THE BOURSE WHISPERER: Westgold Resources and Metals X have executed a Merger Implementation Agreement.

The agreement is proposed to result in Metals X acquiring all of the issued shares in Westgold that it does not already own by way of Scheme of Arrangement.

Under the proposal Westgold shareholders will receive 11 Metals X shares for every 10 Westgold shares held at the record date for the merger.

Metals X has been a long-time major shareholder of Westgold and the two companies have decided a merger is the ideal way to arrange funding to bring Westgold’s project portfolio on stream.

“Westgold’s Board has held the view for some time that the company’s projects are not receiving appropriate recognition in the equity market and that there are significant funds required to bring both the Central Murchison gold project and the Rover 1 project into development and subsequently production,” Westgold Resources chairman Michael Atkins said in the companies’ announcement to the Australian Securities Exchange.

“This is an attractive proposal from Metals X, which brings the financial strength to rapidly progress these assets and expose Westgold shareholders to a diversified range of commodities as part of a larger, well-funded mining house.”

Atkins’ comments were supported by Metals X managing director Warren Hallam who said the merger was in-line with his company’s strategy of supporting its strategic investments through to production.

“The merger provides continued diversification and growth to our current portfolio and presents an excellent opportunity to leverage of Metals X’s financial and balance sheet strength to develop the Central Murchison gold project to the benefit of both companies’ shareholders,” Hallam said.

Metals X has been Westgold’s largest shareholder since 2007 and currently holds a shareholding interest of 26.98 per cent.

The Directors of both companies consider the proposed merger provides Westgold shareholders with an attractive premium for its shares, in the absence of a superior proposal.

THE BOURSE WHISPERER: Southern Cross Goldfields is on the verge of becoming the first gold miner and producer in the Marda region, located 400km north-east of Perth in Western Australia.

The company has recently received a positive result from an independent Feasibility Study on its 100 per cent-owned Marda gold project, which it said confirmed the viability of a standalone $51 million greenfields gold development.

 

Marda gold project location plan. Source: Company announcement

 

The Feasibility Study defined a robust initial gold operation based on a centrally located 480,000 tonnes per annum gold plant at Marda, which would be the only gold processing facility in the region.

The company considers combining the plant with its extensive tenement package provides an opportunity to develop a significant long-term gold business.

“While the Southern Cross-Marvel Loch region is well known as an established and historic gold producing region, the Marda region to the north – which forms the centre of gravity of our gold business – is by comparison lightly explored,” Southern Cross Goldfields managing director Glenn Jardine said in the company’s announcement to the Australian Securities Exchange.

“While the Feasibility Study announced today underpins the viability of an initial base case 35,000 ounces a year gold mine at Marda, the broader story is the establishment of a strategically significant regional gold processing facility which would effectively open up this hitherto largely ignored region to exploration, development and production.

“This region has extensive gold endowment as evidenced by a number of significant deposits both on our tenements and in the broader region which have not been fully explored.”

Southern Cross said the completion of the Feasibility Study will enable it to proceed with project financing in the second half of 2012, with the objective of commencing construction by the end of the year targeting first gold production in 2013.

“We are very pleased with the results of the Study and we look forward to continuing discussions with potential financiers and other parties with a view to SXG becoming a gold producer in 2013,” Jardine said.

THE BOURSE WHISPERER: While we were attending the RIU Sydney Resources Roundup The Roadhouse caught up with its old buddies from Breakaway Research which passed on a couple of its recent company research notes.

Matsa Resources (ASX: MAT) has a diverse portfolio of projects at various stages of assessment. The most advanced is the Norseman gold/magnetite project which hosts a JORC resource of 26.5 million tonnes at 1.7 grams per tonne gold for a total of 1.47Moz of gold.

Negotiations of a joint venture for the Norseman project are well advanced with the final terms expected to be agreed imminently. Once completed, further exploration programs, feasibility studies and ultimately development of the project (targeting 2 million tonnes per annum by 2015) are likely to follow.

