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By Team Ace Investors

Company Overview

Barton Gold Holdings Limited (“BGD” or the “Company”) is a gold exploration company with a total attributable 1.3Moz Au JORC Mineral Resources endowment (40.6Mt @ 1.0 g/t Au), a pipeline of advanced exploration projects and brownfield mines, and 100% ownership of the only regional gold mill in the central Gawler Craton of South Australia. Barton’s immediate focus is on continuing exploration in its two large-scale mineral systems at the Tarcoola Project and the Tunkillia Project, where the latest technical work demonstrated significant new upside opportunities in historically under-invested assets. The Tarcoola Project is located 70 km NNW of Barton Gold's Tunkillia Project in South Australia and comprises ~1,640km2 of tenements, including the open pit Perseverance Mine at the brownfields Perseverance Deposit. On 26 April'2023, the company announced an updated JORC (2012) compliant Mineral Resource Estimate (MRE) for the Tunkillia Project '223 Deposit. The updated MRE delivered a +45% increase or ~12 Mt increase in tonnage to 38 Mt and +20% or ~189,000 oz increase in gold inventory to 1.15 Moz AU compared to the October 2020 MRE at an AISC cost of ~$12/oz. The MRE also provides an attractive emerging profile, with ~80% of MRE tonnes and ounces within 200m of surface and ~58% or 670koz of the new 223 Deposit MRE in the Indicated category, 225koz Au in the shallow supergene blanket, and 300m long high-grade core respectively. The Company’s goal is to become South Australia’s largest independent gold producer (150kozpa) in two stages: (i) Leverage Barton’s fully permitted Tarcoola Mining Lease and mill to restart operations, generate cash, and fund Stage 2 Expansion; (ii) Build a second mill at the Tunkillia Project, funded wholly or partly by Stage 1 operations, for large-scale, bulk efficient open pit operations.

Investment Rationale

Executed multiple major exploration programs to further expand the JORC 2012 Mineral Resource Estimate (MRE) at Tunkillia

During the year ended 30 June 2024, Barton has executed multiple major exploration programs to further expand the JORC 2012 Mineral Resource Estimate (MRE) at Tunkillia. It has also completed geophysical mapping of the regional architecture of the Tarcoola Goldfield to inform testing of prospective targets within a historical high-grade producing goldfield. This was followed by a large-scale regional drilling program to evaluate theorized structural targets in key areas. As a result of these programs, the Company published (on 28 November 2023) a detailed new 3D map of the Tarcoola Goldfield’s sub-surface structural architecture, announced (on 11 December 2023) an MRE increase at Tunkillia of ~224,000oz Au, announced (on 4 March 2024) a further MRE increase at Tunkillia of ~115,000oz Au, and shortly after the end of the reporting period announced (on 3 July 2024) an MRE increase at Tarcoola’s Perseverance Mine, and (on 16 July 2024) a Scoping Study outlining a competitive 130,000ozpa Tunkillia gold operation. The resulting updated Tunkillia JORC MRE is 1.493 million ounces and the total Company JORC MRE is 1.588 million ounces. This has provided the scale platform necessary for the Company’s development strategy. Barton has also completed several key corporate initiatives including the rationalization of (withdrawal from) non-core historical joint venture interests and the conditional sale of approximately 1,400oz gold-in-concentrates for which the Company received a provisional payment of US$2.82 million (AUD 4.25 million) representing 90% of the estimated final value.

Announced substantial growth in MRE at Tunkillia

Over the last 12 months, the company announced three MRE updates for Tunkillia, which added ~530,000oz Au for ~A$15/oz (‘all in’ basis). Barton has rapidly grown the neighboring Tunkillia Gold Project (Tunkillia) to a JORC MRE of 1.5Moz Au (51.3Mt @ 0.91 g/t Au) over the past two years. The updated 1.5Moz Au Resource provides a critical mass on which to now model baseline economic analyses while pursuing neighboring high-grade targets like Tunkillia's Area 191 and Tarcoola. These have significant potential to enhance overall project economics and support Stage 1 development by leveraging its existing mill.

During the quarter ended 31 Dec’2023, Barton completed major Tunkillia growth drilling programs of more than 20,000m of reverse circulation (RC) and diamond (DD) drilling. The program delivered an initial expansion of Tunkillia JORC 2012 Mineral Resources in and around the 223 Deposit to 1.38Moz Au.
On 4 Mar’2024, the Company announced a new 115,216oz Au MRE for Tunkillia’s Area 51 zone, bringing the total Tunkillia MRE to 1.5 Million ounces Au (51.3Mt @ 0.91 g/t Au) including 820koz Au (~55%) in the indicated category. The Area 51 deposit is a satellite deposit approximately 4 km north of the Tunkillia Project. Approximately ~80% of tonnes and gold ounces are within the 200m of surface, and the central zone contains a higher-grade ~300m core. Over the last 12 months, the company achieved ~530koz Au growth in MRE at an estimated average 'all-in' cost of only A$15 per ounce. Additionally, the drilling from the Area 191 target confirmed visible high-grade gold, including an intersection of 3.83m @ 68.0 g/t Au from 104.1m depth (downhole).
On 3 July 2024, the Company announced an updated Tarcoola MRE, increasing the MRE contained in the Perseverance Mine’s open pit floor to approximately 20,000 ounces at an average grade of ~ 2 g/t Au within 60 to 80 meters of the open pit floor. Barton has rapidly grown the neighboring Tunkillia Gold Project (Tunkillia) to a JORC MRE of 1.5Moz Au (51.3Mt @ 0.91 g/t Au) over the past two years. The total Tarcoola MRE is now 29.5koz Au (0.54Mt @ 1.70 g/t Au), with ~45% classified as ‘Indicated’ category, including 9.6koz Au contained in lower-grade existing stockpiles next to the Perseverance Mine. Barton's regional development strategy is to establish large-scale, bulk open pit mineralization combined with nearby higher-grade blending feed to realize the benefits of economies of scale, and to potentially support an early 'Stage 1' operation leveraging the existing Central Gawler Mill to process these materials. A preliminary Scoping Study is now underway to test a prospective 5Mtpa processing model and to identify key cost drivers for subsequent optimization. On 1 Oct’2024, the company confirmed further high-grade open pit Perseverance Mine assays at the Tarcoola Gold Project (Tarcoola).

