Exploration company Kingswest Resources (ASX: KWR) has inked a deal to buy tenements covering one of Western Australia’s major historic goldfields from Perth-based junior miner Intermin Resources (ASX: IRC).
In an announcement today, Kingswest said it will purchase 100% of the Menzies and Goongarie gold projects for $8 million in cash and shares, to be paid over 18 months.
Kingswest has paid an initial $750,000 in cash and will pay a further $1 million in cash and $3 million in shares at $0.15 per share on settlement of the deal, which is expected in the current September quarter.
The company will then be required to pay an additional $1.625 million in cash and $1.625 million in shares 18 months after settlement.
The main attraction for Kingswest is the Menzies project, which includes multiple high-grade deposits and historically produced close to 800,000 ounces at an average grade of 19 grams per tonne gold from underground and open cut operations.
A high-grade gold centre
The Menzies project is located 130km north of some significant Kalgoorlie deposits and covers contiguous land over a strike length of more than 15km.
Menzies was mined underground in the first half of the twentieth century, producing 643,000oz at 22.5g/t gold.
Open cut operations then produced a further 145,000oz at 2.6g/t gold during the mid to late 1990s.
A current JORC 2012 compliant resource has been defined at the Yunndaga, Pericles, Bellenger and Warrior deposits of 2.42Mt at 2.2g/t gold for 171,310oz of gold.
Additional historical production areas and current exploration targets include Lady Shenton, First Hit, Lady Irene, Selkirk and Lady Harriet.
Kingwest said its exploration strategy will focus on the high-grade, structuralised mineralisation, shown to extend at depth, and test for blind repeating lodes.
While the company says there is potential to increase the resource inventory close to surface and exploit these with open cut mining, it said it believes that “immediate economic potential exists for high-grade underground mining”.
“Only the Princess May shoot at the Yunndaga deposit has been mined to more than 200m vertical depth and has had no drilling below workings,” Kingswest stated.
The company also said it believes there is “excellent potential” for parallel lodes, strike and depth extensions to known lodes and extensions to the main lodes.
Kingswest’s acquisition also includes the Goongarrie project, located 45km south of Menzies.
Although Goongarrie has a proven record of production and there is exploration upside, the company said its focus in the short term would just be on Menzies.
Intermin narrows down focus
In a separate announcement, Intermin said its divestment of the Menzies and Goongarrie projects would enable to focus on its core standalone gold project in the Kalgoorlie and Coolgardie regions.
“This divestment supports this objective while retaining exposure to both Menzies/Goongarrie and Kingwest’s current gold projects in the north-eastern goldfields,” Intermin managing director Jon Price said.
“The deal is another step in Intermin’s strategy of monetising assets through mine development or generating value through the divestment of lower priority projects to support future growth plans and minimising shareholder dilution wherever possible,” he said.
Kingswest board changes
As part of the acquisition, the company also announced a few board changes including Galena Mining (ASX: G1A) founding chief executive officer Ed Turner moving into the role of chief executive officer at Kingswest.
Stephen Woodham, stepping down from the role, will remain as a non-executive director.
Galena’s founding chairman Adrian Byass will also join Kingswest as its new chairman, replacing Peter Bennetto.
In addition, Intermin managing director Jon Price will join the board as a non-executive director.
The acquisition remains subject to Kingswest completing a $4 million capital raising and other standard conditions.