Exploration adding value

Barton has increased its aggregate resource by 648.1koz, or 40.8%, in the 16 months since June 2024. We estimate that this increase corresponds to a value of A$24.5m (A$0.11/share) at the average in-situ rating of pre-production gold resources listed in Australia, or A$78.4m (A$0.35/share) at Barton’s premium rating.

Valuation: A$2.84/share; maybe A$7.45

At an updated forex rate of A$1.5286/US$ (cf A$1.5616/US$ previously), we estimate that Tunkillia’s optimised pre-tax NPV_7.5 of A$1,416m translates into a post-tax NPV_7.5 of c A$960.6m, or A$4.25/share, or A$1.44–2.15 on a risked basis (cf A$1.38–2.07/share previously) based on EV/NPV multiples. For the first time however, we have also incorporated CGM-Challenger cash flows into our financial model. On a stand-alone basis (using the same macroeconomic assumptions as Tunkillia), we value this asset at c A$194.6m or A$0.86/share. As a contributor to Barton, we value it at exactly the same level, albeit its contribution manifests itself in reducing and deferring future equity financing requirements. On this basis, we calculate that Barton can support the required equity fund-raising for Tunkillia at the current share price such that net debt:equity peaks at 2:1 and still return dividends to shareholders with an NPV₁₀ of A$2.84/share (cf A$1.45/share previously), or A$3.71/share at the current price of gold. Ultimately, if it is able to extend the lives of its operations indefinitely, we calculate that a valuation of c A$7.45/share is possible.

Recent developments

Since our last note on the company on 12 May, Barton has made important progress in pursuing its ambition to achieve production of 150koz per year in a regional hub and spoke model from two mills, with the second stage taking Barton to its target scale via bulk, lower-grade production from Tunkillia complemented by high-grade ore from Tarcoola. This is summarised below.

At Tarcoola-Tolmer:

• Follow-up drilling on the high-grade gold and silver targets was announced on 22 May, expanded on 10 June, and completed on 16 June.
• On 14 July, the company announced that it had completed an expedited soil sampling campaign over a 1.9km² area surrounding the new Tolmer high-grade silver discovery at Tarcoola.
• On 5 August, it announced the extension of the Tolmer high-grade ‘Silver Zone’ in both the ‘upper’ and ‘lower’ horizons, which includes an intersection of 2,240g/t (72.0 ounces per tonne) Ag and 6m at 4,747g/t Ag (152.6 ounces per tonne) in the ‘Western Silver Zone’ along with the emergence of high-grade gold up to 13g/t Au.
• On 24 September, it announced that soil assays at Tolmer were indicating further extensions to the mineralisation and new targets to drill, with the results of structural diamond drilling completed on 25 August expected during early November 2025.

At Wudinna:

• On 30 June, Barton announced the acquisition of the 279koz Wudinna gold project, approximately 200km south-east of Tunkillia, for an initial consideration of A$1.0m (equivalent to A$3.58 per resource ounce), a final settlement of A$4.5m (A$16.13/oz) and a contingent consideration of A$9.5m (A$34.05/oz). The project is composed of the Barnes, White Tank, Clarke and Baggy Green deposits, comprising 5.81Mt at an average grade of 1.5g/t, c 45% of which is contained within the Barnes deposit. Consideration for the transaction is as follows:
  • A$0.5m in cash.
  • A$5.0m in equity, in the form of 6,410,120 shares at a price of A$0.78/share.
  • A$2.0m in equity, in the form of 2,564,048 shares at a price of A$0.78/share held in escrow for 31 December 2026 (being a portion of the contingent consideration in the event that Wudinna’s JORC mineral resource estimate increases to beyond 500,000oz).
  • The remaining consideration is payable up to a maximum of A$7.5m at a rate of A$50/oz over 150,000oz produced in the event that a JORC reserve of no less than 250,000oz has been declared. Note that Barton has the right to buy back this ‘Production Benefit’ at any time prior to the start of gold production for 50% of its calculated value.

• On 10 September, Barton announced that metallurgical testwork at Wudinna had indicated gold recoveries of at least 89.8% and up to 99.3%, with the potential to truck concentrate grading up to 25g/t Au for blending at the CGM and/or Tunkillia or to export it directly from any one of three regional ports.

