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Independent corporate advisory and equity capital markets firm Rawson Lewis has given Australian gold explorer and project developer Brightstar Resources (ASX:BTR) a ‘buy’ recommendation, with a net present valuation of AU$0.033 per share at AU$3,080 per ounce.
“If it delivers on production as expected, the discount rate should fall and share price rise to AU$0.056 in one to two years,” wrote Rawson analyst Mike Harowell in the report.
The report projected gold production and sales from Brightstar’s Selkirk deposit to generate AU$3 million in cash for the company by March 2024. Assuming Brightstar joint ventures the Menzies gold project with a mining contractor, the analyst report also projects the Menzies tolling business to generate between $30 million and $50 million in cash.
Brightstar has partnered with mining contractor BML Ventures to develop the Selkirk deposit. Rawson recommends the company engage BML and other similar mining contractors to help fund and develop the additional Menzies deposits.
“Brightstar is well placed to leverage competitive tension from these providers, so any buy-in to future projects is likely to be competitively priced.”
Selkirk Pit, Menzies (looking north-east)
Rawson Lewis’ report highlighted the following:
- With support from mining contractor BML, Brightstar’s Selkirk deposit’sgold production and sales will likely generate AU$3 million cash for Brightstar by March 2024.
- Assuming it is funded by profit share joint venture or a 50 percent sale to a contractor, the Menzies tolling business could generate between $30 million and- $50 million..
- Laverton plant restart to generate AU$100 million post tax – BTR is assumed to retain 100 percent and fund the $94 million capex with retained Menzies cash and debt.
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Brightstar Resources
Investor Insight
A gold-focused emerging gold producer with a clear pathway to production growth, Brightstar Resources presents a compelling investment case driven by its mining and development hubs strategy and a district-scale resource opportunity.
Overview
The price of gold stays strong. In April 2024, the yellow metal’s price passed US$2,400 per ounce for the first time. The reason is multifaceted. The world teeters on the brink of a severe recession while some markets attribute the increase to safe haven rush. Amidst ballooning interest rates, bank failures and falling bond yields, demand for gold continues to rise. At this precise moment, gold is simultaneously an excellent portfolio diversifier and a compelling hedge against ongoing inflation — particularly if one invests in the right company.
Brightstar Resources (ASX:BTR) aims to be that company. An emerging mining and development company, Brightstar occupies a strategic land position of roughly 1,200 square kilometers in the Sandstone Greenstone Belt, 300 square kilometers in the Laverton Tectonic Belt and 80 square kilometers of the Menzies Shear Zone.
The company also owns an existing processing facility that can potentially provide tremendous shareholder value in a low-capital cost restart scenario.
That plant, once fully refurbished and operational, could prove a key differentiator for the company, enabling fast gold production at a low capital cost. This is especially noteworthy given that many other gold companies trading on the ASX are largely focused on greenfield exploration and development. Even once those companies discover a promising resource, mining and processing facilities would still need to be built, undertakings which can incur significant upfront capital costs and take several years.
Brightstar's Laverton gold assets are all centered on a 100 percent-owned 300-square-kilometer tenure in the Laverton Tectonic Zone and all within 70 kilometers of the Laverton Processing Plant. Additionally, all resources within this zone are open along strike and at depth. Only minor drilling programs have been conducted in recent years, paving the way for significant exploration upside with the potential for further regional and greenfields discoveries.
Brightstar also owns 100 percent of the Menzies Gold Project, a contiguous land package of granted mining leases over a strike length of roughly 20 kilometers along the Menzies Shear Zone and adjacent to the Goldfields Highway.
In 2023 and 2024, the company announced a mineral resource upgrade to the Cork Tree Well deposit (Laverton gold project) and also delivered two maiden mineral resource estimates at the Link Zone and Aspacia deposits (Menzies gold project). This has grown the total group MRE by approximately 150 koz gold through organic exploration.
The company has also acquired 100 percent of the shares and options of Linden Gold Alliance, a gold producer, developer and explorer with existing mineral resources of 350 koz @ 2.1 g/t gold near Brightstar in the Laverton district. Brightstar’s MRE has reached 1.1 Moz gold across the Menzies and Laverton projects, with an additional 0.35 Moz gold in resources added after the successful acquisition of Linden Gold Alliance.
