Crest Minerals to acquire gold project from Reed Resources

THE BOURSE WHISPERER: Crest Minerals (ASX: CTT) has executed a binding Memorandum of Understanding to acquire the Comet Vale gold project, located in the Eastern Goldfields region of Western Australia from Reed Resources (ASX: RDR) for $6 million in cash.

Crest is to acquire Reed’s subsidiary company Sand Queen Gold Mines, which holds the Comet Vale gold project near Kalgoorlie.

In turn, the Comet Vale project hosts the Sand Queen gold mine, which is currently on care and maintenance, with total resources of 534,000 tonnes at 10.8 grams per tonne gold containing 186,000 ounces of gold.

 

Plan of tenements surrounding the Sand Queen mine. Source: Crest Minerals company announcement

 

The sale also includes Reed’s 1 per cent zinc net smelter royalty over the Nimbus project of MacPhersons Resources (ASX: MRP), subject to MRP not exercising its pre-emptive right to purchase the royalty.

Crest has paid a non-refundable deposit of $100,000 to secure the contract, which includes a two month due diligence period.

“Our proposed acquisition of the Comet Vale gold project is in line with our business objective of delivering shareholder value via definition drilling and project generation”, Crest Minerals managing director Angus Middleton said in the company’s announcement to the Australian Securities Exchange.
 
“Our plan is to expand the current resource base at Sand Queen to underpin a bigger mine plan that will see the resumption of operations at the site as soon as is practical.

“This will coincide with the planned recommissioning of the nearby Nimbus processing plant by its owners.

“We are of the firm view that the recent history of high-grade production (80,000 tonnes at 10g/t gold) and the existing underground and surface infrastructure, should ensure the restart is low-risk with a low-capital cost.

“Crest believes the current high-grade resource inventory at Sand Queen (186,000 oz at 10.8 g/t gold) in the current global gold price environment, together with a milling solution, is a valuable company making asset.”

The sale is subject to Crest completing its due diligence enquiries within 2 months, completing a capital raising of at least $13,000,000 and the company receiving any necessary regulatory and shareholder approvals prior to the end of June 2013.

The transaction is also conditional on Reed obtaining any necessary third party consents, approvals and waivers, together with any necessary governmental authorisations or approvals.

“With the company fully focused on its now producing Meekatharra Gold Operation, it is the appropriate time to sell Comet Vale,” Reed Resources managing director Luke Tonkin said in the company’s announcement regarding the sale.

“This is consistent with the company’s strategy of realising value for its suite of attractive non-core assets, and concentrating on delivering solid cash flows from Reed’s Meekatharra Gold Operation.”

Once the deal has been finalised, Crest indicated it intends to continue exploration on its current assets, continue to seek and evaluate new opportunities.

It also intends to conduct additional exploration at Sand Queen, with a view to possibly recommencing operations.

The company said it did not expect operations will recommence until July 2014 at the earliest.