The next gold producers? These juniors are closer than you think

Gold prices are surging but new mines are getting harder to find. That’s why these near-production juniors are catching the eye.

They're on the cusp of gold production, but these companies remain hidden gems on the ASX. Pic: Getty Images

• A key moment takes place once a company enters into production 

• In an environment of declining discoveries, capital is flowing more frequently toward near-term developers

• Here are a few lesser-known junior gold companies nearing production 

For junior exploration companies, the leap into production is a defining moment.

It signifies the transition from discovery of a high potential deposit to the unlocking of its commercial value through extraction and market sales.

Timing production during a period of elevated gold prices, like the boom we’re in now, can also bring multiple advantages from stronger balance sheets to higher valuations, faster development timelines and potential interest from larger mining companies seeking to secure future supply.

In fact, in its second volume of the ‘The Emerging Precious Metals Book’, Canaccord Genuity says with less discoveries being made, inorganic growth through M&A and strategic investment into emerging developers is becoming more common.

“We believe this is likely driven by rapid growth of mid-tier gold companies over the past 10 years causing a shift in skillsets away from grassroots exploration to a more operational focus,” the broker says.

ASX-listed companies nearing gold production often draw strong investor interest, yet the select few highlighted below remain largely overlooked, despite holding tier-one assets.

Argentina’s next gold producer

A prime example is Challenger Gold (ASX:CEL), which has its sights set squarely on bringing the Hualilan gold project in Argentina into production.

Last December, the company locked in a three-year toll mining deal with Casposo Argentina Mining – part of ASX-listed Austral Gold (ASX:AGD) – for 150,000tpa of processing capacity.

A total of 450,000t of capacity has been locked in, with the deal also providing working capital support for mining, trucking, and processing until CEL’s operations begin generating revenue. That will enable Challenger to start churning out cash from a small, high grade portion of its 2.8Moz AuEq Hualilan project.

Speaking to Stockhead, CEL managing director Kris Knauer noted that the company has revised its strategy in response to the current high gold price environment.

“The market simply isn’t valuing companies fully or anywhere near close to fully unless they are in production,” he said.

“We are going into production imminently by toll milling, and changed our plans given the high gold price – we’ll be toll milling nearly 3% of our ore body to fund a standalone, larger development project.

“We’ve got a 2.8-million-ounce resource and the opportunity to start a really large gold mine all for toll milling 3% of that ore body, which means we can effectively leverage ourselves into production for very minimal capital expenditure upfront.”

Knauer said 100% of the company’s focus right now is on getting the project mine ready.

“We are working through our mine readiness plan, getting final quotes from mining contractors, with the aim to be pouring first gold in November.”

First gold pour in Q4

South African gold developer West Wits Mining (ASX:WWI) is hoping to make the transition at its Qala Shallows asset, part of the larger Witwatersrand Basin Project (WBP).

The project boasts a global resource of ~5Moz at 4.66g/t gold, with 65% of that contained within the indicated and measured categories that provide certainty for mine-planning.

The underground component, Qala Shallows, is the initial development focus which has a resource of 10.28Mt at 3.04g/t for just over 1Moz of contained gold.

Under the definitive feasibility study, the project is expected to produce 924,000oz of gold over a 17-year mine life to deliver post-tax life-of-mine cashflow of US$522m at a conservative gold price of US$2200/oz.

This will deliver post-tax net present value and internal rate of return – both measures of the project’s profitability – of US$366m and 72% respectively.

Speaking with Stockhead's Tylah Tully last week, WWI CEO Rudi Deysel noted the cut-off grade used in the mine plan was far below the record price levels seen today.

"In our case we've used a gold price of US$1750/oz ... considering that we came down to a cut-off grade which is considerably higher ... which gives us the opportunity to optimise our production plan even further," Deysel said. That means a number of mineralised blocks now clear the economic hurdles to enter the mine plan.

"For that reason we need to reconsider ... the project itself and even the future projects we're looking at, because that will make a huge economic difference to those projects and the valuation thereof."