In August 2024, Brightstar entered into a scheme implementation deed to acquire 100 percent of Alto Metals (ASX:AME), which owns the Sandstone gold project located in East Murchison. The project has a current mineral resource of 1.05 Moz of gold at 1.5 g/t.
Brightstar also completed the acquisition of the gold rights at the Montague East gold project (MEGP) from Gateway Mining Limited (ASX:GML). The project is located 70 km from the Sandstone gold project. The acquisition adds a further 9.6 Mt @ 1.6 g/t gold for 0.5 Moz gold to Brightstar’s JORC Mineral Resource Estimate, giving the company a total mineral endowment of 38.3 Mt @ 1.6 g/t gold for 2.0 Moz gold.
The acquisition of the MGEP from Gateway Mining and 100 percent of Alto’s shares creates a third district-scale resource base for the company called the Sandstone Hub. Upon consolidation of the Laverton, Menzies and Sandstone hubs, Brightstar’s mineral resources would reach 3 Moz at 1.5g/t gold.
Subsequent to the deal with Alto Metals, Brightstar entered into a $4 million drill-for-equity agreement with Topdrill to aggressively advance the consolidated Sandstone gold project. The deal strengthens Brightstar's financial capacity to fulfill its multi-hub exploration and development strategy, which includes the Menzies, Laverton and Sandstone hubs.
Company Highlights
- Brightstar Resources is an ASX-listed mining and development company with more than 3 million ounces of gold resources and an on-site processing infrastructure across its project locations in Laverton, Menzies and Sandstone in Western Australia.
- Brightstar's mineral assets are situated across roughly 300 square kilometers of 100-percent-owned land in the Laverton Tectonic Zone and ~80 square kilometers in the high-grade Menzies Shear Zone.
- The Laverton Gold project has a mineral resource of 9.7 Mt @ 1.6 g/t gold for 511 koz gold and the Menzies gold project has 13.8 Mt @ 1.3g/t gold for 595 koz gold.
- In 2023, the company completed a scoping study into the development of its Menzies and Laverton gold projects and the refurbishment and restart of its processing plant in Laverton.
- In 2023 and 2024, Brightstar completed a small-scale mining joint venture with BML Ventures which involved a 50/50 profit-sharing agreement to exploit the Selkirk deposit at Menzies. In April 2024, Brightstar announced that this joint venture delivered a net profit to Brightstar of $6.5 million.
- In June 2024, the company successfully acquired all of the issued ordinary shares and options in Linden Gold Alliance, a gold producer, developer and explorer with existing mineral resources of 350 koz @ 2.1 g/t gold near Brightstar in the Laverton district.
- As part of the merger with Linden Gold, Brightstar released a scoping study into Linden’s development-ready Jasper Hills gold project, which delivered key metrics including:
- 140 koz mined over 3.75 years (35 koz pa)
- Net present value of AU$99 million
- Internal rate of return of 736 percent
- Pre-production capital requirements of $12 million
- All-in sustaining costs of AU$1,972/oz
- Jasper Hills is located just 50 km SE of Brightstar’s processing plant in the Laverton gold project
- Brightstar has recently completed the acquisition of the gold rights at the Montague East gold project (MEGP) from Gateway Mining Limited (ASX:GML), and has entered into an agreement to acquire Alto Metals (ASX:AME) further creating the company’s third district-scale resource base known as the Sandstone Hub.
- Brightstar plans to continue generating shareholder value through a combination of development and strategic acquisitions along with some exploration.
Key Projects
Laverton Hub
Brightstar’s Laverton hub is comprised of the Cork Tree Well, Beta and Alpha project areas with the addition of the Second Fortune gold mine and the Jasper Hills projects.
Highlights:
- Cork Tree Well, Alpha and Beta have current total JORC mineral resource estimate of 9.7 Mt @ 1.6 g/t gold for 511 koz (52 percent measured and indicated category). All mineral resources are on granted mining leases
- Cork Tree Well (6.4 Mt at 1.4 g/t gold for 303 koz gold)
- Alpha (1.4 Mt at 2.3 g/t gold for 106 koz gold)
- Beta (1.9 Mt at 1.7 g/t gold for 102 koz gold)
- Main project area Cork Tree Well is open at depth and along strike with recent drilling results of 34.4 meters at 7.94 g/t gold from 43.5 meters (CTWMET004) and 27.6 meters at 17.8 g/t gold from 51 m (CTWMET003)
- Second Fortune has a mineral resource estimate head grade of ~11g/t gold with an average ore body width of ~0.6 meters.
