Small Caps | 1:52 PM
Recurring revenues underpin a substantial growth runway for Chrysos as its PhotonAssay technology challenges centuries-old gold assay methods.
- Chrysos PhotonAssay gains global traction
- Recurring revenues underpin attractive unit economics
- Strong moat and potential inflection point
- Deployment pipeline points to faster growth
By Mark Woodruff
Displacing the centuries-old fire assay process with a faster and cleaner alternative at a similar price, Chrysos ((C79)) provides technology for analysing mining samples, particularly for gold.
Initiating research coverage this week, RBC Capital highlights the company’s PhotonAssay process as a demonstrably superior alternative to fire assay, a non-discretionary process for gold miners globally.
Improving turnaround times, worker safety and environmental outcomes, the process uses high-energy X-rays to analyse samples of up to 500 grams in around two minutes.
Unlike fire assay, it does not destroy the sample or require lead and other hazardous chemicals.
Chrysos retains ownership of its PhotonAssay units and leases them to customers under long-term contracts, generating high-quality recurring revenue at gross margins of 70%-80%.
RBC anticipates a long and visible growth runway for the company, supported by an expanding contracted pipeline across 23 countries and adoption by major miners including US-listed Barrick Mining and Newmont Corp ((NEM)), along with and Gold Fields listed in South Africa.
It’s noted an increasing number of units are also being deployed directly at major mine sites.
At FY26 results in August, management, for the first time, provided longer-term deployment targets pointing to a near doubling of the installed base over the next three years.
Inflection point reached?
Combined with accelerating industry adoption and increasing operating leverage, Shaw and Partners felt the August result provided further evidence PhotonAssay was reaching a commercial inflection point.
Evidence is building that the assay service is moving beyond early adoption towards becoming an industry standard, the broker noted.
Growing adoption is translating into volumes, with samples processed rising 67% to 11.3m.
Yet, with only around 7% of the estimated global addressable market captured, Shaw suggests the growth runway remains substantial.
Management defines the total addressable market (TAM) as 610 gold mining sites globally producing at least 40,000 ounces annually, comprising 200 hub laboratories and 410 direct mine sites.
The 46 units deployed across 34 active sites at end-June 2026 represent just 8% penetration of this market, with RBC Capital forecasting penetration will rise to 34% over the next decade from below 10% currently.
History and competitive moat
PhotonAssay was developed by CSIRO, with the underlying intellectual property protected by a global portfolio of patents.
Chrysos acquired the technology in December 2016, with the first unit commencing commercial operations in mid-2018.
At the time of its ASX listing in 2022, Chrysos had eight units deployed and another 25 committed.
There are currently no known competing or copycat technologies, with Chrysos’s rapid deployment and deepening customer relationships making it increasingly difficult for potential rivals to close the gap, RBC Capital suggests.
The company’s competitive moat is further reinforced by an actively defended patent portfolio, highly specialised components and established relationships with all major global laboratory groups.
PhotonAssay units are operated by independent laboratories, including ALS Ltd ((ALQ)), Bureau Veritas in France, London-based Intertek Group and MSALABS, along with SGS SA on the Swiss Exchange.
Ongoing development of next-generation units and extensions into solution analysis is also expected to further widen the technology gap.
Recurring revenue/funding of unit deployments
RBC highlights this model generates recurring revenue and a return on invested capital (ROIC) of around 50%.
Combining a recurring minimum monthly payment with volume-linked upside, annuity-style cash flows are generated that build as the installed fleet matures, the broker explains.
Utilisation increased from 44% in FY25 to 57% in FY26 as recently deployed PhotonAssay units ramped up, and mining industry adoption increased.
RBC estimates each machine costs around -$4m to manufacture and install, while generating approximately $2m of annual revenue at a gross margin of around 75%.
Over an estimated 20-year life, this equates to around $40m of cumulative revenue and an internal rate of return (IRR) of approximately 50%.
The trade-off is near-term cash flow. Despite earnings (EBITDA) margins above 30%, RBC expects free cash flow (FCF) to remain negative for the next five years as Chrysos funds its expanding fleet.
A recently secured $200m syndicated debt facility is expected to fund deployment of at least 15 new units annually without requiring additional equity.
FY26 results
When Chrysos released its FY26 results, revenue of $88.1m (up 33% on FY25) came in at the upper end of guidance and earnings (EBITA) of $27.2m were slightly ahead.
The key positive, according to Shaw, was the strengthening forward outlook.
Record contracting provided materially better visibility over FY27 deployments and revenue.
Combined with accelerating industry adoption and increasing operating leverage, Shaw felt the result provided further evidence PhotonAssay is reaching a commercial inflection point.
Operating costs rose 22% to around -$63m, broadly in line with the broker’s -$62m forecast.
FCF after capex was a negative -$20.2m, better than the -$31m forecast by the analyst, largely due to the timing of capex.
The FCF outlook is improving materially, RBC points out, with the gap between operating cash flow (OCF) and capex narrowing each year.
Chrysos ended FY26 with net debt of $33.6m, comprising $25.9m of cash and $59.4m of drawn debt, leaving around $140m undrawn on its $200m facility.
After the full-year result, Bell Potter upgraded its EPS forecasts for Chrysos by 85%, 40% and 44% for FY27, FY28 and FY29, respectively, largely reflecting a material reduction in depreciation following an extension to the assumed useful life of deployed units.
The broker explained growth in minimum monthly assay payments (MMAP) was driven by expansion of the installed base.
A significant increase in additional assay charges (AAC) also reflected higher PhotonAssay fleet utilisation as stronger global exploration activity drove increased sample volumes.
Seven units were deployed during FY26, taking the installed and operational fleet to 46 units at June 30.
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