Key Highlights

•  The BFS base case uses a gold price of A$6,000 per ounce, with undiscounted pre-tax free cash flow of A$104 million and a pre-tax NPV8 of A$87 million.

•  The study estimates an IRR of 417 per cent and is stated to be accurate to within plus or minus 10 per cent.

•  All ore scheduled during the payback period comes from measured or indicated resources.

Carnavale Resources (ASX:CAV) has released a Bankable Feasibility Study (BFS) for the open-pit stage of its Kookynie Gold Project in Western Australia, outlining a short, high-grade operation with low upfront capital. The base case uses a gold price of A$6,000 per ounce.

At that price, the study estimates undiscounted pre-tax free cash flow of A$104 million, a pre-tax net present value (NPV8) of A$87 million and an internal rate of return (IRR) of 417%. The study is stated to be accurate to within plus or minus 10%.

Small capital, short mine life

The unusually high IRR largely reflects the small capital requirement. Pre-operating capital is estimated at A$2.4 million, with payback forecast in month 10 of an 18-month open-pit life. All-in sustaining costs (AISC) are estimated at A$2,721 per ounce, and the breakeven gold price is put at A$2,900 per ounce.

The study indicates that a 10% move in the gold price would shift undiscounted cash flow by about A$20 million, highlighting the project's sensitivity to the metal price.

Maiden ore reserve

The BFS is supported by a maiden ore reserve of 35,600 ounces of gold at 5.0g/t, of which about 70% is classified as proved and 30% as probable. All ore scheduled during the payback period comes from measured or indicated resources.

That distinction matters. An ore reserve is the portion of a mineral resource that has been shown, through studies such as this BFS, to be economically mineable. The reserve is modest in size, which is consistent with the short mine life.

Underground potential remains at scoping level

Separately, the company restated scoping-level figures for an underground operation beneath the Swiftsure pit, with pre-tax free cash flow of A$111 million and a target of 47,000 ounces. These figures come from a scoping study with an accuracy of plus or minus 35%, and no underground ore reserve has been declared. The underground case therefore carries significantly more uncertainty than the open-pit BFS and should not be combined with it as if it were of equal confidence.

Funding and approvals still required

Several steps remain before mining can begin. Carnavale needs about A$24 million in funding before a final investment decision (FID). An ore purchase agreement, on which the BFS is modelled, also needs to be secured before FID, which suggests ore would be sold to a third-party processor rather than treated at a company-owned plant. The identity of any counterparty was not disclosed.

Environmental approval decisions are expected in the first half of 2027, and the company is targeting FID in the same period. Open-pit production is scheduled for the second half of 2027, subject to a positive FID and statutory approvals.

Why it matters and the risks

For a small explorer, a BFS with low pre-production capital can provide a pathway to early cash flow that may help fund further work, including the underground opportunity. The project is located about 60km south of Leonora in the Eastern Goldfields.

However, the forecasts depend on gold remaining well above the breakeven level, on securing funding and an ore purchase agreement on acceptable terms, and on approvals arriving as scheduled. The short 18-month life leaves limited room for delays or cost overruns. The economics are estimates, not achieved results.

The 417% IRR should be read in context. IRR measures returns relative to the capital invested, so a very small upfront spend can produce a very high percentage even when absolute cash flow is moderate in size compared with larger projects.

Carnavale's next milestones are securing funding and the ore purchase agreement, obtaining approvals and reaching an investment decision, with FID targeted for the first half of 2027.