- Jasper Hills is located 50 km from Brightstar’s existing processing facility along a wholly-owned private haul road, allowing unimpeded, direct access to both projects
- Permitted, previously mined and production-ready
- Last mined by current owners in 2020 with 23,000 oz gold mined
- Scoping Study outcomes include:
- Pre-production capex of $12 million required (maximum capital drawdown)
- Open pit mine at Lord Byron and underground mine at Fish
- Production of 141 koz over four years (35 koz per annum)
- LOM EBITDA of $135 million (@ AU$3,000/oz)
Menzies Hub
The Menzies Hub comprises a tenement holding of a contiguous land package of granted mining leases over a strike length of more than 20 km. The majority of deposits hosted along the Menzies Shear Zone are located adjacent to Goldfields Highway in Menzies (130km north of Kalgoorlie).
Highlights:
- Total Current Resource: 13.7 Mt at 1.3 g/t gold for 595 koz gold (36 percent measured and indicated)
- September 2023 scoping study showed the simultaneous development of open pit mining at Lady Shenton system and underground mining at Yunndaga:
- 1.9 Mt @ 1.63 g/t Au (100 koz) in open pit mining at Lady Shenton
- 650 kt @ 2.91 g/t (60 koz) in underground mining at Yunndaga
- Low capex of $22 million
- Significant opportunities to find virgin discoveries and brownfields mineral resource growth:
Sandstone Hub
The consolidated Sandstone project is over 100 km from existing third-party milling operations in the Murchison. This third processing hub boasts Alto’s Sandstone project with a mineral resource of 1.05 Moz at 1.4 g/t gold and Gateway’s Montague gold project with a mineral resource of 0.5 Moz @ 1.6 g/t gold.
Brightstar aims to fast-track the development timetable through:
- A focused, multi-rig infill drill out to take the inferred mineralisation into measured and indicated status to underpin mining studies and project advancement
- The application of Brightstar’s dedicated in-house geological and mining engineering team to retain crucial project IP and fast-tracked mining studies;
Brightstar Processing Facility
Situated close to Brightstar's existing mineral assets at Laverton, the Brightstar Processing Plant provides the company with a considerable operational head start over its peers.
Highlights:
- Extensive Infrastructure: Current facilities at the plant include two ball mills, a power station and gravity and elution circuits. Other infrastructure includes:
- A tailings storage dam
- An on-site process water pond
- A 60-person accommodation camp
- An airstrip at the Cork Tree Well Project
- Vehicles and equipment include a forklift, bobcat, two loaders, multiple light vehicles and a 30-tonne crane.
- A Leg Up Over Competitors: The presence of pre-existing processing infrastructure represents significant time savings compared to greenfields development. Brightstar had an independent valuation completed which valued the processing plant at AU$60 million in replacement value.
- Low Upfront Capital Cost: As part of the scoping study released in September 2023, GR Engineering estimated a capital cost requirement to refurbish and expand the milling capacity would cost just AU$18.5 million.
- Close to Existing Assets: Brightstar's major development projects — Cork Tree Well, Jasper Hills, Beta and Alpha — are all close to the plant.
Gold doré bars (BTR005 – BTR016) poured on 9 March 2024
Management Team
Alex Rovira - Managing Director
Alex Rovira is a qualified geologist and an experienced investment banker having focused on the metals and mining sector since 2013. Rovira has experience in ASX equity capital markets activities, including capital raisings, IPOs and merger and acquisitions.
Richard Crookes - Non-executive Chairman
Richard Crookes has over 35 years’ experience in the resources and investments industries. He is a geologist by training having previously worked as the chief geologist and mining manager of Ernest Henry Mining in Australia.
Crookes is managing partner of Lionhead Resources, a critical minerals investment fund and formerly an investment director at EMR Capital. Prior to that he was an executive director in Macquarie Bank’s Metals Energy Capital (MEC) division where he managed all aspects of the bank’s principal investments in mining and metals companies.
