On Tuesday, the dual-listed company released an updated exploration target for its Sunday Creek epizonal-style gold-antimony deposit, 60km north of Melbourne.

Southern Cross had a previous exploration target of 4.4-5.1 million tonnes grading 7.2-9.7 grams per tonne gold equivalent for 1-1.6Moz AuEq, with managing director Michael Hudson publicly stating the company was aiming to reach 3Moz by mid-2025.

In a February 19 initiation note, RBC Capital Markets analyst Alex Barkley forecast the exploration target to reach 2.7Moz AuEq by mid-year.

This week, Southern Cross announced an updated target of 8.1-9.6Mt at 8.3-10.6g/t AuEq for 2.2-3.2Moz of contained AuEq.

“Sunday Creek continues to demonstrate why it is one of the most significant high-grade gold-antimony discoveries made in recent times,” Hudson said.

“The dramatic expansion of Sunday Creek’s exploration target – doubling in both tonnage and contained metal while maintaining exceptional grades over the last year – while only representing 67% of the drilled area, represents another key milestone for Sunday Creek.”

Tier one discovery emerging

While it’s still pre-resource, Southern Cross believes it has a tier one discovery on its hands.

The company claims to have the highest hit rate globally of 60 individual 100 gram metre intersections from the 73.3km of drilling completed to date, which Barkley described as a “remarkable” strike rate.

A few of the better intersections have included 455.3m at 7.2g/t gold, including 1m at 2318g/t gold and 331.5m at 6.8g/t gold, including 13.1m at 91.7g/t gold.

Seventy vein sets have been wireframed within the main drill area.

The company has hit mineralisation down to 1120m and it remains open at depth. The grade is improving at depth.

Just 3km of the trend has been tested to date.

Last week, Southern Cross extended Sunday Creek’s strike length by 15%, or 200m westward of Christina, to 1.5km.

Drilling at Christina intercepted the mineralised zone over 330m and identified six new vein sets and 12 instances of visible gold with assays including 1m at 20.8g/t AuEq, 0.5m at 76.1g/t AuEq and 0.5m at 41.3g/t AuEq.

Christina is not included in the exploration target.

Southern Cross is planning to drill 60km between now and the September quarter and release a third exploration target by the end of the year.

The Fosterville comparison

The Fosterville gold mine put Victoria on the map in a global gold sense.

Kirkland Lake Gold’s discovery of the high-grade Swan Zone transformed the operation into the world’s most profitable gold mine due to its staggering 58.8g/t gold reserve grade.

While Swan has been mined out, the success of the mine paved the way for Kirkland Lake to buy Detour Gold and eventually be taken over by the world’s largest gold miner by market capitalisation, Agnico Eagle Mines.

Southern Cross has pointed out that Victorian epizonal systems, including Fosterville, continue to at least 2km depth.

Canadian mining entrepreneur Pierre Lassonde (after who the Lassonde Curve is named) is a major shareholder of Southern Cross and sees Sunday Creek as a “Fosterville lookalike”.

Last year he named Southern Cross as one of his two favourite juniors and described its drilling numbers as “unbelievable”.

The Fosterville comparison is a key reason Southern Cross has a big institutional backing in North America.

The company recently listed on the TSX via a merger with original parent company Mawson Gold and management were invited to close the TSX this week while in Toronto.

Towards development

Southern Cross remains well-funded with A$18 million cash.

The company is carrying out environmental baseline studies and has described the Victorian government as supportive.

Initial metallurgical test work on two holes was released last month and demonstrated a high proportion of non-refractory native gold (82-84%).

Gravity and bulk flotation resulted gold recoveries of 93.3-97.6%, while flotation returned 88.9-95% recovery.

The project will benefit from antimony by-products, which are expected to account for 21-24% of revenue.

Antimony is trading at record highs due to critical shortages and its use in defence applications.

Based on his forecast exploration target of 2.7Moz, Barkley assumes a 700,000t per annum operation to produce around 185,000oz of gold equivalent per annum from early 2029.

“The site would have a low all-in sustaining cost of A$397/oz due to antimony by-product credits, and over A$400 million per annum of free cashflow,” he said.

“We forecast A$500 million capex, and A$650 million of new capital (A$400 million of equity and A$250 million of debt) to fund exploration, studies, and project construction.”

Barkley’s forecasts are based on RBC’s long-term price forecasts of US$2200/oz of gold and US$16,000/t of antimony but using spot antimony prices of around US$45,000/t would lift its projected revenue contribution from 27% to 45%.

Barkley initiated coverage at outperform (speculative risk) with a net asset value and price target of A$4.20. At spot, NAV is A$10.60. Southern Cross was trading at A$3.60 yesterday, giving it a market cap of around A$800 million.