Compelling Story Drives Pantoro Gold Rally

This story features PANTORO GOLD LIMITED.
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The company is included in ASX300 and ALL-ORDS

Junior miner Pantoro Gold has repaired its balance sheet, swung to positive cash flow and offers compelling reserve and grade upside at its Norseman project. But is it too late to invest?

-Pantoro Gold swings to cash flow positive in FY25
-Balance sheet fixed and capital structure simplified
-Norseman offers above-guidance upside in reserves and grade
-Gold mining stocks have run hard in recent months

By Greg Peel

Pantoro Gold ((PNR)) operates its 100%-owned, high-grade Norseman Gold Project, located 180km south of Kalgoorlie in Australia’s premier mining jurisdiction.

A proven gold province with 5.5Moz of historical production since 1935, Norseman currently hosts multiple open-pit and underground operations, alongside numerous high-grade lodes yet to be mined at depth and along strike.

Pantoro reported an FY25 financial result last month that delivered substantial year on year growth across all key financial metrics, including a $112m turnaround from a -$46m loss in FY24 to $66m profit in FY25. Compared with Bell Potter’s forecasts, revenue was slightly lower on the treatment of gold call option deliveries; in-line for earnings, and lower for profit on the broker’s under-estimation of D&A and corporate costs.

Pantoro finished FY25 with $176m in cash and bullion, no debt and minimal hedging in place (6% of forecast FY26 production). FY26 guidance is unchanged 100-110koz at cost of $1,950-2,250/oz, which implies higher production and lower costs compared with FY25 (84.6koz at $2,261/oz).

Based on the USD gold price and AUDUSD exchange rate at the time of writing, the AUD gold price was $5882.90.

The highlight of the result, in Bell Potter’s view, was Pantoro’s improved financial performance, strengthening of its balance sheet and simplification of its capital structure. This included the closure of its US$12.5m convertible debt facility and a 1:17 share consolidation.

Pantoro delivered substantial earnings margin expansion, lifting from 11% in FY24 to 55% in FY25. Bell Potter forecasts this to increase to 65% in FY26.

Free cash flow turned from a -$12m outflow in FY24 to $78m cash generation in FY25. Pantoro continues to guide to a medium-term aspirational production target of 200kozpa-plus, predicated on filling the mill to 1.4Mtpa with high grade ore of 4.5g/t Au.

Reserves

Last month Pantoro released its annual Mineral Resources & Ore Reserves (MROR) estimates.

Group inventory has remained broadly unchanged year on year, Moelis notes, once adjusted for the miner’s divestment of its Halls Creek asset. The uplift in gold price assumptions (A$1,400/oz above last year) has served to partially offset depletion.

While the net outcome from the release is effectively neutral, Moelis notes Pantoro hasn’t really had the opportunity (yet) to significantly drill across the portfolio with the specific intention of resource conversion.

Moelis sees material opportunity to progressively convert the company’s sizeable underground resource base into reserves, but this will require both time and capital, with the prospect of a meaningful lift in reserve grades (and ultimately feed grades) further down the track.

Moelis would hope to see a step change in the MROR update in 12 months’ time following a material uplift in exploration spend/activity. 

Compelling

Morgans has calculated a base case net asset value for Pantoro of $1,638m based on assumed production growth delivered via an uplift in head grade. The broker expects Pantoro may beat its FY26 production forecasts as mining rates and grade increase.

Norseman has the ingredients for a lucrative future, Morgans suggests, being infrastructure rich and cashflow positive. This broker models average annual earnings of $267m and an earnings margin in excess of 50% over the next eight years.

Following a ramp-up of operations, Pantoro is beginning to hit its straps operationally, Morgans believes. Given the historical production head grade, high grade resource inventory and encouraging drilling, this broker’s base case assumes an ongoing lift in head grade to 3.5g/t Au by FY29 — growing production to more than 150kozpa.

The company’s debt has been extinguished, ownership consolidated, and cash reserves are building, which Morgans thinks materially de-risks a balance sheet that historically has been a challenge for the business.

Shut the Gate?

By end-September, the USD gold price had risen 11% for the month and 47% in 2025 to date. Investors are typically slow to get onto a commodity price-based rally, but have recently rushed into gold mining stocks as the gold price has continued to soar. The issue is as to whether valuations have now overshot.

Moelis recently downgraded its investment view on Pantoro to a Hold rating from Buy on valuation grounds following the stock’s 73% rally in just three months. While the business is in solid shape, a rating upgrade would require either greater conviction in the peak production profile or a sustained further leg-up in gold prices, Moelis suggests.

On the broker’s numbers, spot pricing implies a valuation of $5.80/share, suggesting the stock is fully valued at current levels, while under the same scenario (spot) peers retain upside.

Bell Potter last month upgraded its rating on Pantoro to Hold from Sell and raised its price target to $5.35 from $4.40, but qualified that while operational delivery is improving and the pathway to this objective is becoming clearer, there is a risk the market is pricing some of this growth in ahead of time.

In initiating coverage of Pantoro Gold, Morgans has set a Hold rating with a discounted cash flow-based price target of $5.33. With the Norseman gold project wholly consolidated, and with no hedging or debt, Morgans thinks Pantoro is positioned to realise solid free cash flow while establishing access to high grade mining areas.

 Pantoro appears to have turned a corner operationally and Morgans sees upside to FY26 guidance given recent performance. However, in Morgans’ view, the recent stock price rally has somewhat diminished short-term upside.

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