 

Norseman Project Tenure. Source: Company

Matsa has a strong project pipeline of earlier stage projects. Approximately 5 kilometres north of the Norseman project, the company has identified large widths of magnetite iron ore at Dundas. A further drilling program is required to define a JORC inferred resource, although the company has established an exploration target of +300Mt. Production synergies may exist with the Norseman project.

Matsa is also awaiting further licence application approvals from the Thailand government over tenure prospective for iron ore, copper and gold.

Recommendation: Speculative Buy

Olympus Pacific Minerals (ASX, TSX: OYM) is an established gold producer with two operating gold mines located in Vietnam.

The company produced 42,868 ounces of gold in 2011, at a cash cost of US$715 per ounce, and is on track to increase production to 65,000oz in 2012 at reduced cash costs.

 

Olympus Pacific – Project Locations. Source: Company

With the Vietnam operations now running smoothly, the focus is shifting to the Bau goldfield in East Malaysia.

Bau is a ‘company maker’ and currently hosts a total gold resource in excess of 3 million ounces with significant further exploration potential. Recent drilling at Jugan (one of eight central Bau Trend sectors) has intersected additional large widths of ore grade mineralisation yet to be included in the current resource.

Highlights include 52 metres at 4.64 grams per tonne gold from 3 metres below surface.

A feasibility study is currently underway based on the initial development of the Jugan Hill and Young’s Hill (Bekajang) deposits with the remaining six sectors phased into production in due course. The company envisage a 3 million tonnes per annum plant, employing either an Albion or pressure oxidation circuit to treat the refractory component of the ore, to be commissioned in 2014.

Once in full production, Olympus Pacific have targeted 100,000 to 150,000 ounces of gold per annum from Bau, which when coupled with the Vietnam operations, would bring total gold production to more than 200,000ozpa.

Comparative analysis by Breakaway research indicates that Olympus is cheap relative to its peers based on its established resource base. This creates an opportunity for a strong re-rating as its growth plans are quantified and achieved.

Recommendation: Speculative Buy

Sheffield Resources (ASX: SFX) has a portfolio of mineral sands, iron ore and talc projects, all located within Western Australia, however the principle focus for the company is the development of the Eneabba and Dampier mineral sands projects.

The Eneabba project is the most advanced and was recently the subject of a scoping study completed by mineral sand industry experts TZMI.

Eneabba hosts a 161 million tonnes at 2.5 per cent VHM (Valuable Heavy Minerals) resource comprised from three closely spaced deposits.

Further opportunity exists to extend this resource with infill and extensional drilling on other nearby, already defined prospects. The outcome of the scoping study showed the project to be technically sound and economically attractive under various commodity price assumptions. Sheffield is now progressing with a pre-feasibility study with the goal of first production by 2015.

Stage two in the company growth profile envisages advancing the potentially high grade, large tonnage Dampier project in northern WA. Dampier has an exploration target of 450 to 840Mt at 5 to 10 per cent VHM, more than twice the size and grade of the Eneabba project, and is viewed as the ‘company maker’.

A 12,500 metre drilling program is about to commence with a maiden JORC resource expected in early in Q4 2012.

Mineral sand prices remain at elevated levels and are likely to advance on these levels in the medium term with supply and demand fundamentals underpinning the upward trend.

Sheffield is now advancing the Eneabba project through the feasibility stages with first production slated as early as 2015. Encouragingly, one of the deposits, West Mine North, already sits within a granted Mining Lease.

Recommendation: Speculative Buy

 

Reed Resources’ (ASX : RDR) Meekatharra gold project (100 per cent), located in the Murchison region of WA, is expected to start producing gold during Q4 2011.

