Proactive Investors – Thursday, December 27, 2012 by Angela Kean
Stratum Metals (ASX: SXT) has completed due diligence over the past month which supports the company’s continued path of consolidating the East Menzies Goldfield and has highlighted the significant potential of the area to generate further gold resources.
Initial expectations surrounding the Good Enough Gold Resource and potential production appears optimistic.
An independent optimisation study completed by Orelogy shows a proportion of the existing resource can be extracted at a cash cost of $1,112 per ounce based on contract mining and utilising a nearby gold mill.
Stratum has also secured a new strategic international investor, Mountain Gold International, to assist in funding the East Menzies acquisitions.
An initial A$1.35 million investment has been made with an expectation that further funding will follow in 2013.
Martin Holland, managing director, told Proactive Investors today Stratum will own 60% of newly incorporated subsidiary, Menzies Goldfield Limited, while Mountain Gold International will hold a 40% shareholding.
“We’ll work together to give the ground the best opportunity possible in regards to putting money into the ground on an exploration front, but also focusing on getting some cash flow in from near term production from the resources that are currently there.”
Stratum has received a letter from Peak Resources (ASX: PEK) authorising exploration work on the Riqo ground – M29/189 is held under option with Peak by Riqo – before settlement occurs on 28 February 2013.
Subject to approvals Stratum plans to begin drilling its highly prospective priority targets in February 2013.
Potential mini superpit
A very well-respected independent geologist in Australia, Dr Dennis Gee, has a very high opinion of the overall structure in the East Menzies Goldfield.
“When we looked at the structure he noted that it’s been held like a jigsaw of leases that have been held by 11 different companies for a long period of time,” Holland said.
“To actually consolidate that whole structure and to have a global view of the entire structure and to be able to explore it as one, rather than as small individual leases, could potentially provide us with the opportunity to find a mini superpit.
“We have over about 100 old workings and shafts that were done by the old timers as well. So the geology actually stacks up that there could possibly be an opportunity for us to identify a mini superpit.”
Potential for near term cash flow
The Goodenough area has been the subject of a large amount of work by past tenement holders, ranging from various rotary air blast and reverse circulation drilling programs to historic small scale open pit and underground mining.
In 2004 Yilgarn Gold Ltd released a then JORC classified resource estimate for Goodenough (M29/141) of 546,000 tonnes at 2.07g/t for around 36,000 ounces.
Based on the Yilgarn Gold Ltd resource estimate a mining optimisation study was completed at a gold price of A$560, with the assumption of toll treatment at Leonora, at the time a suitable mining option was not realised.
Now with the gold price close to A$1700 an ounce – this can now become a reality.
Changes to binding heads of agreements
New terms with Resource Assets
Final consideration for the acquisition to obtain 100% of tenements:
- A$1.4 million, of which $50,000 has already been paid, this is a discount of $600,000 for early cash settlement and funding secured;
- 7 million shares issued at $0.25;
- 250,000 options, exercisable at $0.25;
- 250,000 options, exercisable at $0.35; and
- Acquisition completion date 18 January 2013.
Terms with Riqo Pty. Limited
A first non-refundable instalment of $50,000 to secure 45 day due diligence period has already been paid.
A second payment of $50,000 was due on 21 December 2012.
Final consideration for the acquisition to obtain 80% of the company:
- 5,749,285 shares, issued at $0.25;
- 500,000 options, exercisable at $0.25; and
- Acquisition completion date 28 February 2013.