Over the past two years, there has been an understandable reluctance among juniors to move into the development phase due to escalating costs and labour shortages.

But for gold developer Brightstar Resources, the transition looks like a no-brainer.

The company is coming off a pivotal 2023 which kicked off with a merger with fellow gold junior Kingwest Resources, bringing together the Laverton and Menzies gold projects in Western Australia’s Goldfields.

What followed was a board reset in which geologist and former Canaccord Genuity investment banker Alex Rovira was appointed as managing director.

Brightstar raised A$10 million in equity last year with a focus on “institutionalising” its register.

Rovira says the register has gone from about 1% institutional this time last year to around 20% today.

Path to production

Another major milestone for Brightstar was the release of a scoping study in September 2023.

The study looked at a staged development, starting with a large open pit complex and underground mine at Menzies, followed by phase two at Laverton, which would see four open pits at Cork Tree Well and one underground mine at Alpha developed.

That would see 322,000 ounces of gold produced over an eight-year mine life at C1 cash costs of A$1765 an ounce, or average annual production of 40,000oz.

The study was based on just 30% of Brightstar’s 1.02 million ounce resource base.

Pre-production capital costs were estimated at just A$22 million.

“Keeping that capex low was incredibly important,” Rovira said, referring to current market conditions.

The reason the capex is so low is that Brightstar already owns a 485,000 tonne per annum processing plant – a rarity for a junior.

Brightstar estimates the replacement cost of the plant is A$60 million – more than double the company’s current market capitalisation.

Using a gold price of A$2900 an ounce, the scoping study returned a post-tax net present value of A$103 million, utilising around A$53 million of accumulated tax losses, and a payback period of 18 months.

Rovira described the financial metrics as excellent and pointed out that at the current gold price of A$3100/oz, the NPV increased to A$153 million.

“That’s essentially a 50% increase in NPV from A$2900 to spot,” he said.

“What that delivers for us is a sector-leading return on investment and for me, that’s best characterised as the project NPV over the pre-production capital. So every dollar we spend to build this, how many dollars do we get back?

“And if you look around the market, what that will show is that number, based on A$2900, is exceptional for the explorer and developer space.”

Using a gold price of A$3000/oz and a 25% risk discount, Sydney’s Evolution Capital values Laverton and Menzies at projects at $93 million – more than triple Brightstar’s current market capitalisation.

Early cashflow

While a standalone operation is the main game for Brightstar, the junior is actually already in production at Menzies via a joint venture with contractor BML Ventures.

Mining at the Selkirk pit began in August 2023 and wrapped up in February. The estimated 35,000t of ore at 5 grams per tonne gold has been trucked up the road to Genesis Minerals’ Gwalia plant with processing to begin today.

Evolution expects the toll treatment campaign to generate A$4 million of cash for Brightstar.

Brightstar’s last reported cash position was A$4.8 million at December 31.

Rovira says the company is looking at the potential for further small-scale open pits that can be toll-treated.

“To really continue to generate organic free cash so we’re less reliant on equity markets and we can put that cashflow into more drilling and development studies,” he said.

Drill and develop

Brightstar’s focus for 2024 is continued resource growth and conversion and further studies.

The first two diamond holes from Cork Tree Well, reported two weeks ago, included an “exceptional” hit of 34.4m at 7.94g/t gold from 43.5m, including 8.4m at 13.47g/t, 3m at 7.05g/t and 15.6m at 8.23g/t.

It was followed up this week with a “spectacular” hit of 27.6m at 17.77g/t from 51m.

“We knew there was mineralisation there but that grade exceeded our expectations,” Rovira said.

Alongside exploration, a prefeasibility study is underway and on track for completion early in the September 2024 quarter.

“We’d like to be in a position at the start of next year – call it 12 months from now – where we have both project areas fully permitted, a definitive feasibility study completed and be making FID,” Rovira.

If all goes to plan, Brightstar will be in production by late 2025, putting it at the front of the queue in terms of Aussie gold developers.