Kristie Batten: Brightstar maps path to 200,000ozpa of gold
It's been a busy couple of weeks for Brightstar Resources (ASX:BTR) as ticks off milestones on the road to its goal of becoming a 200,000 ounce per annum gold producer by 2029.
The up-and-comer is already ramping up to become a 35,000-40,000ozpa gold producer from its Second Fortune and Fish underground mines via an ore processing agreement with Genesis Minerals.
But the company has bigger aspirations of becoming a gold producer in its own right and in the process, becoming a major player in the Eastern Goldfields.
A week ago, Brightstar released a definitive feasibility study for the staged development of its Menzies and Laverton gold projects.
Based on a maiden open pit reserve of 210,500oz at 1.63 grams per tonne gold, the project would produce 338,528oz, or an average of 70,000ozpa, over five years at all-in sustaining costs of $2991 an ounce.
Using a base case gold price of $4500/oz, the project returned a pre-tax net present value of $203 million and an internal rate of return of 48%.
Increasing the gold price to around $5000/oz, which is closer to spot, increases the NPV to $316 million and IRR increases to 73%.
The company has signed a memorandum of understanding to process Menzies ore through the Paddington mill for up to two years while the Laverton plant is being built.
Total project peak funding requirements for the Menzies and Laverton projects is $120 million, while payback from the commissioning of the plant, expected in early 2027, is one year.
Brightstar has received letters of intent or term sheets from multiple domestic and offshore commercial banks, as well as interest from non-bank lenders for debt financing of up to 70% of the capital requirements.
The company has also received a non-binding term sheet from an offshore precious metals specialist investment company for a funding package comprising a gold doré offtake and equity financing at a premium for A$120 million.
Brightstar managing director Alex Rovira described Laverton and Menzies as 'a really financeable project with great return on investment'.
The bigger prize
A prefeasibility study is also underway for Brightstar's larger Sandstone project, due for completion next year.
Sandstone hosts shallow resources of 1.5Moz at 1.5g/t gold and Brightstar has 80,000m of drilling planned across the project this year.
The PFS will consider a 3-5 million tonne per annum open pit development.
The company is aiming to move straight into a DFS on Sandstone next year, with the aim of making a final investment decision in early 2027, coinciding with first gold from Laverton and Menzies.
Brightstar is aiming to self-fund at least part of the Sandstone development from its other operations.
'We see Sandstone as the flagship, tier one asset within our portfolio and the ability to fund that from existing and near-term operations is important,' Rovira said.
Canaccord Genuity analyst Tim McCormack is modelling a $250 million, 3Mpta operation which would pour first gold in the June quarter of 2029.
'We expect the project to support production of around 130,000ozpa at an AISC of $2655/oz for six years,' he said.
McCormack maintained a speculative buy rating and $1.50 price target for Brightstar, which is more than three times its Friday closing price of 46c.
Deal brewing
Brightstar has been one of the more acquisitive juniors in the gold space.
Over the past two years, Brightstar has merged with Kingwest Resources, acquired unlisted Linden Alliance, merged with Alto Metals and bought Gateway Mining's Montague project.
In October last year, Brightstar revealed it had made an offer to Sandstone neighbour Aurumin (ASX:AUN) over a potential joint venture.
Last week, the two companies announced they were in merger talks, which would create a larger Sandstone project with a resource of 2.4Moz.
Under the proposed deal, Brightstar would offer one share for every 4.6 Aurumin shares held, implying a value of 11.7c per Aurumin share, a 17% premium to the previous close.
The companies are carrying out mutual due diligence.
'For context, Aurumin's ground is encapsulated entirely within our portfolio,' Rovira said.
'They have 900,000 ounces of resources, and importantly, the old mill site where Troy Resources mined and operated, so a potential transaction here delivers some great open pit resources that would be perfect to go through any mill in the district, but also key licences, permits and infrastructure.'
Rovira pointed out that there were no major mills within 100km of Sandstone, but there were a handful of other junior companies with resources in that radius.
'We think ultimately there's a lot more consolidation that should happen in Sandstone that will be for the betterment of all sets of shareholders and the market in general,' he said.
'I'd love to have a business here in Sandstone that's underpinned by 3-4 million ounces of resources, on mining leases, that is near-term development.
'That opportunity, in my view, doesn't exist anywhere else in the Eastern Goldfields of WA.
'That would underpin a significant valuation for this business in the future, but also probably importantly, it would be a very opportune target for the mid-tier sector, which is looking for growth opportunities, so we're excited about the opportunity that we can build out here in Sandstone.'
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