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KAISER REEF LTD (KAU) - High-Grade Gold Mining: Kaiser Reef's Path to Expansion

• Andrew Musgrave

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Unlocking the riches beneath Australia's historic goldfields takes vision, expertise, and careful strategy. In this revealing conversation, Jonathan Downes, Managing Director of Kaiser Reef Limited, takes us deep into the company's transformation from small player to emerging force in high-grade gold production.

Kaiser Reef now controls three underground gold mines across Australia's eastern states, with two currently producing and a third poised for reactivation. The recent acquisition of the Henty gold mine marks a watershed moment, bringing substantial immediate cash flow that could generate over $50 million annually at current gold prices. The impact was immediate – a record 1,200+ ounce gold pour within just ten days of taking ownership, as the operation processes higher-grade ore than its historical average.

What makes Kaiser's story particularly compelling is their multipronged growth strategy. At the A1 mine, Australia's longest-running gold operation, the company has invested over $25 million to reach virgin territory below historical workings. This transitions them from "remnant mining" leftover material to accessing untouched high-grade deposits with greater tonnage potential. Meanwhile, the historic Maldon mine stands ready for reactivation, representing another significant production opportunity. With strategic partner Catalyst Metal maintaining a 19.99% stake, Kaiser gains valuable alignment with a major Victorian goldfields player.

Having secured $40 million in recent funding, Kaiser is well-positioned to execute their expansion plans at a time when gold prices are setting records. For investors seeking exposure to producing gold assets with clear growth pathways, Kaiser Reef offers an intriguing opportunity to participate in the renaissance of Australia's storied gold mining districts. Follow their journey as they unlock the potential of these historic but still richly endowed underground operations.

Andrew Musgrave Host

Welcome again to ASX Briefs, where we unpack the strategies and stories behind ASX-listed companies shaping Australia's resource landscape. And today we're joined by Jonathan Downes, the Managing Director of Kaiser Reef Limited, a high-grade gold producer that's rapidly expanding its footprint in Australia's historic goldfields. Jonathan, thanks for joining me today and welcome to the ASX Briefs podcast.
 
 Jonathan Downes Guest

Thank you very much, Andrew.
 
 Andrew Musgrave Host

Now, Jonathan, for investors that may be unfamiliar with Kaiser Reef, can you just provide a brief overview of the company? 

Jonathan Downes Guest

So, Kaiser is an ASX listed. It's fairly small ASX listed underground high-grade gold producer. Listed underground high-grade gold producer. We operate two mines in the eastern states of Australia, and we also have a large third underground mine that's currently on care and maintenance. We own that 100% and we're intending to get that back into production too. 

Andrew Musgrave Host

Okay now, Jonathan. The acquisition of Henty marks a significant shift for Kaiser Reef, so what does this transaction mean for the company's production profile and strategic direction? 

Jonathan Downes Guest

Well, look from a strategic direction, it's an excellent fit for Kaiser. It's again, it's a high-grade underground gold mine. It's very fitting for us because it's a profitable mine. It's generating cash flow right now and it brings in substantial cash flow. In fact, if you were to take last year's production and project it at the current gold price, we'd be looking at north of $50 million in free cash flow. So that will be an excellent addition to our other operations which are at different stages of production. So, it's a fantastic fit. 

Andrew Musgrave Host

Okay, and with two operational gold projects now in play, you've now got the infrastructure, workforce and production platform in place. So, what's the plan to grow beyond the current production rate? 

Jonathan Downes Guest

So, we have many opportunities across the three mines. The one that's on care and maintenance obviously bringing that into production is going to be a priority for us. It was a spectacular mine. It's Hey Day, it's a multi-million-ounce high-grade producer in the past and it's got a lot of existing infrastructure that's already there. We keep it on care and maintenance with a decline and so bringing that on will obviously have a big impact on our production rate. 

The Henty mine also. It's currently at full capacity. So de-bottlenecking various elements of that for example the processing plant 300,000 tonne per annum processing plant is operating at 300,000 tonnes per annum. So, any kind of expansions we can do along those bottlenecking points and we have some great early leads will have a direct impact as well. And then the A1 gold mine. It's a small mine but it's a very high grade mine. It's Australia's longest running gold mine will be a fantastic addition for us too, but that is currently going through development. We have several loads being prepared for stoping, and they're due to be sort of, I guess, brought into larger scale production, really accessing those in a big way, and entering proper production in about late September October.
 