Announced an Initial Scoping Study for Tunkillia with an initial NPV_7.5% of ~A$512m, IRR of 40%, and a payback period of 1.9 year

On 16 July 2024, the Company announced the results of an Initial Scoping Study for Tunkillia. The Scoping Study is a preliminary technical and economic assessment of Tunkillia’s prospective viability for potential development on a large-scale, bulk open pit basis. The primary objectives of the study were to –(i) evaluate indicative capital costs, operating costs, and mine design optimization on a 5Mtpa basis; (ii) validate prospective economies of scale and identify key drivers of cost and value; and (iii) identify key opportunities for subsequent optimization and growth. The study proposed a 5Mtpa bulk open pit mining and processing operation, targeting capital economies of scale, and outlined a competitive potential operation with a projected initial 6.4-year life-of-mine (LoM) delivering production of ~130,000ozpa gold and ~311,000ozpa silver at an all-in sustaining cost (AISC) of only circa A$1,917 / oz gold, with an estimated 40% unlevered IRR and 1.9 year payback period from start of production. Tunkillia is estimated to produce a total of ~833,000oz recovered gold and ~1,993,000oz recovered silver during a 6.4-year processing period, for an average annual production of ~130koz Au gold and ~311koz silver. Estimated LoM revenue is ~A$3 billion, with an estimated operating pre-tax cash margin of ~A$1.3 billion. The Scoping Study has evaluated Tunkillia on a 'standalone' basis, with the process plant and associated process infrastructure delivered via an EPC contract and mining performed by a third-party contractor. Key highlights-

Initial Scoping Study completed for Barton’s South Australian Tunkillia Gold Project (100%), for potential 5Mtpa bulk open pit mining and processing model targeting capital economies of scale
Initial 6.4-year life-of-mine (LoM) and total ~8-year project life (including construction), with a total of 30.7Mt processed materials grading an average 0.93 g/t gold (Au) and 2.52 g/t silver (Ag)
Initial LoM estimates include:
Total payable metal of ~833koz Au and ~1,993koz Ag
Avg annual production of ~130koz Au and ~311koz Ag
Avg operating cash flow of ~A$1,626 / oz Au (net of by-product Ag credits), and
Avg All-in Sustaining Cost (AISC) ~A$1,917 / oz Au (net of by-product Ag credits), would currently rank Tunkillia #17 of 47 Australian gold operations reporting AISC / oz Au produced.
Higher-grade 'Starter' pit during the first ~18 months of mining and processing:
4.9Mt mill feed averaging 1.26 g/t Au and 3.32 g/t Ag
Total production of ~181koz Au and ~420koz Ag, and
Avg operating cash flow of ~A$2,265 / oz Au (~A$396m total) (net of Ag credits).
~A$374m initial capital cost (incl. ~A$70m EPC), before owner costs, pre-strip, and contingencies
Initial Net Present Value (NPV)_7.5% ~A$512m, 40% IRR and 1.9-year payback (unlevered, pre-tax)

ACE’s Recommendation

Barton’s goal is to become South Australia’s largest independent gold producer. During the year, Barton has executed multiple major exploration programs to further expand the JORC 2012 Mineral Resource Estimate (MRE) at Tunkillia. It has also completed geophysical mapping of the regional architecture of the Tarcoola Goldfield to inform testing of prospective targets within a historical high-grade producing goldfield. This was followed by a large-scale regional drilling program to evaluate theorized structural targets in key areas. As a result of these programs, the Company published (on 28 Nov’2023) a detailed new 3D map of the Tarcoola Goldfield’s sub-surface structural architecture, announced (on 11 Dec’2023) an MRE increase at Tunkillia of ~224,000oz Au, announced (on 4 Mar’2024) a further MRE increase at Tunkillia of ~115,000oz Au, and shortly after the end of the reporting period announced (on 3 July 2024) an MRE increase at Tarcoola’s Perseverance Mine, and (on 16 July 2024) a Scoping Study outlining a competitive 130,000ozpa Tunkillia gold operation. On 16 July 2024, the Company announced the results of an Initial Scoping Study for Tunkillia. The study proposed a 5Mtpa bulk open pit mining and processing operation, targeting capital economies of scale, and outlined a competitive potential operation with a projected initial 6.4-year life-of-mine (LoM) delivering production of ~130,000ozpa gold and ~311,000ozpa silver at an all-in sustaining cost (AISC) of only circa A$1,917 / oz gold, with an estimated 40% unlevered IRR and 1.9 year payback period from start of production. We believe that the recently announced upgrade to the Tunkillia MRE and Scoping Study will underpin the development case for stage1 of the Tunkillia project. The stock closed the day at A$0.280/share and presents an investment opportunity. So, we would like to recommend a SPECULATIVE BUY rating on the stock.

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