Andrew Rich - Executive Director
Andrew Rich is a degree qualified mining engineer from the WA School of Mines and has obtained a WA First Class Mine Managers Certificate. Rich has a strong background in underground gold mining with experience predominantly in the development of underground mines at Ramelius Resources (ASX:RMS) and Westgold Resources (ASX:WGX).
Ashley Fraser - Non-executive Director
Ashley Fraser is an accomplished mining professional with over 30 years experience across gold and bulk commodities. Fraser was a founder of Orionstone (which merged with Emeco in a $660-million consolidation) and is a founder/owner of Blue Cap Mining and Blue Cap Equities.
Jonathan Downes - Non-executive Director
Jonathan Downes has over 30 years’ experience in the minerals industry and has worked in various geological and corporate capacities. Experienced with gold and base metals, he has been intimately involved with the exploration process through to production. Downes is currently the managing director of Kaiser Reef, a high grade gold producer, and non-executive director of Cazaly Resources.
Matthew Bowles – Non-executive Director
Matthew Bowles is a senior corporate finance executive with extensive public corporate advisory, private equity and capital markets experience in the resources sector. Bowles has successfully negotiated domestic and cross border corporate funding, joint venture and M&A transactions for a number of ASX listed companies in Africa, the Americas and Australia. He was previously chief development officer for a West African focused ASX listed company. He commenced his career with Rio Tinto, working in corporate and commercial roles for nine years, before moving to London to work in banking and finance. Since his return to Australia, Bowles has held senior roles with global advisory firms, focusing on the resources sector. Bowles holds a Bachelor of Business, is a member of CPA Australia and a Fellow of the Financial Services Institute of Australia.
Dean Vallve – Chief Operating Officer
Dean Vallve holds technical qualifications in geology & mining engineering from the WA School of Mines, an MBA, and a WA First Class Mine Managers Certificate. Vallve was previously in senior mining and study roles at ASX listed mid-cap resources companies Hot Chili (ASX:HCH) and Calidus Resources (ASX:CAI).
Gold Price 2024 Year-End Review
Read on for more on what factors moved the gold price in Q4, followed by a look back at the entire year.
Gold price in Q4
The gold price began Q4 at US$2,660.30, but quickly saw a retraction to US$2,608.40 on October 9. However, the decline didn't last, and gold again rose, setting a new record high of US$2,785.40 on October 30.
The surge upward was fueled by a weaker-than-expected September US consumer price index report, which showed annual inflation of 2.4 percent and monthly inflation of 0.2 percent. These numbers were higher than analysts' forecasts of 2.3 and 0.1 percent, raising expectations that the Fed would cut rates at its November meeting.
Gold was in retreat to start November, dropping to US$2,664 on November 6 after Trump’s victory. The next day, it briefly surged above the US$2,700 mark as the Fed cut interest rates by 25 basis points on November 7.
By November 15, the price of gold had fallen to its quarterly low of US$2,562.50.
The end of the month saw gold leap to US$2,715.80 on November 22. Following this peak, gold entered December below the US$2,700 mark, closing at US$2,660.50 on December 9.
Gold price, Q4 2024.
Chart via Trading Economics.
Geopolitical impacts have been important to gold in Q4.
In addition to Trump's re-election, which has caused turmoil in various forms, on November 17 the US authorized Ukraine to use ATACMS long-range missiles to attack targets deeper into Russian territory. The UK and France mirrored this move, giving Ukraine the green light to use long-range missiles in the ongoing conflict.
Tensions continued to ratchet up in the days following as Russia announced it was lowering the threshold for nuclear retaliation to include conventional attacks from countries backed by nuclear nations. In a demonstration of its capabilities, Russia launched an intermediate-range ballistic missile for the first time on November 21. While the missile appeared only to carry inert warheads, it is capable of delivering both conventional and nuclear armaments.
The threat of a significant escalation has bolstered gold’s appeal as a safe-haven asset and store of value.
How did gold perform for the rest of the year?
Gold price in Q1
Gold set its first record price of the year at US$2,251.37 on March 31.
