Empire Resources sells Penny’s Find gold mine to Orminex

Junior gold explorer Empire Resources (ASX: ERL) has agreed to sell its flagship Penny’s Find gold mine in Western Australia to fellow goldfields operator Orminex (ASX: ONX) for $600,000.

The two companies emerged from a trading halt this morning to reveal they have entered into a binding term sheet, under which Orminex will acquire 100% of Empire’s Penny’s Find mining tenements via a staged cash payment schedule.

After establishing open pit and underground gold resources at Penny’s Find, Empire completed open pit mining in April last year and had put the project on hold pending a decision on future mining operations.

Sale terms

The cash payments, totalling $600,000, are payable on three milestones: signing of full documents, upon commencement of mining at Penny’s Find, and at the first gold pour.

Empire will also receive a 5% net smelter royalty on the first 50,000 ounces of gold recovered. The NSR will then revert to an ongoing 2.5% of gold recovered for the life of the mine.

In addition, the deal terms stipulate Orminex must commence mining within nine months of the document signing or risk paying Empire $100,000 every six months, capped at $400,000.

Empire retains full ownership and all rights to the 32sq km of highly gold-prospective exploration tenements within the broader Penny’s Find project lying outside the area covered by the mining lease.

Penny’s Find underground potential

Penny’s Find, located 50km northeast of WA mining town Kalgoorlie, has an underground resource of 248,000 tonnes grading 7.04 grams per tonne gold for 56,000oz.

The resource extends from the base of the completed open pit to at least 250m below the surface and remains open at depth.

As part of the purchase of Penny’s Find, Orminex will acquire all the data and information relating to the proposed underground mine including geological information, drill data and results, the underground mining model and independent consultant reports.

Orminex said it concluded through its due diligence process that the Penny’s Find underground mine “has the potential to be a viable operational gold mine”.

“The current model indicates that ore containing gold may be accessible within a short period as the decline development is relatively short,” the company stated.

Orminex’s mineral ventures model

Orminex listed on the ASX less than a year ago then quickly commenced operations at its 51%-owned goldfields project, Comet Vale, announcing a first gold pour of 202oz in August 2018.

Its second gold pour was achieved in January, after processing a further 5,000t of development and remnant stoping ore at the project.

In its December quarterly, the company said its next campaign of processing was scheduled for February 2019.

The company also mentioned at the time that its focus was on rolling out its mineral ventures model and was reviewing several potentially suitable high-grade gold assets.

In today’s announcement, Orminex executive chairman Daryl Henthorn said the Penny’s Find acquisition fits its mineral ventures model “perfectly”.

“Penny’s Find has previous mining history, a mineral resource and potential for a long underground mine life, and the existing infrastructure provides quick lead time that allows us to get on with what we are good at – mining,” he said.

“It further demonstrates that our mineral ventures model is scalable and repeatable,” Mr Henthorn added.

Empire’s plans for the funds

In today’s announcement, Empire managing director David Sargeant described the sale of the mining leases as a “timely disposal”.

“On completion, it provides to Empire a cash injection and the ability to participate in the royalty stream resulting from an earlier development of the project in a strong gold price regime rather than would otherwise have been possible with Empire’s current limited cash reserves,” he said.

Mr Sargeant said the income from the sale will be used towards exploring Empire’s prospective Penny’s North tenements.

“It will also enable the company to explore at the Yuinmery project to expand the already significant copper-gold resources previously defined by the company,” he added.

Empire shares rose 20% on the news to A$0.012 but slipped back down to A$0.01 by midday trade.

Meanwhile, Orminex shares were up 5.41% to A$0.195.