Hillgrove Project: Separating Base-Case Value From Speculation

Larvotto Resources began mining at Hillgrove as a gold-antimony story. Ten months later, the same ground has thrown up two developments that were never in the original pitch: a tungsten circuit recovering 90% of metal in the first rougher float, and an exploration target sitting roughly 50 metres from active underground development, with a mid-range estimate near 656,000 gold-equivalent ounces.

For Australian investors weighing junior miners with multi-commodity potential, the useful question is rarely whether new discoveries are real. It is whether they are close enough, cheap enough, and de-risked enough to shift a project’s baseline valuation, or whether they simply extend the forward speculation. Hillgrove now presents both a tungsten byproduct opportunity and a proximal high-grade gold target at once, at a moment when tungsten prices have moved sharply and the base-case operation is reconciling to reserve grades.

That combination is what makes the Hillgrove project value worth dissecting carefully. This analysis gives you a structured way to separate which of these two developments represents genuine near-term value addition and which remains speculative optionality, so you can position your view of the project without conflating the two.

What the Midas zone actually tells you about the project’s resource ceiling

Start with what the drilling confirms. Eight holes into the Midas zone have all intersected high-grade mineralisation, and the standout numbers are genuinely strong.

Those intercepts establish continuity of mineralisation across a target measuring roughly 700 metres along strike and 350 metres vertically, and it remains open to the northwest and at depth. The high-grade cores, particularly 4.5m at 27.78 g/t AuEq, tell you the system carries real width and grade where it has been drilled.

What the drilling has not yet established is tonnes. That is where the range comes in.

Midas Exploration Target range 223,000 to 2.95 million AuEq ounces, derived from an estimated 2.7 to 10.7 Mt at 2.58 to 8.55 g/t AuEq.

Exploration target versus mineral resource: why the distinction matters here

An Exploration Target under the JORC Code is a conceptual estimate of tonnes and grade based on geological extrapolation, not on enough drilling to support a formal Mineral Resource. To upgrade it, a company needs sufficient drilling density to give geologists confidence the mineralisation is continuous between holes.

The JORC Code resource classification framework establishes the confidence thresholds that separate an Exploration Target from an Inferred Resource, with each step up requiring denser drilling, tighter geological continuity, and a sign-off from a qualified Competent Person.

That confidence bar sits above even the lowest resource category. An Inferred Resource can itself carry uncertainty of plus or minus 35% to 100%, according to industry resource-precision work, and an Exploration Target sits one tier below that.

Larvotto’s preferred estimate is 3.95 Mt at 5.16 g/t AuEq for 656,000 oz AuEq. Read that as the company’s working planning model, not a confirmed inventory. The 13-fold spread between the bottom and top of the target range tells you the drill pattern is still too sparse to anchor a formal resource, so Midas is best understood as a near-term catalyst for resource conversion rather than a current asset.

Exploration target conversion from a sparse drill pattern to a formal Inferred Resource typically requires a step-down in hole spacing that can cost several million dollars and six to twelve months of drilling time, meaning the capital commitment needed to firm up Midas is not trivial even with underground access already established.

The differentiator from a typical grassroots discovery is location. Midas sits about 50 metres from current mining and is accessible from existing underground development. If conversion drilling tightens the range toward the preferred estimate, the capital cost to fold Midas into the mine schedule is materially lower than for a standalone new mine, which is precisely what changes the optionality maths for anyone modelling mine-life extension.

The tungsten circuit: negligible capex, genuine upside, significant pricing uncertainty

The metallurgical result is the anchor here, and it is a good one. Initial flotation testing achieved an average 90% tungsten recovery in the first rougher stage.

• 90% tungsten recovery in the first rougher flotation stage
• 16-fold increase in concentrate grade
• Tungsten losses to tailings below laboratory detection limits in most test runs

The low-capex case builds directly on existing infrastructure. The Hillgrove plant already contains a dedicated tungsten gravity circuit that was never used commercially, and the site sits roughly 200 metres from what was reportedly Australia’s highest-grade tungsten mine in the 1960s. Stage 2 testwork positions the planned circuit, using flotation plus gravity, directly after the existing gold flotation circuit, meaning most processing energy is already applied upstream and the marginal operating cost of recovering tungsten is small.

So the technical picture is compelling. The commercial picture is where the uncertainty lives.

Price context CommoditiesTracker recorded a greater than 240% increase in APT prices, from US$920 per mtu at the end of 2024 to approximately US$3,140 per mtu in Q1 2026.

How to read the tungsten price data (and which numbers to use)

For an Australian producer targeting non-Chinese buyers, the commercially relevant reference is the Western APT benchmark, quoted CIF Rotterdam (ammonium paratungstate, priced per metric tonne unit, delivered to the European port). Crux Investor and EQ Resources, citing Fastmarkets, put that benchmark around US$2,900 to US$3,100 per mtu in mid-September 2026.

China’s domestic APT sat far lower, at roughly US$895 per mtu on 17 September 2026, per ScarceEarth data. That gap is structural, driven by Chinese export controls, and it produces a premium of around 3.5 times for Western-delivered material.

