Commodities | Sep 25 2025
This story features VAULT MINERALS LIMITED.
For more info SHARE ANALYSIS: VAU
The company is included in ASX200, ASX300 and ALL-ORDS
While a new three-year plan by Vault Minerals points to rising gold production, it also points to a pivot for free cash flow.
-FY26 expected to be a transitional year for Vault Minerals
-Three-year plan points to strong production outlook
-On-market buyback marks inaugural return to shareholders
-Analysts suggest investors are under-appreciating future cash generation
By Mark Woodruff
ASX-listed midtier gold producer Vault Minerals ((VAU)) offers a clean blend of near-term cash generation and longer-term growth as the hedge book rolls off through FY26, leaving the company some 95% exposed to spot gold by 1H FY27.
UBS notes the shares have outperformed peers over the past two months, helped by the gold price rally, succession announcements and the launch of an on-market buyback of up to 10%.
Management’s new multi-year guidance frames FY26 as a transition year, with production expected to dip -6–13% versus FY25’s volume before returning to growth through FY28. While FY26–FY27 production guidance landed -5% below consensus, Barrenjoey comments guidance for costs and capex is broadly in line.
Importantly, the FY26–FY28 plan points to as much as 20% production growth from the FY26 base, funded entirely from internal cash flows.
Macquarie views the three-year outlook as a “reserve base case”, likely to be exceeded via incremental extensions at Mt Monger and Deflector.
Formed in mid-2024 via the merger of Silver Lake Resources and Red 5, Vault is now a diversified gold producer with four core operations: Leonora (King of the Hills and Darlot) in WA’s Leonora district, Mt Monger and the gold/copper Deflector mine (both in WA), and Sugar Zone in Ontario, Canada.
Leonora is the flagship, base-load asset with 10-plus years of mine life. Ongoing drilling and a Stage 2 open-pit expansion at King of the Hills have lifted Leonora ore reserves by 39% to 2.8moz, with the broader Leonora mineral resource now exceeding 6.2moz.
Acquired in 2022, Sugar Zone remains on care and maintenance while a turnaround plan is finalised. Over the past 18 months, drilling has increased reserves by 20% to 389,000oz, with total resources at 1.23moz; management targets a restart in 2027.
While strategy and the operating team are unchanged, a CEO search is underway. Long-serving Managing Director Luke Tonkin plans to step down by mid-2026.
Guidance in more detail
Vault’s FY26 gold output is forecast between 332,000-360,000oz with costs (AISC) of -$2,650-2,850/oz.
The lower production forecast for the year ahead (FY26) compares with 380,985oz produced in FY25 and is mainly the result of lower output at Deflector, reflecting the shift to an owner-operator model and the start of new mining areas, explains Jarden, while production at Mount Monger and KoTH is expected to remain steady.
The current mining services contract at Deflector concludes in December quarter 2025. While the broker explains the subsequent transition will temporarily lift costs and reduce production, it is also expected to deliver lower operating costs over time.
Group costs are expected to rise over FY26 due to lower production and transition costs at Deflector, while at Mount Monger the increase reflects additional expensed mining as the Santa strip ratio falls, even though absolute spend declines from FY25, Jarden explains.
At Leonora, higher cash costs from increased material movement are largely offset by a significant inventory credit, note the analysts, which masks the higher absolute spend in dollar terms.
Thereafter, higher throughput and new ounces are expected to drive production back up: FY27 guidance is for 360,000-390,000oz, and FY28 for 370,000-400,000oz.
Production growth is driven by expanded plant capacity at Leonora as well as the restart of production at Sugar Zone in FY28.
FY28 guidance represents a significant ‘beat’ versus Petra Capital’s prior 328koz forecast largely due to the restart of Sugar Zone.
The Sugar Zone restart largely offsets the decline at Deflector, this broker explains, and is seen as a positive step toward sustaining Vault’s medium-term gold production.
Improving cash flows
Barrenjoey believes Vault’s potential for future cash generation is undervalued relative to many peers.
While Vault may not deliver the strongest sustainable production growth, this broker suggests the company offers a compelling free cash flow pivot. This is expected to arise from three factors: rising cash flow in FY27–28 as most hedges roll off by end-FY26; completion of capital spending at the KoTH mill by December 2026; and a favourable shift in stripping and grades at Mount Monger from FY27–28.
These factors bode well for both cash flow and margins, even as costs are guided to remain in the mid-$2000s/oz range. Management has indicated FY26 unit costs will be broadly in line with the prior year, with elevated waste stripping and development investments setting the foundation for improved output in subsequent years.
Despite sustained investment, Vault generated significant free cash flow in FY25.
Buoyed by record Australian-dollar gold prices (peaking above $5,000/oz) and a 221% year-on-year jump in earnings, the gold miner ended June 2025 with $685.9m in cash and no debt.
Moelis notes a spot price scenario could justify a valuation of around 90c, with FY27 trading on an 18.7% free cash flow (FCF) yield and forecast cash of around $1.5bn, placing Vault among its preferred gold exposures.
Valuation
Macquarie’s analysis shows net asset value (NAV) more than doubles under a spot price scenario, rising 141% to $1.02 per share.
At spot prices, Moelis notes Vault is trading on an 18.7% free cash flow (FCF) yield in FY27 and is expected to finish the year with around $1.5bn in cash, or roughly 22c per share.
This broker continues to nominate Vault as one of its preferred gold exposures.
Capital management
Marking the first capital return to shareholders, in August Vault’s board demonstrated confidence in the outlook by announcing an on-market share buyback of up to 10% of issued shares over the next 12 months.
Commenting after “solid” FY25 results in August, Ord Minnett explained the buyback was consistent with management’s capital management framework, given the King of the Hills platform is now established and future capital requirements are clearly defined.
Outlook
Timely delivery of the King of the Hills expansion and higher mining rates are critical for the longer term growth outlook, Macquarie asserts, while incremental mine life extensions at Deflector and Daisy (Mount Monger) remain key to the mid-term outlook.
Moelis and Jarden have downgraded to Hold (or equivalent) from Buy due to the strong rally in the share price which has eroded any upside to the brokers’ respective targets, which are marginally adjusted up and down.
UBS also downgraded its rating to Hold from Buy, citing softer production guidance and after assuming management will moderate the pace of the buyback following the recent share price strength.
Moelis and Jarden are not included in FNArena’s daily monitored brokers, but UBS’s downgrade to Hold stands out against two remaining Buy ratings, though Ord Minnett is yet to refresh its research following management’s updated guidance.
Ironically, UBS has the only price target (out of the three) that is currently above the share price (72c).
Outside of daily coverage, the average target from four brokers is 68 cents, with Petra Capital’s 79c the high marker and Jarden’s 49c the laggard. Here, there are two Buy ratings and two Holds.
For more details: See Stock Analysis.
Shares in Vault Minerals last traded at 66c, having fallen from above 70c following this week’s market update. They roughly doubled over the year past.
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