Financial updates:

• In addition to the share issues with respect to the Wudinna acquisition, on 2 June, Barton announced an A$3m placement in the form of 4,285,730 shares at A$0.70/share (then a premium to the share price) with no brokerage fees in order to fund reserve conversion upgrade drilling at Tunkillia as well as a JORC resource upgrade at Tarcoola (among others).

At the Central Gawler Mill:

• On 21 July, Barton announced that preliminary engineering analysis had confirmed that full refurbishment of the CGM to its original 600ktpa specification was estimated at A$26m (±30%) and that the associated processing cost would be only A$44.40/t (±30%), representing material cost advantages compared to either building a new mill or using third-party toll milling.
• Barton’s 21 July announcement followed a 156.5koz increase in the JORC resource at Challenger (announced on 30 June). A further increase of 90.5koz was announced on 8 September, which increased the total mineral resource estimate from 0.53Mt to over 10Mt ore (ie from less than one year’s worth of ore feed to over 17 years) and from 66koz gold to over 300koz gold, with as much as three years’ worth of material available at a grade of 3.23g/t.
• Barton has now commenced a definitive feasibility study (DFS) on ‘Stage 1’ production at the CGM, as part of a process evaluating de-risked, two-phase operations, comprising initial tailings processing (‘Phase 1’) followed by the introduction of high-grade, fresh ore (‘Phase 2’). The feasibility study is expected to be completed by the end of Q1 CY26, with commissioning of the CGM into production by the end of 2026.

At Tunkillia:

• On 25 June, Barton announced the start of baseline water monitoring programmes at Tunkillia. The baseline water monitoring programme is a key long-lead feasibility and work approvals programme, which requires a minimum of two years’ worth of baseline water data prior to the start of mining and production and is designed to support a Mining Lease (ML) application in late CY26.
• On 18 September, it announced that resource upgrade drilling had begun at Tunkillia’s high-grade ‘Starter Pits’ in the form of an 18,000m reverse circulation campaign and that it was targeting ore reserves and a pre-feasibility study to coincide with its mining licence application at the end of CY26.

Stock market listing:

• On 22 September, Barton confirmed that, following an index rebalancing, completed pre-market, its share had been admitted as a constituent of the S&P Dow Jones ASX All Ordinaries Index, the index of the 500 largest companies in the Australian equities market.

An analysis of the quantitative aspects of the announcements follows.

Challenger resource upgrade

Barton announced a 156.5koz increase in the JORC resource at Challenger on 30 June and a further 90.5koz upgrade on 8 September, following detailed remodelling of gold mineralisation on or near existing development drives within the historical Challenger underground mine (below the 90m RL level). An analysis of the fully updated mineral resource estimate at Challenger, relative to that prior to the first upgrade on 30 June, is as follows:

Exhibit 1: Challenger upgraded mineral resources analysis (September 2025 compared to July 2024)

Source: Barton Gold, Edison Investment Research.

Note: *Cut-off grades are 2.0g/t Au (Deeps), 1.0g/t Au (underground above 215m RL) 0.5g/t Au (Main open pit, Challenger West, SSW) and 0.0g/t Au (TSF1 and TSF2). **Cut-off grade was 2.0g/t Au. Totals may not add up owing to rounding.

The new Challenger mineral resource estimate reflects the original and adjacent ‘SEZ pit’ open pits (Challenger Main), the ‘West’ open pit (Challenger West), the ‘South Southwest’ Deposit, historical Tailings Storage Facilities 1 and 2 (TSF1 and TSF2, respectively) and the historical Challenger underground mine. However, it excludes various lower-grade stockpiles and higher-grade mill residues (eg ball mill rejects), which are located on the run-of-mine pad, but are likely to form a component of early mill feed as the hard rock crushing and grinding circuits are recommissioned for the start of Phase 2 (fresh rock) operations.