One figure in the earlier project commentary, US$350,000 per tonne, conflicts with every verified external benchmark and should not be carried into any commercial planning assumption. The takeaway for you is direct: because the circuit relies on existing plant and near-total recovery, its value does not hinge on winning a capex battle. But it should not be modelled as a revenue line until a defensible tungsten price is locked in and the circuit is proven at commercial scale.

Why tungsten prices moved and whether the structural case holds

The supply side is the tighter half of the story. Chinese export controls and domestic resource depletion have squeezed the Western merchant market, and there are few near-term greenfield projects lined up to fill the gap. That leaves a seller-dominated market with limited slack.

The tungsten supply deficit is rooted in structural factors that predate the 2026 price spike: Chinese domestic resource depletion, tightening export controls, and a Western merchant market with limited conversion capacity have combined to create a seller-dominated pricing environment that most commodity analysts did not anticipate moving this quickly.

Demand is climbing into that constraint. S&P Global projects global first-use tungsten demand rising from around 162,000 tonnes WO3 in 2025 to 202,000 tonnes by 2035, driven by cemented carbides, high-performance tooling, aerospace, EV supply chains, and military restocking.

The forecast that matters most for producers comes from CICC, which projects a 17% global supply gap between 2026 and 2028, equivalent to roughly 19,000 to 21,000 tonnes annually, and expects 15% to 20% annual price rises through that deficit.

Set against that, the sustainability risks deserve equal weight:

1. A geopolitical thaw that eases strategic defence stockpiling.
2. Speculative activity driving temporary market overshoots.
3. Improvements in recycling loops adding supply.
4. Easing of bottlenecks in Western merchant feed and conversion capacity.

The structural tailwind is credible through at least 2028 on CICC’s numbers. But Crux Investor flags that a CIF APT price below US$1,900 per mtu would simply be a reversion to mid-February 2026 levels. The gap between that downside marker and current Western benchmarks near US$3,000 per mtu is wide enough that you should not assume today’s price persists in your project modelling, particularly while the circuit is still pre-production.

The market’s framework for junior multi-commodity stories: where Hillgrove sits

Institutional investors apply a fairly consistent set of red flags to junior miners selling multi-commodity upside. It is worth naming them before judging Hillgrove against them.

Junior miner valuation frameworks that layer base-case NAV against probabilistic optionality, rather than blending both into a single enterprise value, are better suited to situations like Hillgrove, where the primary operation is validated but secondary targets remain at different confidence levels.

• Over-promising on integration: treating unproven byproduct circuits as guaranteed revenue before a combined flowsheet is demonstrated.
• Dilution risk: per-share value eroded by repeated equity raises to fund exploration across secondary commodities.
• Valuation stretch: treating low-confidence targets as fully costed, feasible projects.

Grade reconciliation as the anchor for optionality claims

Hillgrove addresses each flag partially. The pre-existing tungsten circuit reduces integration risk because the plant is already built. The more than $20 million per year exploration commitment signals scale, though it also means continuous capital deployment. And Midas is a primary-lode target, not a marginal byproduct.

But the most important number in this section is operational. Underground mining at the Syndicate Lode, within the Metz Mining Centre, began over three months ago, and mined grades are averaging around 6.5 g/t AuEq, broadly reconciling with the reserve model.

That reconciliation is confirmation of the geological and engineering assumptions, not just a routine update. It tells you the base case is performing as designed, which is the foundation any optionality value must sit on. Without it, both the Midas and tungsten stories would be floating on an unvalidated primary thesis. With it, the balance tips toward taking both seriously, because the optionality is attached to a functioning operation rather than a concept.

The limits remain real. The tungsten circuit has not run at commercial scale, Midas has no formal resource classification, and both sit on top of an operation less than four months old.

Where the two discoveries leave the Hillgrove investment thesis

The cleanest way to hold optimism and scepticism at once is to separate the value into layers rather than blending them into a single verdict.

1. Near-term anchor: the base-case gold-antimony operation, now reconciling to reserve grade at the Metz Mining Centre.
2. Medium-term optionality: the tungsten circuit, capital-light on existing plant but contingent on commercial-scale demonstration and a defensible price assumption.
3. Longer-term upside: the Midas zone, accessible from existing underground development and therefore low in capital intensity, but contingent on resource-conversion drilling.

Two catalysts would move investor confidence most: a formal Mineral Resource estimate for Midas, and first commercial tungsten production data from the circuit. Both are measurable and time-bound, which means you have clear signposts rather than an open-ended wait for value.

Capital signal to monitor Larvotto is committing more than $20 million per year to exploration, with all above-ground rigs now reallocated to Midas. That is a strong statement of intent, and also a capital commitment worth watching for dilution implications.

Investors who know which layer they are buying, near-term base case, medium-term tungsten, or longer-term Midas, are better placed to size exposure than those treating all three as equally de-risked or equally speculative.

Investors who are new to sizing exposure across tiered value layers will find our dedicated guide to junior resource stock investing useful, as it covers position sizing, catalyst-based entry frameworks, and how to assess dilution risk across equity raises.

This article is for informational purposes only and should not be considered financial advice. Investors should conduct their own research and consult with financial professionals before making investment decisions.

Past performance does not guarantee future results. Financial projections are subject to market conditions and various risk factors, and forward-looking statements are speculative and subject to change based on market developments and company performance.