An exclusive option agreement has been signed by De Grey Mining and Kalamazoo for the acquisition of Kalamazoo’s Pilbara-based Ashburton Gold Project.

An upfront $3 million fee is payable to Kalamazoo within five business days of option execution.

Ashburton consists of granted mining leases and exploration licences, including Kalamazoo’s existing 1.44 million ounce gold resource. 

The exploration package covers 217km² and is located 35km from Paraburdoo and 290km south of De Grey’s Hemi Gold Project, with main roads connecting the two projects.

The option period is 12 to 18 months, at De Grey’s election, with De Grey to commit $1 million minimum expenditure for exploration, testwork and studies as part of its due diligence program on Ashburton. 

De Grey has established business development and studies teams separate to the Hemi Project development team to conduct due diligence on Ashburton.

Exercise of the option agreement, at De Grey’s election following or during the option period, would result in payment of $15 million and an additional $15 million within 18 months of exercise. 

Payments can be made in cash or De Grey shares, at De Grey’s election.

Development studies undertaken by Kalamazoo and previous operators have highlighted the potential for Ashburton to produce a high-grade gold concentrate from processing open pit ore.

Initial due diligence by De Grey indicates the potential to economically deliver concentrate at some future time from Ashburton to the proposed Hemi pressure oxidation plant with a view to potentially increase Hemi’s annual gold production rate and/or to extend Hemi’s operational life.

At a potential overall acquisition cost of under $25 per ounce gold, Ashburton represents an attractive opportunity for De Grey in consolidating regional opportunities surrounding Hemi.

Ashburton has previous production history on its granted mining leases and is in close proximity to potential support and services at the township of Paraburdoo.

De Grey Managing Director, Glenn Jardine, said that the proposed 10Mtpa gold plant at Hemi, including a 0.8Mtpa POx circuit, will be a regionally strategic asset that provides De Grey with the potential to treat gold ore and concentrates from other regional gold projects. 

Mr Jardine also said that the leverage has the potential to increase Hemi’s annual gold production rate, economic returns and project life.

“Ashburton’s 1.44 million ounce resource is one of the largest unmined gold resources in the Pilbara outside of Hemi. 

“It has previous mining history, an extensive drilling database and development concept studies which indicate it may be complementary with our development strategy for Hemi.”

Mr Jardine said that De Grey’s current scoping study into its 2.2Moz Hemi regional resource is also consistent with this strategy, however, the potential development of additional production sources outside the Hemi deposits would occur only following the commencement of production and cashflow from Hemi itself.

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