Aurumin divests Mt Palmer project to Kula Gold, focuses on Sandstone development

Aurumin (ASX: AUN) has agreed to divest the Mt Palmer gold project in Western Australia to Kula Gold (ASX: KGD) as it shifts its focus to building critical mass at its flagship Sandstone development.

The divestment includes the historic high-grade Mt Palmer mine, which produced approximately 158,000 ounces of gold at 15.9 grams per tonne before ceasing commercial operations in 1944.

Under the terms of the agreement, Kula will pay Aurumin $250,000 in shares or cash in exchange for a 51% interest in the tenements and related mining information.

Kula has committed to spending $1 million on the project over the next three years to earn an additional 29% interest.

Buyback option

If Kula chooses not to increase its interest beyond 51%, Aurumin will have the option to buy back a 2% joint venture percentage share in the tenements for $1.00.

Should Kula proceed to acquire a maximum 80% equity, all subsequent exploration expenditures will be shared between the two companies.

Aurumin will retain the right to dilute its 20% equity.

Should it reduce to less than 10%, Aurumin’s stake in the Mt Palmer project will convert to a 1% gross royalty.

Southern Cross exit

The Mt Palmer divestment is believed to be Aurumin’s final transaction in the Southern Cross area.

It follows the divestment of the Mt Dimer mining tenements in November to Beacon Minerals (ASX: BCN) and an iron ore royalty agreement for the same project with Mineral Resources (ASX: MIN).

Mt Dimer was discovered by WMC Resources between 1987 and 1989 and was mined by Tectonic Resources from 1994 to 1997.

Historically, it produced over 125,000oz of gold from approximately 600,000t of open-pit and underground operations, grading 6.4 g/t.

Aurumin retains a 2% net smelter return royalty on gold production at Mt Dimer above 12,000oz and on all other minerals.

Sandstone scale

Managing Director Brad Valiukas stated that the divestment strategy would enable Aurumin to concentrate on developing significant scale at Sandstone.

“Subject to the successful completion of this deal, we will retain a 20% interest in Mt Palmer plus a royalty on the Mt Dimer gold-silver tenements with Beacon Minerals and a potential future royalty on the Mt Dimer exploration tenements with MinRes,” he said.

“There is still significant potential at Mt Palmer and we look forward to our continued involvement as Kula gives the project the attention it deserves.”

In April, Aurumin confirmed that a $2.5m capital raising and the granting of additional tenements at Sandstone had placed it in a strong position to advance the flagship asset.