All mineralisation is adjacent to the company’s CGM and almost all is located in, on, or adjacent to existing serviceable open pit and underground developments. Aside from the material increase in the overall mineral resource estimate from less than one year’s worth of ore feed to over 17 years (at an average grade of 0.92g/t cf an average head grade of 0.82g/t at Tunkillia according to the latter’s optimised scoping study), as much as three years’ worth of material is reported to be accessible at a materially higher grade of 3.23g/t.

On our estimate of the value of average in-situ gold resources listed in Australia of US$24.08/oz (see our report Gold stars and black holes, published in January 2019), we therefore value Barton’s Challenger resource upgrade at US$5.9m, or A$9.1m or 4.1 Australian cents per share. At Barton’s prevailing rating of US$77.10/oz, we value it at US$19.0m, or A$29.1m, or 13.0 Australian cents per share.

In the wake of the resource increase, Barton has commenced a DFS on the project, with the objective of starting initial ‘Stage 1’ CGM operations by the end of 2026. Initially, this will focus on reprocessing higher-grade tailings (0.6–1.0g/t Au) identified within its historical TSF1 (‘Phase 1’), with the subsequent integration of fresh ore feed from open pit and underground mining (‘Phase 2’). Within this context, there may also be scope to defer capital cost elements (eg crushing, grinding and gravity circuit refurbishment and upgrades) to a later date, which would reduce upfront capital requirements for the first 12–24 months of operation, with such works then being funded from operating cash flow before fresh ore supplies enter the mill feed schedule. The DFS is expected to be completed by the end of March 2026.

After both its acquisition of Wudinna and its mineral resource upgrade at Challenger, we estimate that Barton’s aggregate, group-wide resources now amount to 2.2Moz, categorised as follows:

Exhibit 2: Barton Gold mineral resource estimate*

Source: Edison Investment Research, Barton Gold. Note: *Comprises Tunkillia, Tarcoola, Challenger and Wudinna.

This updated resource estimate compares with an equivalent June 2024 number of 1,587.5koz. On our estimate of the value of average in-situ gold resources listed in Australia of US$24.08/oz (see our report Gold stars and black holes, published in January 2019), we therefore value the 648.1koz increase in Barton’s resource in the intervening 16 months at US$15.6m, or A$24.5m or 11.0 Australian cents per share. At Barton’s prevailing rating of US$77.10/oz, we value it at US$50.0m, or A$74.8m, or 35.1 Australian cents per share.

Development timelines and milestones

Barton’s ambition is to achieve production of 150koz per year in a regional hub and spoke model from two mills, with the second stage taking it to its target scale via bulk, lower-grade production from Tunkillia blended with complementary high-grade ore from Tarcoola. Subject to the usual caveats regarding timelines, Barton’s ambition for achieving its targets remains as follows:

• To validate high-grade ‘Stage 1’ feed and ‘Stage 2’ blending mineralisation at Tarcoola in early CY26.
• To return the existing CGM to production in late CY26.
• To ramp up the CGM to an annual production rate of 20koz per year in the six to 12 months following the mill’s recommissioning (ie CY27).
• To ramp up CGM production to an annual production rate of 30–50koz per year via the addition of higher-grade regional blending materials from CY28.
• To accelerate Tunkillia development as soon as possible thereafter, aiming to bring it into production in c 2029–30 at a rate of 125koz per year or greater, to bring total group production to, or above, its target of 150koz per year.

Note that the opportunity to truck high-grade concentrates from Wudinna to either the CGM or Tunkillia presents an upside opportunity to the overall production profile.

Valuation

Compared to past notes, our valuation methodology regarding Tunkillia as a project remains unchanged. However, in our valuation of the company we have incorporated production from CGM-Challenger for the first time, based on the parameters indicated by the work completed since May. This is shown in the table below. At the same time, we have re-phased and refined our estimate of Barton’s equity requirements, such that it raises sufficient in FY26 to bring the CGM into production using Challenger ore, then benefits from positive free cash flows in FY28 and FY29 and raises a reduced amount of equity in FY28 in order to develop Tunkillia (our estimate for the FY28 raise is now A$56.2m).

