Golden opportunity: The rare tale of an explorer becoming a producer

Finding a company ready to move “from the dream to the reality” is an exciting prospect that is bound to pique the attention of investors – especially if that transition means generating cash.

And that’s exactly how Calidus Resources (ASX: CAI) caught the eye of Yarra Capital Management portfolio manager Joel Fleming, who selected Calidus as one of his favourite stocks during his Meet the Fund Manager session with Reach Markets in April.

Australia’s newest gold producer, Calidus controls 100% of the Warrawoona and Blue Spec gold projects in the East Pilbara district of the infamous Pilbara Goldfield in WA, as well as 50% of the nearby Spear Hill lithium project.

In June 2022, the company achieved operating cash flow positive status – attaining the coveted position just one month after pouring its first gold bars in May.

Racing towards steady state production of 90koz per year as part of its Stage 1 Conventional CIL Plant operation, Calidus is already delivering an All-In Sustaining Cost of $1,290/oz, significantly less than the gold spot price of $2,524.

Mr Fleming suggested during his April session that as the Perth-based Calidus “begins to ramp up and deliver, there is a really strong opportunity for a re-rating”.

Stage 2 of the operation will boost production to 130koz per year and will be funded from existing cash flow, he said.

The Blue Spec definitive feasibility study is due this quarter and is expected to bring crucial value to the project, utilising a higher-grade ore that will be processed through a sulphide plant.

Calidus is also in possession of a highly prospective 1,063sq km lithium project in the Pilbara that has yielded rock chip assays grading up to 2.75%.

Mr Fleming said he expects a long future in lithium, and noted that while this project is at an early stage, it is located “in the right area” and initial drilling had already begun.

The company plans to spin out the project before the end of CY22.

Recent demergers and subsequent IPOs of lithium assets has proven to be a lucrative strategy on the ASX, with Green Technology Metals (ASX: GT1) and Winsome Resources (ASX: WR1) all trading at substantial premiums from their previous value under the parent entity. At one point, GT1 reached almost 5x IPO price, and WR1 almost 3x.

Australian lithium mining giant Mineral Resources (ASX: MIN) saw its shares jump over 15% last Friday on news it might be considering spinning out its lithium assets.

Calidus has ore reserves of 547koz Au at 1.2g/t and an eight-year mine life that may be extended upon conversion of its 1,714koz Au at 1.21g/t mineral resources into reserves.

Click here to view more videos from Joel Fleming’s The Insider: Meet the Fund Manager session.

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