 13c.

Lower coal prices saw Queensland's State budget report a drop in coal royalties from $10.52bn in FY24 to $6.17bn in FY25, with struggling junior Bowen Coking Coal (ASX:BCB) again taking a swipe at state royalty pressures in a trading halt notice announcing it was seeking funding to support its current operations.

$10m capped Bowen, worth over $500m during the 2022 coal boom, has struggled to make ends meet since making its first coal shipments at the tail-end of that boom, regularly fingering the scale of the State's royalty hike for hurting investment in coking coal mines.

Issued by the previous Labor government but maintained by David Crisafulli's LNP, the tiered coal royalty regime shifted from its pre-2022 level of 7% up to $100/t, 12.5% to $150/t and 15% beyond that with three additional tiers.

Coal sales now draw 20% for the final $50 of coal sold between $175-225/t, 30% from $225-300/t and 40% for any dollar earned beyond $300/t.

Front month coking coal futures are currently US$175/t.

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