Exhibit 3: Edison estimate of CGM-Challenger operating parameters, FY27–35

Source: Edison Investment Research

Analysed as presented in Exhibit 3, CGM-Challenger has an NPV₁₀ of A$194.6m based on discounted cash flows, or A$0.86/share as at 1 July 2025, as a standalone asset. Within the context of Barton however, its principal contribution to the company’s valuation is in the form of reducing future equity funding requirements (see Exhibits 7 and 8).

Unrisked Tunkillia valuation

Barton’s optimised scoping study calculated a pre-tax internal rate of return (IRR) on the Tunkillia project of 73.2% and a pre-tax NPV_7.5% of A$1,416m. Using the same gold price ( US$3,333/oz), but an updated silver price of US$50/oz (cf US$30/oz previously) to mirror the optimised scoping study and in deference to recent strength in the silver market and an updated foreign exchange rate of A$1.5286/ US$, we calculate an equivalent post-tax NPV_7.5 for Tunkillia of A$960.6m, or A$4.25 per share.

Tunkillia valuation risked for two factors

Risk associated with Tunkillia may be assumed to comprise sovereign risk, execution risk, geological risk, metallurgical risk, engineering risk, management risk (possibly also including funding risk) and an overall risk of ‘commerciality’. Three of these risks – sovereign risk, execution risk (in the form of ‘stage of development’ risk, ie scoping study or preliminary economic assessment) and overall ‘commerciality risk’ – may immediately be adjusted for.

Sovereign risk

In our report Gold stars and black holes, published in January 2019, we calculated that companies with completed scoping studies commanded valuations between -4.8% and 50.7% of attributable project NPV, with an average of 11.7% (see Exhibit 166 on page 82 of the report).

According to the Fraser Institute’s 2023 survey, South Australia ranks in the top quartile of jurisdictions most attractive to mining investment, on a par with Finland and Idaho and above British Columbia and the Northwest Territories:

Exhibit 4: Fraser Institute survey of mining investment attractiveness, by jurisdiction (2023)

Source: Fraser Institute

The mean Fraser Institute investment attractiveness score for all jurisdictions is 56.56, which is between the scores for Serbia and California in the exhibit above. If this is deemed to attract an average valuation of 11.7% of attributable NPV, and the top and bottom halves of the sample are presumed to attract valuations with respect to the average and pro rata to their scores, then a company with an average project in South Australia may be expected to attract a valuation of 33.9% of attributable project NPV. For Barton, this would imply an updated valuation of A$1.44/share for Tunkillia alone, excluding any contribution from its other assets.

Tunkillia valuation risked for overall commerciality

In our Gold stars and black holes report, we similarly calculated a statistically significant relationship between the valuation of a company and its IRR, which is demonstrated in the exhibit below.

Exhibit 5: Company enterprise value as percent of attributable project NPV (%) versus project IRR (%)

Source: Edison Investment Research

On the basis of the Tunkillia project’s scoping study pre-tax IRR of 73.2%, therefore, Barton could be expected to command an updated valuation equivalent to 46.0% of its NPV, or A$1.96/share.

Alternatively, if a multiple regression analysis between the IRR and Fraser Institute investment attractiveness scores and a company’s enterprise value/NPV ratio is performed and the resulting equation applied to Tunkillia, a 50.5% enterprise value/NPV ratio is predicted. This implies an updated valuation of A$2.15/share.

A summary of all four of these project valuations of Tunkillia is provided below:

Exhibit 6: Tunkillia valuation summary

Source: Edison Investment Research. Note: *Using spot gold price of US$3,333/oz and a 10% discount rate.

Barton valuation based on Edison assumptions

We have updated our long-term, real gold price forecast to US$1,866/oz in FY26 terms (cf US$1,794/oz in FY25 terms previously), largely based on the assumption that, at some point, positive real interest rates must return to western economies in general and the US economy in particular. Over the period in which we would expect Tunkillia to be in production (FY30–37), we estimate the gold price will average US$1,846/oz in real US dollar terms, in which case – at the costs indicated in its optimised scoping study – the project is somewhat marginal in terms of returns to shareholders. However, at the price of US$3,333/oz used in the optimised scoping study, and including production from CGM-Challenger, we estimate that it could support a fund-raising of A$16.7m in FY26 at the current share price and one of A$56.2m in FY28 (such that the net debt:equity ratio peaks at 2:1 in FY29 when all capex has been expended) and return dividends to shareholders with an NPV₁₀ of A$2.84/share (cf A$1.45/share previously) in 1 July 2025 money terms. At the current price of gold of US$3,830/oz, this valuation increases by a further 30.6% to A$3.71/share.

