Gold project developer Ausgold Ltd (ASX: AUC) recently released new drilling results from its Katanning gold project in Western Australia, which have caught the eye of the analyst team at Canaccord Genuity.
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Firming up a larger project
Ausgold is looking to develop the Katanning project, where it has already completed a definitive feasibility study (DFS) envisaging a mine operating for 10 years, producing 140,200 ounces of gold per year for the first four years.
The mine is expected to cost $355 million to build and pay itself back in just 13 months.
The company is continuing to drill at the project, however, and this week announced some of its recent results.
The company said "significant intercepts" were returned from a further 77 reverse circulation and diamond drill holes targeting grade increases within the central zone of the gold deposit.
Results returned included 11m at 7.88 grams per tonne of gold and 21m at 3.27 grams per tonne.
There were also "wide zones of mineralisation encountered in areas of Inferred Resources beneath the current DFS Update pit design and outside the current Ore Reserve, highlighting strong potential for reserve growth and mine life extension''.
The company said further:
Broad, high-grade intercepts (were) returned from in-fill drilling at the Jinkas and White Dam lodes within the first two years of planned mine life, increasing confidence in grade continuity in the initial phases of the DFS Update mine plan.
Ausgold Executive Chair John Dorward said regarding the results:
The ongoing drilling campaign continues to deliver exceptional results across multiple fronts at the Katanning Gold Project. The consistency of high-grade results from both in-fill and extensional drilling continues to strengthen the Katanning growth story. With extensions of the mineralisation confirmed beneath the DFS Update pits and outside current reserves, we see a clear opportunity to grow the production base and extend mine life, while simultaneously optimising the early years of production. With regional drilling at Nanicup Bridge now complete, we are looking forward to reporting results from this exciting satellite project along with the balance of results from the Katanning Gold Project.
The team at Canaccord Genuity analysed the most recent results and has maintained their speculative buy recommendation on Ausgold shares, and a price target of $3.45.
If this were achieved, it would represent a 238% return, with Ausgold shares currently trading at $1.02. The shares are up 85.5% over a 12-month period.
Ausgold is currently valued at $567 million.