West Wits director Warwick Grigor, Australia's first specialist gold analyst in the 1980s and the steward of research firm Far East Capital, said current gold price movements mirror the transformational run after the end of the Gold Standard in the 1970s and 1980s. With global economic uncertainty growing, there's no reason its run can't continue he said, providing incredible tailwinds for WWI.

"I see no reason why this gold price won't go on for another year, year and a half, at least and could quite comfortably get to US$5000/oz," he told Tully.

"The way to tell when it's starting to peak is if you have movement of US$500 a day. Now I think we're a long way from that.

"It's the best place to be at the moment, and being the best place to be, what a position to be in opening a new gold mine in the famous Witwatersrand goldfield."

A major funding milestone was hit with a ZAR 902.5 million (~US$50 million) credit-backed senior loan from the IDC and Absa, covering roughly 55% of Phase 1’s project costs.

The company is targeting first gold pour from Qala Shallows in Q4 this year, with steady state production of 70,000tpa expected by 2028.

Now Watch: Long Shortz with West Wits Mining: Qala Shallows production closes in on record gold markets

Gold Duke ready to break ground

Western Gold Resources (ASX:WGR) owns the shovel-ready 3.25Mt Gold Duke project in WA’s northern Goldfields.

The company’s planned stage 1 development involves the production of 447,000t at 2.55g/t gold for 34,000oz of gold from the Eagle, Emu, Gold King and Golden Monarch deposits.

All mining approvals have been secured for all four proposed mining pits within Gold Duke.

A 2024 scoping study, based on a ~$3,500/oz gold price, has forecasted an un discounted cash surplus of $38.1 million, with upfront CAPEX in the range of $2.1–$2.5 million.

But this figure may significantly understate the project’s potential, with surging gold prices and a soft Australian dollar driving the local gold price up to around ~$5100/oz.

With the wind at its back, WGR managing director Callum Winn told Stockhead there’s potential to grow the production target at Gold Duke as the company works on updating the scoping study.

“We’re purely focused on the scoping study, and the outputs on that will feed into an updated grade control and infield drilling design as well as more current parameters in terms of gold price and costs of haulage and processing,” he said.

“We’re negotiating gold processing options which include toll treatment and ore purchase agreements and production is looking like seven to eight months after that.”

GWR Group (ASX:GWR) holds a gold royalty over tenements M53/1016-1, M53/1017-1, and M53/1018-1, part of the Gold Duke Project owned by WGR.

A gold royalty of $10 per troy ounce applies to the first 50,000 ounces produced, decreasing to $5 per ounce thereafter.

Immediate cashflow potential 

TG Metals (ASX:TG6) is wasting no time at its newly acquired Van Uden project in WA, with work underway to determine the potential of near-term cashflow using material from existing stockpiles.

Existing stockpiles could mean early cashflow through toll treating — and with gold prices on a tear, the shallow historic workings could open the door to a much bigger operation.

Van Uden sits within WA’s Forrestania greenstone belt and consists of four mining leases within short distance to the producing Marvel Loch as well as the mothballed Edna May gold processing plants.

The project already has a historical resource of 5.4Mt at 1.38g/t for 238,000oz of gold, which is now set to guide follow-up drilling and analysis aimed at upgrading it to a JORC 2012-compliant estimate.

Historical production at the site includes 1142oz of gold from the Tasman and Diemens open pits as well as surface gold-bearing laterites, providing confidence that a gold system is present.

CEO David Selfe views getting stuck into the stockpiles as a key focus, with PoWs now in place to test the revenue opportunity.

“In consideration of the large amount of drilling completed since the last publicly stated mineral resource estimate, we are in the process of completing a JORC 2012 compliant resource, which will form the foundation of mining studies, focused on a low capital cost startup,” he said.

At Stockhead we tell it like it is. While Challenger Gold, West Wits Mining, Western Gold Resources and TG Metals are Stockhead advertisers, they did not sponsor this article.

Originally published as The next gold producers? These juniors are closer than you think