Exhibit 7: Barton Gold EPS, maximum potential DPS and NPV of DPS, FY22–37 (Ac/share)

Source: Edison Investment Research. Note: Based on the execution of Tunkillia project to the parameters set out in its initial scoping study only, using a spot gold price of US$3,333/oz and a 10% discount rate.

From this level of A$2.84/share on 1 July 2025, we would expect the valuation of Barton to increase and to peak at A$4.49/share (also on 1 July 2025 money terms) on the cusp of the company’s first material potential dividend to shareholders in FY31.

A bridge chart of the evolution of Tunkillia’s valuation contribution to Barton is as follows:

Exhibit 8: Evolution of Barton Gold valuation (October 2025 cf May 2025)

Source: Edison Investment Research

As noted previously, the standalone NPV₁₀ of CGM-Challenger on the basis of a discounted cash flow analysis of the financial forecasts made in Exhibit 3 is A$194.6m, or A$0.86/share, which may be rationalised in the chart above as comprising the direct contribution of CGM-Challenger to dividends of A$0.24/share plus the contribution made to delaying and re-phasing future equity issues (and thereby reducing potential dilution) of A$0.54/share and A$0.08/share.

Within this context, Barton’s other assets may prove significant multipliers of value. Although small in terms of ounces, Tarcoola boasts a low-grade oxide stockpile with a grade of 1.20g/t, a low-grade sulphide stockpile with a grade of 1.40g/t and the Perseverance pit with a grade of 1.99g/t – all of which are significantly in excess of Tunkillia’s average resource grade of 0.80g/t and its average life-of-mine head grade of 0.82g/t. In addition, Barton is targeting a further c 365koz gold in higher-grade zones to be fed into the mill in the first two to three years of operation and potentially as much as 120koz per year to be fed into the mill over its full eight-year processing life. Possible sources for such material include potentially extending the Starter pit and deepening and smoothing the eventual Main pit floor. Whether early or late in the life of the operation however, we estimate that future exploration success and/or future optimisation studies have the potential to add materially to Tunkillia’s NPV.

Aside from grade, our valuation is also sensitive to the extent to which Barton is able to extend its life of operations. In our base case, we assume that it would raise equity in FY26 and FY28, would pay off outstanding net debt in early FY31 and that it would then generate an average of A$256.7m per year for the remaining seven years of its life, which it would pay out as (maximum potential) dividends at an average rate of c A$0.89/share. If it is able to extend this performance into the future, our valuation of the company varies as shown in Exhibit 9, below.

Exhibit 9: Barton Gold life of operations’ extension sensitivity (A$/share)

Source: Edison Investment Research. Note: *Using spot gold price of US$3,333/oz and a 10% discount rate. **Assumed at the rate of A$5.2m per year.

Moreover, while an extension of Barton’s operations’ lives ad infinitum would increase our valuation of the company today by A$2.07/share, from A$2.84/share to A$4.91/share, this valuation would continue to rise with time to settle at A$7.45/share from FY37, as depicted in Exhibit 10 below:

Exhibit 10: Barton Gold maximum potential DPS and NPV of DPS, ad infinitum (Australian cents per share)

Source: Edison Investment Research. Note: Based on the ad infinitum extension of Barton's operations, with Tunkillia at its core, using a spot gold price of US$3,333/oz and a 10% discount rate.

Accepting the ad infinitum valuation shown in Exhibit 10, we calculate that Barton’s P/E ratio in the years FY30–37 (ie those for which we have full financial forecasts) would range from 5.2x in FY30 to 22.2x in FY37. This compares with Capricorn Metals’ current consensus forecast P/E range of 20.6–10.4x for FY26–28 (ie the same order of magnitude; source: LSEG Data & Analytics, 30 September 2025).

Exhibit 11: Financial summary

Source: Company sources, Edison Investment Research