INSIDE UPDATE: Middle Island Resources (ASX: MDI) is selling the company’s West African interests to concentrate on its 100 per cent-owned Sandstone gold project in Western Australia.
Middle Island Resources began a further campaign of ore sorting to verify positive results from initial testwork on the Two Mile Hill tonalite deeps deposit at the Sandstone gold project.
Previous scoping level testwork demonstrated sorting can deliver a 185 per cent to 257 per cent increase in grade, with gold recoveries in excess of 93 per cent and 64 per cent of the sorter feed material being rejected.
The new ore sorting campaign is to be more definitive and will include work based on crush size and grade range, designed to improve the original results.
Ore sorting validation is anticipated to have a positive impact on project economics, delivering reduced haulage and process operating costs, and lower tailings disposal requirements.
The Two Mile Hill tonalite deeps deposit comprises an Exploration Target of 24 million tonnes to 34 million tonnes at 1.1 gram per tonne to 1.4g/t gold for 0.9 million to 1.5 million ounces of gold.
Should it achieve a successful outcome on the Stage II ore sorting trials for the primary (underground) component of the Two Mile Hill deposit, Middle Island intends to immediately progress a staged drillout of the upper half of the Exploration Target via RC pre-collared diamond drilling.
The program is designed to infill the existing drill pattern, upgrading the upper portion of the underground Exploration Target into a Mineral Resource.
“Ore sorting offers the potential to make a significant positive impact on the economics of the Two Mile Hill tonalite deeps deposit,” Middle Island Resources managing director Rick Yeates said.
“Should the new, more definitive, ore sorting campaign replicate or improve on the initial trial results, bulk underground mining at Two Mile Hill becomes a very real opportunity that would substantially extend and enhance the envisaged project production schedule.
“While the focus of the current ore sorting campaign is very much on the deeper underground potential of the Two Mile Hill deposit…we will utilise the opportunity to also assess the response of the open pit mineralisation to ore sorting.”
Earlier this year, Middle Island announced a Heads of Agreement (HoA) had been signed with TSXV-listed Tajiri Resources relating to the divestment of the company’s 100 per cent interest in the Reo gold project in Burkina Faso, West Africa via an Option to Purchase Agreement.
Under the terms of the deal, Tajiri will pay Middle Island US$35,000 on execution of the HoA in return for a three-month exclusivity period, during which the buyer is conducting its due diligence.
Once due diligence is completed and the formal Option to Purchase Agreement signed, Tajiri will pay a further US$150,000 and issue Middle Island with 2.5 million Tajiri shares.
On its part, Middle Island will grant Tajiri an exclusive option to purchase the company’s entire interest in the Reo project.
During the subsequent 18-month Option term Tajiri will be required to pay all expenses associated with maintaining the Reo project permits in accordance with Burkinabe law.
Should Tajiri elect to exercise the Option, it will pay a further US$150,000 and issue Middle Island with a further 2.5 million Tajiri shares.
Middle Island will retain a two per cent net smelter return royalty on any minerals derived from the Reo project, although Tajiri will have the right to acquire that royalty from Middle Island for US$5 million.
If Tajiri doesn’t exercise the Option, Middle Island will retain all consideration already paid and continue to own the project.
“The transaction structure allows Middle Island shareholders to retain a significant indirect interest in the upside potential of the Reo project via the Tajiri equity and royalty components,” Yeates said on announcing the deal.
“The full equity component, which will represent some eight per cent of Tajiri’s issued capital on a fully diluted, post issue basis, also offers shareholders considerable exposure to Tajiri’s highly prospective gold project interests in Guyana, South America.
“On completion, the Reo project transaction will represent the divestment of Middle Island’s remaining gold interests in West Africa, allowing the company to fully focus on our Sandstone gold project development in Western Australia.”
Middle Island Resources Limited (ASX: MDI)
…The Short Story
2 Richardson Street
West Perth WA 6005
Ph: +61 8 9322 1430
Peter Thomas, Rick Yeates, Beau Nicholls