In the wake of the De Grey Mining Ltd takeover, it’s hard to look past Kairos Minerals as the new standout single-asset gold exploration and development play in Western Australia’s Pilbara region.
As close followers of the mining industry would know, De Grey reawakened the world to the Pilbara’s gold potential with its Hemi discovery, within an hour’s drive of the bustling iron ore port of Port Hedland, in 2019.
Through intensive drilling, De Grey grew the Hemi resource to 11.2 million ounces of gold before agreeing to a $5.5 billion takeover from Australian gold major Northern Star Resources Ltd. The transaction completed in April.
Kairos Minerals Ltd’s flagship Mt York Project, just 50km south-east of Hemi, is not yet close to matching its neighbour in terms of scale.
But a scoping study handed down in November last year indicated that the makings of a robust mining operation are already there and there is plenty of scope for improvement as Kairos moves through the study phase towards a final investment decision.
Building off a solid base
Mt York has been mined before. Previous owner Lynas Gold extracted about 125,000 ounces between 1994 and 1998 from the Main Trend and a series of small open pits on the main project tenements.
Kairos inherited a similar-sized resource (123,000 ounces) when it acquired the project in 2016 and since then has done an admirable job of expanding the resource more than 10 times. It now stands at 43Mt at 1.0 g/t Au for 1.4Moz.
Importantly, the current resource is contained within a single pit on the Main Trend – a significant point of difference to peers that have 1Moz-plus resources spread over multiple smaller pits.
A single pit with coherent gold mineralisation makes for a much more attractive development proposition.
Based on Kairos’ track record for growing the resource and the recent addition of new exploration ground, it is not difficult to see Mt York eclipsing 2Moz soon.
The new ground comes courtesy of a deal struck in August last year in which PLS (formerly Pilbara Minerals) agreed to sell Kairos the gold and base metals rights over 367km2 in the region surrounding Mt York.
This package includes a 1.5km extension to the Mt York Main Trend on E45/2241 to the north-west where PLS previously intersected significant shallow gold including 16m at 2.43 g/t Au from 16m and 4m at 3.32 g/t Au from 4m.
“We know that ground’s mineralised,” Kairos managing director Dr Peter Turner says. “There’s been some previous work done by PLS looking for lithium. They certainly hit the main gold zone.
“We were very keen to pick those gold rights up, but we also gained gold rights to another 367km2 to the south and east of us, which is really the blue sky.
“It’s look-alike geology to Mt York. Nobody’s ever done any exploration there.”
As part of the same transaction, Kairos agreed to sell PLS a handful of non-core assets – six prospecting licences and an overlying mining lease application – for $20 million in cash.
Kairos banked the first $10 million instalment in September last year and expects to receive the second before the end of this year, leaving no concerns around funding exploration at Mt York in the near-term.
“We’re cashed up, we’ve got a really good project, we know there’s extensions to the mineralisation that are not currently part of the resource estimate and the plan is to make Mt York one of the largest free-milling gold projects in WA,” Turner says.
No refractory issues
The inclusion of “free-milling” as a descriptor is with good reason.
There is a clear misconception among some investors that like parts of the Hemi orebody, Mt York is a refractory deposit, meaning that additional processing would be required to liberate the gold from the ore.
This typically results in a higher upfront capital cost to develop processing infrastructure and higher ongoing operating costs.
However, extensive metallurgical testwork on Mt York ore has shown there are no problems extracting gold through a simple carbon-in-leach process.
“It is a very clean ore,” Turner says. “That will hold us in good stead going forward.”
Kairos is continuing to undertake metallurgical testwork to optimise the flowsheet as part of a pre-feasibility study (PFS) that is underway and due for completion in the March quarter next year.
Biggest drill program Mt York has seen
In late April, Kairos kicked off the 2025 exploration program at Mt York.
Comprising more than 30,000m of RC and diamond drilling over two phases, it will be the largest program undertaken on the project since the company took ownership.
The first phase of the program is targeting resource growth, primarily on the 3.0km Main Trend and the 1.5km north-west extension on the PLS tenement E45/2241.
Phase two will seek to upgrade inferred resource ounces to the higher confidence indicated category in preparation for both resource and reserve calculation.
Kairos anticipates announcing an updated Mineral Resource Estimate in the September or December quarter this year, which would feed into the PFS.
Turner believes the drilling has the potential to throw up some surprises, including the discovery of higher grades, and additional drilling will be allocated to tracing the continuation of higher-grade shoots along the whole trend.
While there are plenty of similar-grade open pit gold mines operating very profitably today, Mt York’s modest 1.0 g/t resource could be a reason that investors are yet to fully latch on to its potential.
With a market capitalisation of about $55 million and $12 million in cash, Kairos shares certainly trade on a relatively undemanding valuation of $31 per resource ounce.
Any number of higher grade hits outside the existing resource would likely bring with them greater market recognition.
Rapidly moving to FID
In parallel to the drilling and other PFS activities, Kairos is also in negotiations with the traditional owners of the project site, the Nyamal Aboriginal Corporation (NAC), over a native title mining agreement.
Turner is pleased with progress with the NAC and believes an agreement could be expedited, which would clear the way for the Mt York mining lease application to be granted.
Once the PFS wraps up in the March quarter next year, Kairos will move to a definitive feasibility study (DFS) on Mt York before thinking turns to arranging project financing and taking FID in the second half.
In the meantime, the company intends to keep a watching brief on other gold plays in the Pilbara, although it is clear Turner doesn’t feel a pressing need to make any corporate moves himself.
“We feel spending $7 million on the drilling that we’re going to do in the next four months is going to be the best bang for buck we can give our shareholders,” he says.
“When you’ve got another 1.5km that you know is mineralised and it doesn’t currently sit within the resource then the obvious thing to do is to go and drill that.”
Despite the Northern Star-De Grey takeover ranking as one of the biggest recent deals in mining, the Pilbara is arguably still underappreciated as a gold province, a point that appears to frustrate Turner.
“Everyone thinks it’s Woop Woop, but it’s not,” he says. “There’s some very large gold deposits up there.
“I’m hoping at some stage they will look and understand where we are and the quality of our project.”
KAIROS MINERALS INVESTOR SNAPSHOT
- ASX CODE: KAI
- MARKET CAPITALISATION: $55.25 million (at 2c share price)
- SHARES ON ISSUE: 2.63 billion
- CASH (at 31 March 2025): $11.77 million
- ENTERPRISE VALUE: $43.48 million
- KEY ASSET: Mt York Gold Project, Pilbara region Western Australia (Mineral Resource 43Mt @ 1.0 g/t for 1.4Moz gold)
THE PROACTIVE TAKE
“Investors might be discounting Kairos for Mt York’s modest resource grade and a misconception that it is a refractory orebody, but they shouldn’t. This is a big single-pit development story with resource growth about as assured as you can get. Funds from last year’s asset sale to PLS put Kairos in an absolutely enviable position and the proximity to Northern Star’s 11.2Moz Hemi Gold Project is the icing on the cake.”