 

Project location map. Source: Company

Given the successful completion of the BFS, Reed is aiming to start producing gold from its flagship Meekatharra gold project, by mining open pit sources, in the fourth quarter of 2012, subject to financing. The plan is to ramp up production to 95,000 ounces per annum by the end of 2014 and increase production to 160,000 to 180,000 per annum under Stage 2 (planned to commence in 2015).

Reed has defined a substantial reserve base of approximately 0.75 million ounces of gold, estimated by the respected geological consultants Snowden Mining.

The company has three primary open pit ore sources, Bluebird, Mickey Doolan and Prohibition, that will provide the ‘base load’ ore for the plant in the initial years of operation. Total reserves could support a production rate of 100,000oz per annum for over six years.

We like the fact that Reed could start producing gold before the end of the year at average (C1) cash costs of A$1,076 per ounce. Reed’s existing plant can be refurbished for a relatively low capital expenditure of A$35.5 million.

Recommendation: Speculative Buy

 

 

THE BOURSE WHISPERER: Musgrave Minerals has been granted four new mineral Exploration Licences in the Musgrave Geological Province, situated within in the far north of South Australia.

The four new licences cover a combined area of more than 7,300 square kilometres, which will more than double the company’s current explorable ground holding.
 

Musgrave Minerals holds a 100 per cent interest in three of the licences, while it can earn up to a 75 per cent interest in the fourth.

 

Location of Musgrave Minerals’ exploration licences. Source: Company announcement

 

The new licences cover areas Musgrave considers to be prospective for magmatic nickel-copper sulphide deposits that it has interpreted to be covered by thin less than 20 metres of sand with minor outcropping and sub-cropping geology.

The region is host to the large Nebo-Babel nickel-copper sulphide deposit in the West Musgrave currently held by BHP Billiton.

Musgrave Minerals said the granting of the new licences highlighted the relationship it has forged with Anangu Pitjantjatjara Yankunytjatjara – a body corporate established by the APY Lands Rights Act 1981, SA) – and Traditional Owners.

The company signed a Deed of Exploration with APY late last year in regards to these new licences, which were the first mineral Exploration Licences granted in the APY Lands since 2008.

“Musgrave Minerals is the first company to hold an active minerals Exploration Licence in this particular part of the Musgrave Province,” Musgrave Minerals managing director Robert Waugh said in the company’s announcement to the Australian Securities Exchange.

“That’s a very exciting first mover opportunity.

“It’s very exciting to be in a part of Australia and have Exploration Licences granted over areas that have no record of any previous mineral exploration.

“We look forward to generating and advancing targets to a drill stage on these new areas as quickly as possible.”

THE BOURSE WHISPERER: Radar Iron has announced a maiden Mineral Resource for the Muldoon prospect, situated at the company’s Johnston Range iron ore project in Western Australia.

Recently-completed modelling and mineral resource estimation has resulted in a JORC Code-compatible Inferred Mineral Resource at a 55 per cent iron cut-off grade of 2.1 million tonnes at 57.6 per cent iron.

At lower cut-off grades the mineralisation inventory exceeds 3 million tonnes at 56 per cent iron.

Radar said it had identified the Johnson Range area to hold potential to host numerous hematite enriched deposits of similar size and grade.

 

Project area. Source: Company announcement

The company now intends to progressively test these zones during 2012 with the aim of delineating additional resources at the project.

The Johnston Range is a major focus for Radar as the company confidence it its potential for hematite mineralisation grow.

Radar said its strategy is starting to create investor interest within the wider industry in Asia.

“Drilling to date has only tested the more obvious targets at Johnston Range,” Radar Iron managing director Jonathan Lea said in the company’s announcement to the Australian Securities Exchange.

“The presence of multiple hematite enriched BIF bands is very exciting for the company as extensive potential hematite targets are yet to be drill tested.”

Radar said the mineralisation at Muldoon is at or near surface, which means extraction through shallow open pit mining may be possible.

The company is envisaging a relatively low cost mining and crushing operation that may result in a period of campaign mining that will be followed by crushing to minimise the need for extensive site infrastructure.