Gascoyne Resources is on a rapid ascent to develop its two advanced gold projects in Western Australia’s Mid West.

It has cash in the bank, a substantial resource upgrade, existing infrastructure, low-cost near-term development – and to date, its market capitalisation has been overshadowed by its peers.

Gascoyne has just announced a major mineral resource estimation upgrade which means its two key projects now both contain more than one million ounces of gold, not to mention plenty of upside.

Its 100%-owned Glenburgh project already contained a one million tonne mineral resource, including a high-grade core of 2.1 million tonnes at 4.1gpt gold.

It was shaping up as the company’s flagship project until the highly prospective Dalgaranga gold project took the title in November with a 35% mineral resource estimate upgrade, to 23.0Mt at 1.4 gpt gold for 1.02 million ounces.

Gascoyne managing director Mike Dunbar said the sizeable upgrade put the company in an exciting, unique position.

“Now we’ve got more than two million ounces in resources and I think it’s a really enviable position to be in,” he said.

“There are very few million-ounce projects left in hands of juniors and mid-tiers and we’ve got two of them.

“We are near-term developers of not one but two substantial gold projects.”

Gascoyne easily raised A$2.5 million in a heavily oversubscribed book build in October, which will fund development studies and exploration at Dalgaranga and Glenburgh.

“It shows how well priced the deal was but it also demonstrates how undervalued we are,” Dunbar said.

“Compared with WA’s other independent gold companies with advanced exploration or development projects – Gold Road, Dacian and Blackham – our market cap isn’t even half of theirs.

“Our enterprise value is under $9 per ounce in the ground and all the others are well north of $30 per ounce.

“There’s a massive disconnect between our peers and our share price but we’ve been concentrating on doing the right technical work and not marketing.”

The technical work is paying off and Dunbar is aiming to complete a pre-feasibility study for Dalgaranga early in 2016.

The company is also benefiting from the massive data set from Dalgaranga’s previous production years between 1996 and 2000 with reported cash costs below $A350 per ounce at the time. 

The project, which is an 80:20 joint venture, retains its mining infrastructure, is close to mining services and will be significantly cheaper to develop than Glenburgh, with Dalgaranga’s capital cost estimated around $40 million.

“Dalgaranga is substantially cheaper, it has a lot of soft, free-dig ore, lower mining and input costs and we have a fantastic historic data set,” Dunbar said.

“We’ve got monthly reagent consumption figures and metallurgical recovery rates from when it previously operated and that gives us a huge amount of confidence in developing it and knowing how the ore will behave along with what the costs will be.”

Dunbar said the new mineral resource upgrade boded well for the project to grow towards a 100,000oz per annum producer.

Prior to the upgrade, a June 2015 scoping study for Dalgaranga conservatively estimated 60,000oz production a year generating an operating cash surplus of $A183 million over six years.

Dunbar also expects improved figures for Glenburgh, which will have an updated pre-feasibility study in mid-2016.

The 2013 PFS for Glenburgh indicated a four-plus year mine life at 73,000oz per annum with an all in sustaining cash cost of $A994 an ounce.

“If we can get Dalgaranga to the 80,000 to 100,000oz level for plus-six years, then we’ve got our Glenburgh project with four to five years at 70,000oz per annum – we’re suddenly a plus 150,000ozpa company and there aren’t that many of them out there,” Dunbar said.

“The closest analogy is Doray which started its production life with one asset producing around 80,000ozpa, they had to buy their growth project (Deflector) to build their production base to around 160,000oz.

“Gascoyne not only has the starter project in Dalgaranga, but we also have the Glenburgh project as our growth project as well, which is a fantastic position to be in.

“These two projects of ours are a great base to build on but we are only just scratching the surface with massive exploration upside remaining at both projects.”

The bulk of the recent capital raising will be spent on further exploration at Dalgaranga as well as completing our development studies, with a 10,000m exploration drilling program scheduled to start on November 10 and finish by Christmas.

“There’s been no exploration done outside Dalgaranga’s known mineral resource for 15 years so the potential for additional discoveries is just fantastic,” Dunbar said.

Recent drilling has intersected visible gold and shallow RC highlights include 16m at 4.4g/t to the end of hole, outside the current resource.

Turning to Glenburgh, Dunbar said it was similar geologically to the eight million ounce Tropicana deposit in the Eastern Goldfields and could also turn into a monster project.

“The potential is there for a multi-million ounce system,” he said.

“We’ve already identified one million ounces inside our mining lease and we’ve discovered a six kilometre extension to the mineralisation to the north-east and there’s the potential for another million ounces, if not more.

“There is so much potential around Glenburgh to have another monster project that the real question is: how are we going to fund the development and ongoing exploration?

“And we believe the best way is through cash flow and that’s where Dalgaranga comes in because it’s a lower cost, lower-risk entry into production.”

Glenburgh is also sweetened by the presence of Gascoyne’s 100%-owned, high-grade 24,000oz at 6.4gpt gold Egerton project, 150km away.

“Egerton has open pit potential and we can just truck that across for a cost of around 0.5gpt gold so it’s a really nice ‘sugar hit’ for the early stage of development at Glenburgh,” Dunbar said.

“That’s just from one deposit at Egerton and there’s a lot of other potential there including Gaffney’s Find, which has drilling highlights of 8m at 11.4gpt gold and 4m at 72.3gpt gold.

“Gaffney’s could be another teaspoon of sugar to sweeten Glenburgh even more.”

Gascoyne has a rapid schedule ahead as it works to develop Dalgaranga and complete its feasibility study in the third quarter of 2016.

The Dalgaranga feasibility study will mark a turning point for the minor joint venture partner, who will either have to contribute to future expenditure or revert to a 2% net smelter royalty.

“It’s a very clean cut joint venture and we own all our other projects outright,” Dunbar said.

“We’re uniquely placed – we have two advanced gold projects in WA, both have got more than one million ounces each, both are on granted mining leases and we’re busily progressing towards development.

“The company is currently undervalued but we have multiple catalysts ahead for a share price rerating.”