VAU’s cash earnings result was in line with our estimates while reported earnings beat, driven by lower depreciation and a tax credit. We have upgraded our near-term earnings forecasts to reflect lower depreciation rates and incorporating the beat in the 1HFY25 result. Improving grades from the King of the Hills open pit and at Mt Monger should see VAU’s 2HFY25 production grow 10% vs the 1HFY25. The higher production combined with buoyant gold prices should see VAU generate strong free cash flow. We are reiterating our BUY rating on VAU and A$0.69 price target. The stock looks attractive on multiples, trading on a FY26 EV/Ebitda multiple of 1.8x and a free cash flow yield of 17%. We expect VAU’s cash balance to rise to over 30% of its market capitalisation by the end of FY26.
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