Kula Faces Funding Crunch as Mt Palmer Drilling Intensifies

Exploration Momentum Builds at Mt Palmer

Kula Gold Limited (ASX: KGD) has delivered a robust quarterly update for the period ending 31 December 2024, highlighting multiple encouraging gold intersections across its Mt Palmer Gold Mine and surrounding prospects in Western Australia. The company’s recent drilling campaign has revealed several shallow gold zones, including 4m at 3.02g/t and 7m at 3g/t at the Bryant prospect, and a standout 6m at 8.3g/t at El Dorado, underscoring the potential for resource expansion in this historically productive greenstone belt.

Diamond core drilling, while not intersecting immediate resource-grade gold, has provided valuable structural data essential for modelling the complex mineralisation system. This foundational work is critical for guiding future discovery efforts and refining resource estimates, particularly at the Bryant’s Lode and El Dorado prospects, which remain open along strike and at depth.

Government Support and Strategic Capital Raising

Further bolstering Kula’s exploration efforts, the Western Australian Government’s Exploration Incentive Scheme (EIS) has awarded co-funding for drilling at the Mustang Prospect, supporting 50% of direct drilling and mobilisation costs up to $180,000. This endorsement not only validates the prospectivity of Kula’s targets but also alleviates some financial pressure amid ongoing exploration expenditures.

Reflecting the company’s need to sustain and accelerate its drilling programs, Kula announced a non-renounceable pro-rata entitlement offer to raise approximately $1.6 million before costs. The offer, priced at $0.005 per share, aims to strengthen the balance sheet, fund resource definition drilling at Mt Palmer, and repay related party loans. With only $40,000 cash on hand at quarter-end, this capital injection is pivotal for maintaining momentum.

Focused Strategy on High-Value Assets

Kula has strategically reduced its tenement holdings where exploration potential has diminished, concentrating resources on the Mt Palmer Gold Mine and its 10km greenstone belt. The company currently holds a 51% interest in Mt Palmer, with an option to increase to 80% by incurring an additional $1 million in exploration expenditure under its earn-in agreement with Aurumin Limited (ASX: AUN). This focused approach leverages proximity to existing infrastructure and record-high gold prices, positioning Kula to unlock significant value from its flagship asset.

Additional prospects such as Meiers Find and Mt Palmer East have also emerged as compelling targets, with geochemical anomalies and high-grade drill results warranting further RC drilling. Meanwhile, reconnaissance drilling has commenced at the Mustang Prospect, where geological and geochemical data suggest a promising epithermal gold system analogous to nearby successful mines.

Outlook and Market Implications

Managing Director Ric Dawson emphasised the company’s progress, noting the transition from early-stage rock chip sampling to peer-reviewed, drill-ready targets. The combination of government co-funding, disciplined capital management, and targeted exploration underpins Kula’s strategy to delineate a significant gold resource at Mt Palmer.

However, the company’s limited cash reserves and reliance on successful capital raising introduce execution risks. The market will be watching closely for the outcome of the entitlement offer and subsequent drilling results, which will be critical in validating Kula’s exploration thesis and supporting a re-rating of the stock.