MI6 spies opportunities for more growth after whopping gold resource increase

Gold explorers with active drilling programs are adding ounces to their resource base all the time.

But rarely is the resource upgrade as big as the one Minerals 260 (ASX:MI6) talked about for its Bullabulling project near Coolgardie at the Sydney leg of the Resources Rising Stars Summer Series conference this week.

The resource more than doubled to 4.5Moz (130Mt at 1g/t gold) making it the biggest undeveloped gold resource held by an ASX company outside of the producers.

It was remarkable stuff given MI6 only got the keys to the project in April, promptly kicking off a 90,000m drilling program which has delivered the additional 2.2Moz at a knockdown cost of about $15/oz.

The market had a good idea the Tim Goyder company  was on to a company-maker when Bullabulling was acquired from China’s Zijin for $166.5 million, with MI6’s market cap ratcheting up since acquisition.

So what was a $30m company pre-acquisition became a $200m company six months ago and a $784m (36.5c a share) company this week.

“So to say it’s been a transformational year is an understatement,” MI6 managing director Luke McFadyen told the conference.

Still, the market’s anticipation of a big resource increase meant the market reaction to the 4.5Moz figure – it was at the very, very high end of expectations – has been met with a sedate share price response.

Fair enough. But McFadyen made sure that the record numbers of investor-types at the conference were well aware of the value growth ahead of the company as it works getting Bullabulling into production in late 2028.

“Today, we’re valued at about A$200 an ounce in the ground,” he said.

“If we develop this and build our own plant, we should be valued at somewhere between A$1000 and A$1500 an ounce, so there’s between a five and seven times uplift in our value if we get our execution right,” McFayden said.

It’s why the former OZ Minerals operative reckons MI6 offers the “best developer exposure to the Australian gold price on the ASX via 4.5 million ounces, which is the largest resource not owned by a producer, the second largest open pit resource, and the third largest project not built in Australia yet”.

The next re-rating event for the company is the release in mid-2026 of a maiden ore reserve and the outcome of  preliminary feasibility study. A final investment decision is expected to follow in early 2027.

Gorilla Gold (ASX:GG8):

Simon Lawson of Spartan Resources fame – he took it from a $75m mess to the $2.4 billion company acquired by Ramelius in the space of four years through exploration success – was on hand at the Melbourne leg of the conference yesterday to present for Gorilla Gold (GG8).

Like MI6 has just done, Gorilla in the next week or two will announce a resource upgrade at its high-grade Comet Vale project, about one hour north of Kalgoorlie. The company is trading at 42.5c for a market cap of $310m ahead of the upgrade.

Lawson sits on the Gorilla board as a non-executive and it will come as no surprise that he continues to believe that the best way to drive value in gold stocks is to keep the drill bit spinning.

“Companies have got to have a love of rocks, the right people and supportive shareholders,” Lawson said.

He reckons Gorilla has all three, laying the groundwork to get the share price to the $1 level ($729m market cap) and beyond, “if we can”.

It is certainly having a crack. Drilling in and around its three high-grade former mines – Comet Vale, Mulwarrie and Vivien – in 2025 amounts to 120,000m and it has already seen 650,000oz at about 4/g/t added to Gorilla’s resource inventory.

Comet Vale has been the focus and Lawson said the pending resource update “will hopefully impress a few people in the market”.

“Ultimately it is about making value happen, and drilling does that,” he said.

Lawson said Gorilla was not drilling moose pasture. “We are drilling right next to historic high-grade mines that sat in in fractured ownership,” he said.

In his Spartan days, Lawson and the geology team made the high-grade Never Never discovery next to the struggling Dalgaranga operation in the Murchison which had been trying to get by on less than1g/t feed. It is now being wrapped into Ramelius’ Mount Magnet operation.

Gorilla has $40m in the bank to maintain the pace at the projects, all of which sit in easy trucking distance of third party mills if the company decides to go down that route, or if one of the nearby operators makes the decision for it with a bid for one of the projects, or all three.

CZR Resources (ASX:CZR):

One of the busiest company booths at both the Sydney and Melbourne legs of the conference  was that of CZR Resources (ASX:CZR).

It seems the punters were taken by the presentation by CZR managing director Stefan Murphy who was able to mention that while CZR has a market cap of $86m, its enterprise value is all of $18m thanks to the $68m in cash held from the sale of its Robe Mesa iron ore project to Rio Tinto earlier in the year.

The punters also seemed to like the idea of teaming up with Australia’s most successful private explorer Mark Creasy, who owns 52% of the stock. He is also in joint venture with CZR in is go-forward exploration projects.

They are the Croydon gold project in the Pilbara and the Edamurta base and precious project in the WA’s Mid-West.

The Croydon project is split over two blocks of ground (Western and Eastern) which cover about 40km of the prospective Mallina Basin which is home to the 11Moz Hemi gold discovery made by De Grey and now owned by Northern Star about 50km to the north-east.

The drilling is targeting known epithermal style mineralisation at the Top Camp prospect in the Western block and later, the intrusion related-style of gold that De Grey first put on the map as a new exploration frontier in the broader Mallina Basin with its 2019 Hemi discovery.

No results from an RC drilling program yet but Murphy’s presentation did state mineralisation intersected is consistent with historical results (27m at 3.2g/t gold in 2019), and that a second rig was being mobilised to the site during the week.

First assays are expected in early January.

Drilling is planned for early next year at Edamurta where the potential exists for a repeat of the world-class Golden Grove VMS copper-gold-zinc-silver deposits owned by 29Metal (ASX:29M), about 45km to the south-east.

Genesis Minerals (ASX:GMD):

Genesis’ (ASX:GMD) corporate development officer Troy Irvin was on hand at the conference to answer one of burning questions about gold stocks – have they become overvalued?

According to the Kalgoorlie School of Mines mining engineer and financial markets guy, it seems not.

Irvin said the global industry is making an average of $US2000/oz at current prices and balance sheets are net cash for the first time in more than 20 years.

The $7.4 billion Genesis itself is currently adding $100m cash to the balance sheet each quarter.

“Gold is the place to be here straight off the card here, and Genesis is the gold stock to be in,” Irvin said. Fair enough, the company is on a pathway to increase annual production from 275,000oz to more than 400,000oz.

Irvin said that despite the industry’s strong balance sheets and cash generation, the sector has undemanding valuations from a historical perspective.

“The go to valuation metric in the market – the price to net asset value ratio – currently sits well below previous bull market highs. I would argue that sure, the gold price has got to do the right thing, and the industry probably needs to better promote itself as an institutional grade investment product.

“If those things can occur then there is arguably plenty of upside in valuations,’’ Irvin said.