Magnetic Resources [ASX:MAU] Update
Metals & Mining
Major Gold Resource Expansion Strengthens Growth Outlook
We update MAU with a revised Target Share Price of $2.85; this represents a total upside potential of 106.4%, reflecting a significant increase from the current share price of $1.38 and a 2.80% increase from our Target Share Price from our initiation report from July this year. Magnetic Resources' ongoing exploration at the Lady Julie Gold Project (LJGP) has led to a resource upgrade, reinforcing its position as a prominent gold explorer in Western Australia, strengthening the project's economic outlook and enhancing investor confidence in its scalability and future development.
Lady Julie Gold Project Sees Substantial Increases in MRE
Magnetic Resources has provided an update on its flagship LJGP, an advanced feasibility-stage gold development near Laverton, WA. The project, which includes three open pits, a CIL processing plant, and associated infrastructure, has seen a significant increase in resources and continuity of mineralisation due to recent deeper infill drilling at LJN4. This expansion in gold inventory will aid in building a substantial future mining reserve. The updated Combined JORC 2012 Compliant MRE now stands at 28.13 Mt at 1.93g/t Au, containing 1.75Moz of gold at 0.5/1.5g/t cutoffs, with 75% of the resource classified as Indicated, an increase from the previous 68%. The updated Combined Laverton Region Mineral Resource Estimate has also increased to 33.16 Mt at 1.80g/t Au, containing 1.92Moz of gold.
LJGP PFS Update Confirms Exceptional Project Economics with 135% IRR
LJGP’s August 2024 updated economic study established the LJGP as one of the best gold deposits in Australia. The project is now expected to produce 817,500 ounces of gold, averaging 104,000 ounces per year over an eight-year Life of Mine (LOM). The financial metrics remain exceptionally strong, with a pre-tax Internal Rate of Return (IRR) of 135% at A$3,200/oz and a payback period of just 12 months from the commencement of production. The study indicates a pre-tax Net Present Value (NPV) of $925 million, with total EBITDA of $1.49 billion at a gold price of A$3,200/oz. The LJGP remains within the lower half of the cost curve compared to peer pre-development gold projects in Australia, with a life-of-mine average C1 (operating) cost of A$1,377/oz and an All-In Sustaining Cost (AISC) of A$1,386/oz, inclusive of $8 million in sustaining capital.
Strong Upside Potential as Gold Outlook & M&A Interest Strengthen
We update our valuation for MAU to $2.31 per share in the base case and $3.39 in the upside case with a Price/NAV of 0.48x. As MAU is advancing its LJGP towards development, its market cap does not fully reflect its resource growth potential and strategic M&A appeal. The bullish outlook for gold, supported by rising central bank demand, inflation hedging, and geopolitical uncertainty, provides a favourable macroeconomic backdrop for MAU. With $10 million raised through an oversubscribed placement, the company is well-funded to advance feasibility studies, resource expansion, and ongoing project development. Additionally, ongoing M&A interest, with multiple parties conducting due diligence, presents the potential for a strategic partnership or acquisition. MAU’s growing gold inventory, strong project economics, and strategic funding support long-term upside. Strong banking interest boosts financial flexibility, offering multiple financing and development options and reinforcing confidence in the project’s potential.