THE BOURSE WHISPERER: Middle Island Resources (ASX: MDI) is to acquire a 100 per cent interest in the Sandstone gold project, located in the East Murchison gold district of Western Australia.
The Sandstone project comprises a 100 per cent interest in two granted Mining Leases owned by Black Oak Minerals Limited, which is currently in Liquidation with Receivers and Managers appointed.
The Sandstone project comes with a Mineral Resources of approximately 11 million tonnes at 1.4 grams per tonne gold for total contained gold of 480,000 ounces.
Middle Island said previous drilling carried out on the project indicates potential to rapidly expand this resource base, including at least two potential company-making targets.
The project also boasts an existing CIP processing plant with a 600,000 tonnes per annum capacity, associated infrastructure as well as an inventory of spares, with recommissioning costs estimated at five to eight million dollars.
“In excess of one million ounces of gold has been produced from surface, underground and open pit operations in the Sandstone area since the 1890s,” Middle Island Resources said in its ASX announcement.
“In addition to historic mining activities, more recent gold production is variously attributed to Herald Resources Limited in the 1990s and Troy Resources Limited from 1999 to 2010.
“Troy extracted and processed a combined total of approximately 4.4 million tonnes of ore at an average grade of 3.6g/t gold for 508,000 ounces of gold before the operation was placed on care and maintenance in September 2010.
“Southern Cross Gold Limited (SXG) acquired the Sandstone project from Troy in December 2012 with the primary objective of relocating the processing plant to its Marda project some 100 kilometres to the south.
“A subsequent merger of SXG and Poly Metals to form Black Oak Minerals diverted focus to Poly Metals’ NSW assets before being placed into administration in September 2015 and subsequently liquidation in early 2016.”
Two exploration targets have been identified at the Two Mile Hill prospect, located 3.2km north of the processing plant.
The first is 250m long and 70m wide and includes historic drill intercepts of 141m at 2.3g/t gold, 353.3m at 1.04g/t gold and 156.3m at 1.14g/t gold.
A banded iron formation (BIF), which obliquely intersects at depth, is also very strongly mineralised.
Drilling within the BIF, includes intercepts (essentially true widths) of 8.5m at 49g/t gold, 13.7m at 26g/t gold, 4.5m at 25g/t gold, and 3.5m at 20g/t gold at a depth of some 200m below surface.
The Sandstone project acquisition has a headline value of $2.5 million, which is to be paid as follows:
$250,000 deposit by 9 May 2016 (which is non-refundable except in limited circumstances);
$1.25 million at completion, being no later than 1 July 2016 (unless otherwise agreed by the parties);
$500,000 at 18 months following completion (or $400,000, if paid by 1 October 2016); and
$500,000 on re-commencement of gold production from any source by the company.
The tenements come with a legacy 2 per cent NSR royalty payable to Troy, along with a royalty of $1 per tonne of ore mined and processed from M57/129 that is payable to Herald and National Resources Exploration.
The precise legal status of a further legacy royalty remains unclear and is under review.