MGX begins Groundrush construction as gold transition gathers pace

Groundrush decline moves from contract to construction

MGX Resources Limited (ASX:MGX) has begun the physical work that will define its next chapter: construction of the Groundrush exploration decline at the 50%-owned Central Tanami Project Joint Venture. The 14-month, approximately $38 million contract with Macmahon Underground covers the portals and the first 3.5 kilometres of decline development to a depth of about 350 metres. Site establishment is under way, the ventilation portal has seen its first blast and the first blast into the main portal is scheduled for the coming week. The milestone builds on the Groundrush decline contract announced in August.

Drilling is aimed at upgrading the Central Tanami resource

The decline is not simply an underground access project. It is intended to open drilling platforms for about 33,000 metres of resource definition drilling at Groundrush, targeting the conversion of more than 400,000 ounces currently classified as Inferred Resources into the higher-confidence Indicated category. That work is expected to begin in 2027. The wider Central Tanami resource stands at 31 million tonnes grading 2.8 grams per tonne gold for 2.8 million ounces, of which MGX’s attributable share is 1.4 million ounces, following the Central Tanami resource statement released earlier this month.

At the Jims gold deposit, MGX completed 13,900 metres of reverse-circulation drilling across 95 holes during the quarter. Diamond drilling then began, with three holes totalling 639 metres completed by quarter-end, including work intended to support metallurgical testwork. Results from both programs are being compiled for release in the December quarter. MGX’s 50% share of Central Tanami expenditure was $14.7 million for the period, alongside repairs to camp, power, water and communications infrastructure and further permitting work.

Koolan Island completes its iron ore operating chapter

Koolan Island has now shipped its final low-grade cargoes. The last four shipments, totalling 0.3 million wet metric tonnes at an average grade of 42.7% iron, left in July, ending almost two decades of production and sales. The operation generated $0.3 million of operating cashflow in the quarter after $7.7 million of rehabilitation spending, with cash operating costs of $28 per wet metric tonne shipped.

Rehabilitation has advanced through landform profiling, topsoil spreading, seeding and removal of surplus infrastructure. MGX created a controlled channel through the Main Pit’s seaside wall on 24 October and completed flooding to sea level four days later. The company says its rehabilitation obligations under the Crestlink divestment agreement are substantially complete, while Crestlink has received Foreign Investment Review Board and Australian Competition and Consumer Commission approvals. The sale remains targeted for late 2026 or early 2027, with at least $20.2 million of upfront and deferred consideration, potential CPI-indexed revenue share of up to $5 million and the transfer of approximately $30 million of remaining rehabilitation obligations. That is the next stage of the Koolan Island sale agreement.

Cash reserves provide room for the pivot

MGX recorded a $5.1 million net cash outflow for the quarter, including $14.7 million spent on Central Tanami and $3.9 million in corporate, administration and exploration costs. Interest and other income, equipment sales and insurance proceeds contributed $13.2 million, including a $9 million settlement from one insurer over the October 2025 Koolan rockfall. Discussions with the remaining insurers continue, but MGX says the likelihood and amount of any further receipts remain uncertain.

Cash and investment reserves stood at $408.7 million at 30 September, down from $412.1 million a quarter earlier, and MGX had no bank borrowings. The balance sheet gives the company substantial funding capacity for the Central Tanami work program, but the project still has to clear several technical and permitting gates before a development decision targeted within the next 12 months. The December-quarter drilling results, metallurgical work and progress on the decline will begin to show whether the gold pivot is gaining definition beyond its resource headline.