Egan Street Resources reports bonanza intercepts at Rothsay gold targets as project moves into construction

Assays from a diamond drilling campaign at Egan Street Resources’ (ASX: EGA) Rothsay gold project, 300 kilometres north of Perth, have confirmed the high-grade mineralisation extends to the south and at depth of the current 401,000 ounce mineral resource.

The company today said the 16-hole campaign at the Woodley’s and Woodley’s East Shear targets returned “exceptional high-grade results, including bonanza intercepts” grading 776 grams per tonne, 216g/t and 66.3g/t gold.

Best results were 2.0m at 116.9g/t gold from 264m, including 0.3m at 776g/t gold; and 2.63m at 57.2g/t gold from 185.1m, including 0.5m at 216g/t gold and 0.48m at 66.3g/t gold.

Egan Street managing director Marc Ducler said work will now commence on incorporating the new assays into an updated mineral resource for the Rothsay project.

The current resource estimate released in May stands at 1.42mt at 8.8g/t gold for 401,000oz of gold.

“Extensional drilling targeting the southern extensions of our two main gold-hosting structures has been very successful and will [assist] with an updated resource,” he said.

“We will continue to pursue opportunities to grow the gold inventory at Rothsay while completing the final phase of permitting, advancing funding discussions and conducting pre-development activities.”

Orient drilling

Plans are also in place for a new 5000m reverse circulation drill campaign targeting mineralisation beneath the historical Orient open pits, where Egan Street believes there is “excellent potential” to define additional mineralisation.

Drilling completed in the area 30 years ago returned intercepts of 2m at 84.12g/t gold (including 1m at 145.9g/t gold) and will be followed up as part of the new schedule of activities.

In the meantime, the permitting process for Rothsay has entered its final stages with the last two applications for approval recently submitted to the Department of Water & Environmental Regulation and the WA Department of Mines, Industry Regulation & Safety.

Approval for construction

In July, Egan Street’s board of directors gave the go-ahead for Rothsay to move to construction stage after the release of a definitive feasibility study proved the potential for a new low-cost, high-margin gold project using an assumed gold price of US$1275/oz and a US to AUD exchange rate of 75 cents (A$1700/oz gold price).

The study confirmed Rothsay would be financially and technically-viable based on a re-development strategy targeting unmined fresh material which can be accessed via an existing decline.

The project was last mined by (now-delisted) Metana Minerals, but ceased production in May 1991 after the gold price fell below US$360/oz.

Key outcomes of the study included forecast gold production of 250,000oz over an initial 6.5-year mine life from the processing of 1.2mt at an average grade of 6.9g/t gold, with an undiscounted pre-tax project cashflow of $100 million from revenue of $414m.

Net direct (C1) cash costs were estimated at A$941/oz and all-in sustaining costs at A$1083/oz.

With a low initial capital expenditure of $36.1m, the study showed Rothsay would deliver a net present value (using a 5% discount rate) of $80.4m with an estimated capital payback period of less than 1.5 years.

Construction is expected to commence in early 2019, subject to Egan Street securing suitable financing arrangements.

Project development

Preferred contractors have been identified for construction of various elements of the project, including a 200 kilotonnes per annum processing plant; a 100-person camp and non-process infrastructure; a reverse osmosis and a waste water treatment plant; and onsite power generation for the plant, mine and camp.

Expressions of interest for the underground mining contract incorporating dewatering, rehabilitation of the existing portal and decline, development works and underground mining activities have been received.

A shortlist of mining contractors will be invited to participate in a tender process before year end, with underground activities targeted for the new year.

Senior appointments have also been made to the onsite project team including a commercial manager, senior project engineer and construction manager.

At midday, shares in Egan Street Resources were trading 13.16% higher at $0.215.