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Tuesday, October 11, 2016 Derek Macpherson

Austral’s High-Grade Amancaya Likely to Grow


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Last week, Austral Gold Ltd. (TSXV:AAM, ASX:AGD) provided an exploration update from its ongoing exploration program at Amancaya. The surface program doubled the strike length of known structures suggesting significant resource growth is possible over the existing 447k oz AuEq (all categories) resource. This is important since production from Amancaya is expected to play a key role in Austral’s plan to expand from the current ~50k oz AuEq to 150k oz AuEq per year by the end of 2017. To follow up on this surface work, Austral is undertaking a 13.3km drill program. We expect these pending drill results along with the completion of the mill expansion at Guanaco and initial production from Amancaya to be key catalysts for the stock over the next 6 months.


Exploration activities expected to continue at Amancaya. Exploration work at Amancaya has two different tracks. The first is to make Amancaya production ready and to that end, Austral has undertaken an extensive infill program (13.3km) with the goal of upgrading the current 425k oz AuEq (1.67 million tonnes at 8.09 g/t AuEq) Inferred resource to Indicated (Figure 1). The company plans to process the ore at the new plant at Guanaco (73km by road from Amancaya) which is expected to be finished in late 2016, with first production from Amancaya expected in early 2017. The second goal is to expand the existing resource and the results released last week highlight the project's potential by increasing the defined strike of the known veins from ~20km to ~42km. To follow-up on the surface mapping, the company plans to carry out a trenching program and geophysical surveys to identify targets for resource expansion drilling in 2017.


Amancaya plays important role in Austral’s expansion plans. Austral is focused on being a low-cost producer and growing annual production from ~50k oz AuEq to ~150k oz AuEq by year-end 2017. The company currently is producing ~50k oz AuEq from Guanaco in Chile, and expects to add another ~50k oz AuEq from its Casposo gold-silver mine in Argentina (51% owned). Following the completion of the new plant at Guanaco (late 2016), the company is likely to start producing from a starter pit at Amancaya in early 2017. In our view, the market is not giving Austral full credit for the planned production expansion and their ability to deliver excellent AISC costs (US$830/oz AuEq) from the challenging Guanaco mine over the last three years.

Company description: Austral Gold Ltd. (TSXV:AAM, ASX:AGD) is a junior mining and exploration company with three key assets in South America: The Casposo mine in Argentina, the Guanaco gold and silver mine and the Amancaya project in Chile.


Derek Macpherson | VP Mining Analysis
Sunneva Bernhardsdottir | Associate, Mining Analysis
Victoria Ellis Hayes | Associate
 
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