 Andrew Musgrave Host


 OK, and just touching on the Henty gold mine, since the completion of the Henty acquisition, you've already reported a record gold pour of over 1200 ounces in the first 10 days. So, what factors contributed to the strong operational start? 

Jonathan Downes Guest

So, with any mine you get variability in grades and we're going through a pretty good high-grade zone at the moment and still treating higher than usual grades. The reserve grade is about four grams, but over the past few years it's been running at between three and three and a half grams per ton. So, to be feeding four, four-ish gram gold gives us a much stronger production rate and in fact it has many benefits. It also has a sort of a knock-on effect of effectively reducing the all-in sustaining costs as well. So, a really great point to be starting that transition to ownership. 

Andrew Musgrave Host

Now Catalyst Metal remains a 19.99% shareholder post-transaction. So, what does their ongoing involvement mean in terms of collaboration or strategic alignment, especially with potential joint venture at Maldon? 

Jonathan Downes Guest

Yes, so Catalyst thus far have been an excellent partner with us, and they are a very big player in the Victorian goldfields. Obviously, I can't speak for them, but we certainly are looking forward to working together to unlock the opportunities, the overlooked opportunities, across the Victorian goldfields. So that gives us a really strong hub to access all the surrounding goldfields that made Victorian gold such a big producer 100 years ago. 

Andrew Musgrave Host

OK, and the company has been busy drilling at the Nova Zone below the A1 gold mine, returning impressive intercepts, so can you share more about the development strategy and what those results mean for near-term production.

Jonathan Downes Guest

Yes, so the A1 mine has been for the past 40 years, all the production has been what we call remnant mining, that is, mining what's been left over by other operators. So, the best and the highest grade has been taken and in fact occasionally we've been operating profitably as we've worked our way through it. But the prize is to get below what the old-timers exploited and get into untouched material which should deliver a lot more material per vertical metre and a lot more grade, and so we're very excited that we're actually at the bottom now. 

We've invested over $25 million to get there, and it's always a big job. Once you get somewhere you don't just immediately start producing. You've got to develop those ore bodies and get them ready for production, and you've got to establish the services such as ventilation and power down there. But that is all done. It's in production now. We've mostly been focused on developing to access all these ore bodies so we can get into proper steady state production and, as I touched on, it's in late September, early October we hope to start dropping the first of the proper stopes that we've developed. So that'll be a turnaround for that mine. 

Andrew Musgrave Host

Okay, and following a successful $30 million placement and the $10 million Auramet facility, what's the capital allocation roadmap from here? So how are you balancing exploration, production and potential M&A? 

Jonathan Downes Guest

Well, it's very early days and so exact allocations really haven't been decided. The first step is we're starting to build our cash balance. We have a very strong cash position right now, and it's our belief that that's going to grow quite strongly. So how we deploy that is something we're working on, but I personally believe that getting the Maldon mine into production will be one of the higher priorities that we have. 

Andrew Musgrave Host

Okay, Jonathan, and to wrap things up, with gold prices at record highs and multiple levers to grow production and cash flow, what would you say are some of the key catalyst’s investors can look forward to over the next 12 to 18 months? 

Jonathan Downes Guest

We believe that we've made a very successful transition to ownership of the Henty mine, and I think that the revenues and the profitability of that mine will surprise people on the upside. We're a small company so we're well leveraged to our success there. Bringing on the Maldon mine will be very exciting. That was really a truly spectacular mine in its era and all the ore there is still open-ended and very high-grade. So, I think we've got plenty of future upside to really grow our production and I think we've just started really on our journey effectively and a nice suite of assets to get us up to a decent production rate. 

Andrew Musgrave Host

Okay, Jonathan. Well, it's been great to chat today, so thanks very much for your time and we look forward to further updates from Kaiser Reef in the upcoming months.
 
 Jonathan Downes Guest

Thank you very much, andrew, really appreciate the opportunity.
 
 Andrew Musgrave Host

That concludes this episode of ASX Briefs. Don't forget to subscribe and we look forward to catching you on our next episode.