Octagonal and A1 gold strike project consolidation deal

THE BOURSE WHISPERER: A1 Consolidated Gold (ASX: AYC) and Octagonal Resources (ASX: ORS) have entered into a binding Heads of Agreement under which A1 Gold will purchase the Maldon gold operation from Octagonal.

According to the companies’ joint release to the ASX the deal will result in the creation of a substantial junior Australian gold business with over 330,000 ounces of underground and open pit resources and a 150,000 tonnes per annum CIL gold processing facility at Maldon which, as luck would have it, is just the right fit for planned production from the A1 gold mine.

In consideration for the sale of the Maldon operation, Octagonal will receive $5.1 million in A1 Gold shares at 3 cents per share, 1:3 listed A1 Gold options that will vest 3 months after completion of the transaction and have a 5 year life, and a board position on A1 Gold.

Octagonal indicated its intentions to distribute approximately 50 per cent of the A1 Gold shares and options received under this transaction to its shareholders through an in specie distribution on a pro rata basis.

All shares retained by Octagonal will be subject to a voluntary 6 month escrow period.

A1 Gold will complete due diligence on the Maldon gold operation with the agreement anticipated to be executed during December 2014.

The two companies consider the deal has a number of synergies, including providing certainty of ore processing for A1 Gold by removing the need to construct a mill onsite.

The Maldon gold operation has a 150,000tpa CIL gold processing plant. A1 Gold will install a gravity circuit into the plant to improve gold recovery and eventually increase throughput.

The combined company will hold in excess of 330,000 ounces of underground and open pit resources, with the option to expand to almost 600,000 ounces of resources if Octagonal’s option to acquire the Walhalla tenements is exercised.

The companies believe this resource base provides for a long term life of mine operation.