Magnetic Resources' Strategic 2Moz Gold Discovery Draws Major Interest in Laverton Belt

• Magnetic Resources, a gold exploration company in Perth, Australia, has discovered close to 2 million ounces in the Laverton area, the second biggest gold field in West Australia
• The company has delineated three deposits through extensive drilling at a low discovery cost of $9/oz
• A resource upgrade is expected in January 2025, followed by a feasibility study in March that will include plans for both an open pit and underground mine
• The project boasts robust economics based on the pre-feasibility study at a gold price of A$3,200/oz - NPV A$925M, IRR 135%, and 12-month payback
• Magnetic Resources is well-funded with A$12M in the bank, is engaged in discussions with banks for project financing, and is also entertaining potential M&A interest

Western Australia has long been known as a premier gold mining jurisdiction, home to massive deposits like Kalgoorlie's Golden Mile. But a new discovery is shaping up to be the state's next major gold field - and one small exploration company is positioned to reap the benefits. Magnetic Resources (ASX: MAU) has unveiled a major new gold discovery in the Laverton region, with nearly 2 million ounces delineated to date. The project, located 300 km north of Kalgoorlie, was staked by Magnetic in 2017 and has rapidly grown through focused exploration drilling. Magnetic Resources' Managing Director George Sakalidis explains:

We didn't have anything to start with. We pegged the land and then we acquired a bit of extra land. In that period between then and now, we've found three deposits from intensive drilling.

The drilling has certainly been intensive - and effective. Over 170,000 meters in about 1,900 holes has been completed so far at a discovery cost of just $9 per ounce. This is an incredibly low figure by industry standards that demonstrates the quality of the mineralization.

We've spent over $20 million at a discovery rate of $9 per ounce, which is extremely good.

Recent results have been particularly impressive, with thick high-grade intercepts like 76m @ 2.5 g/t and 24m @ 5 g/t gold.

Interview with MD George Sakalidis

Major Growth on the Horizon

The centerpiece of Magnetic's holdings is the Lady Julie North 4 deposit, which hosts 1.5 million ounces. But that is just a starting point according to Sakalidis.

With all the extra drilling we'll be doing, a resource upgrade is due in January. It will get much bigger but I don't know the exact amount. The grade I believe will probably get better but we have to wait for the numbers.

Those updated numbers will feed into a feasibility study expected in March that will examine development scenarios.

That will include an open cut and an underground, because the material that we're finding actually goes down to a kilometer down dip.

The underground potential could significantly increase the project's production profile and mine life. Magnetic is targeting initial output of 150,000 ounces per year, which would establish it as a substantial mid-tier producer.

Location, Location, Location

While the rocks have cooperated so far, Magnetic has also benefited from the project's ideal location. It is surrounded by major producers who are facing a looming ore shortage.

We actually have a data room open to them. We happen to be next door to some big miners with big processing plants. Their processing plants are short on inventory. One of them is just restarted their processing plant, the other one's working with less than half capacity.

This opens the door to potential partnerships that could significantly reduce capital costs and accelerate Magnetic's path to production. The nearby mines are "only 10-15km away," making trucking ore for toll treatment a straightforward proposition.

The project also benefits from existing infrastructure in the area.

There's actually a gas pipeline that's used by our neighbors so we'll be able to tap into that when running. We're literally through 400 meters south of the Dalton road, which is a road used by all the mining vehicles, so we don't have to build major roads or anything.

The Bottom Line

Magnetic Resources has a huge discovery on its hands with a clear path to expanding it further. It is fully funded to complete its feasibility study after which it will explore its development options.

The combination of a large high-grade gold system and a great location surrounded by hungry producers makes Magnetic a prime takeover candidate. As Sakalidis sums it up:

Most likely it [a transaction] will be at a company level...The interest would be from the companies next door with the big plants and running out of feedstock.

If an acquirer does not emerge, Magnetic appears to have a viable path to production on its own.

The project makes a lot of money. It's a second highest grade open cut in Western Australia at close to two grams per ton. The project based on a A$3,200/oz gold price returned an NPV of $925 million, an EBITDA of $1.4 billion, payback in 12 months, and a 135% Internal rate of return (IRR).

Those are incredibly robust economics for a junior producer that will only get better at the current gold prices.

The Investment Thesis for Magnetic Resources:

• Multi-million ounce gold discovery in a Tier-1 mining jurisdiction
• Low discovery costs of just $9/oz point to robust project economics
• Upcoming resource update and feasibility study are major catalysts
• Potential to partner with nearby hungry mills to fast-track production and minimize capex
• Attractive takeover target given strategic location and large resource base
• Well-funded to advance the project following recent A$12M capital raise
• Proven management team with track record of exploration success and corporate transactions

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