AusQuest has materially expanded its Cangallo copper-gold discovery in Peru, but the exploration push came with a larger loss, a sharp rise in cash outflows and an auditor warning that further funding is likely within 12 months. The company ended FY2026 with $6.35 million in cash after a $10 million placement.
- Cangallo corridor extends beyond 1,500 metres and to about 800 metres vertical depth
- Stage 3 drilling returned broad copper intersections and higher-grade zones up to 1.09% Cu
- FY2026 net loss widened to $3.04 million as exploration spending increased
- Cash fell to $6.35 million despite the December 2025 $10 million placement
- Auditor identified a material uncertainty related to going concern
Cangallo grows as funding pressure rises
AusQuest Limited (ASX:AQD) has spent FY2026 turning Cangallo into the centrepiece of its exploration portfolio, expanding the Peruvian copper-gold system into a continuous corridor exceeding 1,500 metres along strike and extending to about 800 metres vertically. The catch is financial rather than geological: the company’s auditor has identified a material uncertainty over going concern, with management saying additional working capital is likely to be needed within the next 12 months.
The exploration results are substantial but remain exploration results, not a mineral resource or an economic assessment. Stage 3 reverse-circulation drilling covered 54 holes and about 21,600 metres, producing broad intersections across a mineralised envelope 250 to 500 metres wide. Diamond drilling also returned 555 metres at 0.26% copper and 0.06 grams per tonne gold from five metres, while southern zones produced copper grades of up to 1.09% and gold values of up to 0.43 grams per tonne.
Deep drilling targets higher-grade sulphides
The next technical question is what sits beneath the broad, near-surface envelope. AusQuest’s drilling has identified primary sulphide mineralisation below the oxide and supergene zones, including chalcopyrite with lesser pyrite and rare bornite and molybdenite in stockwork veins. The company says the system remains open along strike and at depth, and is advancing permits for a Stage 4 program of more than 50,000 metres, with additional drill pads expected to become available during the second half of calendar 2026.
Elsewhere in Peru, maiden drilling widened the company’s testing of the Cangallo district. Playa Kali drilling intersected anomalous copper beneath cover, including 10 metres at 0.37% copper, while nine holes at Lantana were completed with assays pending at year-end. Those programs add optionality, but also reinforce how much of AusQuest’s portfolio remains at an early exploration stage.
South32 alliance supports Australian pipeline
AusQuest’s Australian projects provide a second stream of activity under a Strategic Alliance Agreement with a South32 subsidiary, which has been extended to December 2027. The alliance funded $4.38 million during the year and covers Balladonia, Morrisey, Coober Pedy and Mt Davis. Results included premium-grade magnetite potential at four additional Morrisey prospects and near-surface lead-zinc-copper mineralisation at Mt Davis, including an eight-metre interval grading 9,485 parts per million lead and a peak lead value of 2.8%.
Execution remains dependent on approvals and ground conditions. Balladonia’s planned 65-hole, 8,000-metre program awaits government approval for work in the Dundas Nature Reserve. At Coober Pedy, drilling was suspended after difficult dry sand prevented some reverse-circulation holes from reaching basement, prompting a move to mud rotary drilling with diamond tails in FY2027.
Losses and exploration outflows accelerate
The financial statements show the cost of pursuing that pipeline. AusQuest’s net loss widened to $3.04 million from $2.11 million, while exploration and evaluation expenditure rose to $13.51 million in cash terms. Capitalised exploration and evaluation assets increased to $19.10 million, although the company also recorded a $191,991 impairment on projects and tenements it decided not to renew.
Cash fell from $7.20 million to $6.35 million over the year. Operating and investing activities consumed a combined $10.45 million, partly offset by the $10 million placement completed in December 2025 and $4.43 million received from strategic alliance and joint venture partners. The balance sheet carried $5.39 million of total liabilities at year-end, including $3.06 million in trade and other payables and $1.94 million of unexpended partner funding.
Next milestones carry both upside and dilution risk
The board says it can defer expenditure, relinquish projects or reduce administration costs if required, while expressing confidence that new equity can be raised. That is not a funding commitment. The auditor’s warning makes the timing and terms of any future capital raising a material issue alongside the technical milestones: Cangallo diamond-drilling assays, Stage 4 permitting, early resource and metallurgical work, and Balladonia’s approval process.
Bottom Line?
Cangallo is giving AusQuest a larger exploration story, but the company now needs technical progress and fresh funding to arrive in step.
Questions in the middle?
- Can Cangallo’s deeper drilling convert broad mineralisation into a coherent higher-grade zone or resource?
- How soon will AusQuest need to raise capital, and on what terms relative to its expanded share count?
- Will permits and drilling conditions allow the Stage 4 Cangallo and Balladonia programs to proceed on schedule?