Central bank buying, notably China's purchase of 22 metric tons of gold in the first two months of the year, supported the price. Turkey, Kazakhstan and India also significantly increased their holdings at the start of the year.
Further momentum came from Chinese wholesale demand, which jumped to 271 metric tons in January, the strongest ever recorded. Investors were turning to the yellow metal as a defense against falling real estate and stock prices. At that time, the country's stocks had lost nearly US$5 trillion in value over the past three years.
Gold price, Q1 2024.
Chart via Trading Economics.
“As central banks continue to be significant buyers and geopolitical risks and global uncertainties drive investors towards the perceived safety of gold, the current environment underscores gold’s importance as a strategic asset for portfolio diversification and risk mitigation. Therefore, while there may have been a perception of western disinterest in gold, recent developments indicate a sustained and broad-based demand for the precious metal,” Joe Cavatoni, market strategist, Americas, told the Investing News Network (INN) in an email at the time.
Gold price in Q2
The gold price saw increasing momentum in Q2, setting a new all-time of US$2,450.05 on May 20.
Gains through the quarter were influenced by strong central bank demand. Investor sentiment toward the yellow metal also shifted, with outflows from western exchange-traded funds starting to slow.
Although European funds still saw significant declines, it wasn’t all bad news — the US-based SPDR Gold Shares (NYSE:GLD), the Sprott Physical Gold Trust (NYSE:PHYS), Ireland’s Royal Mint Responsibly Sourced Physical Gold ETC (LSE:RMAU) and Switzerland’s UBS ETF Gold (SWX:AUUSI) all saw increases.
Gold price, Q2 2024.
Chart via Trading Economics.
In a May interview with INN, Jeff Clark, editor of Paydirt Prospector, noted several other market dynamics that caused the price of gold to rise dramatically. He said the real starting point for the precious metal's gains was the end of February, when the Fed indicated it was expecting three or four rate cuts in 2024.
“All of a sudden, gold was off to the races. It jumped so high that suddenly, you had some short covering that needed to happen then as well. So you had short covering, which means they’re buying. And then you had momentum chasers and traders jumping all in. That was a pretty good spike ... that's what kind of started all of this,” he said.
Gold price in Q3
Gold set another record price during the third quarter, reaching US$2,672.51 on September 26.
The high came just a week after the conclusion of the Fed's September meeting, when it announced a jumbo 50 basis point cut to the federal funds rate. While the People’s Bank of China maintained its pause on gold purchases in the third quarter, it granted several regional banks new import quotas in August.
Gold price, Q3 2024.
Chart via Trading Economics.
David Barrett, CEO of the UK division of global brokerage firm EBC Financial Group, suggested at the time that Fed rate cuts were less of a factor for gold than central bank buying. “I still see the global central bank buying as the main driver — as it has been over the last 15 years. This demand removes supply from the market. They are the ultimate buy-and-hold participants and have been buying massive amounts,” he told INN via email.
The quarter also saw significant merger and acquisition activity, with South Africa-based Gold Fields (NYSE:GFI,JSE:GFI) announcing plans to acquire Canada’s Osisko Mining (TSX:OSK) for C$2.16 billion, and South African gold miner AngloGold Ashanti (NYSE:AU) agreeing to purchase UK-based Centamin (TSX:CEE,LSE:CEY) for US$2.5 billion.
Investor takeaway
Overall, uncertainty has been a key driver for gold in 2024.
Central banks have continued to increase their physical holdings against an increasingly polarized political landscape. The most recent data from the World Gold Council shows that they added 186 metric tons of gold to their coffers during the third quarter, with the National Bank of Poland leading the way with 42 metric tons.
The World Gold Council notes that on a rolling four-quarter basis, central bank buying has slowed to 909 metric tons — that's compared to 1,215 metric tons one year ago.
Investors also began returning to the precious metal throughout 2024 as geopolitical tensions and fragile economies pushed them toward gold as a safe haven to help shield their portfolios from volatility.
With the world’s largest economy set to welcome Trump back to the White House in 2025, there are many unknowns. His economic policies could cause inflation to begin creeping up. In contrast, his foreign policies could create new ripples through global trade and financial markets given that he campaigned on more protectionist policies.
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Securities Disclosure: I, Dean Belder, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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