Kalamazoo Resources (ASX: KZR) has moved a step closer to offloading its 1.44-million-ounce Ashburton gold project for $33 million in cash and shares after potential buyer, De Grey Mining (ASX: DEG) completed its on-site due diligence work program, setting the stage for a final acquisition decision in the next few months. $3m has already been paid by way of non-refundable deposit.
Completing the site-based work was a critical part of De Grey’s screening process and the 10-million-ounce Hemi gold deposit owner now plans to demobilise its due diligence staff from site.
Under a option to acquire agreement, De Grey holds exclusive acquisition rights to the project for 12 months until the start of February next year with an option to extend for six more months.
If a positive decision is made, at any stage up to the sunset date, the $33 million price tag will be split between cash and shares in two tranches of $15 million each payable to the $17.5m market capped Kalamazoo. Additionally, De Grey will assume Kalamazoo’s deferred payments and royalty commitments tied to the project.
And to kick off the original deal, De Grey has already lobbed a non-refundable $3 million option fee Kalamazoo’s way as part of the total expected payment.
De Grey will be busying itself with various finalising activities until the end of next month including building a photographic record of significant drill cores stored at the camp and complete relogging of the top-priority drillholes that were plunged into the core of the 1.07-million-ounce Mt Olympus gold deposit, part of the broader Ashburton gold project. Site rehabilitation and associated earthworks will also be finished shortly.
De Grey’s metallurgical drilling program - due to complete at the start of next year - is moving along briskly too, with geochemical analysis of samples already underway and the first batches of samples have been put together for testing. Additionally, De Grey has gathered samples from 90 historical RC drillholes covering about 14,500m of drilling to carry out detailed metallurgical and mineral analysis in the laboratory.
We are delighted to report that as part of the Ashburton Gold Project assessment process De Grey has completed its site-based work program. Should De Grey exercise the Option and acquire the AGP, Kalamazoo will receive an additional $30 million in cash and/or De Grey shares which should result in a significant re-rating of our Company and enhance its future prospects.
Kalamazoo’s CEO Dr Luke Mortimer
In addition to scouting for gold at its 100 per cent owned Mallina West project which sits along strike from and within the same structural corridor as De Grey’s 10-million-ounce Hemi gold discovery, Kalamazoo has also been busy elsewhere revisiting data on its extensive Central Victorian Goldfields portfolio looking for signs of hot commodity, antimony.
Included in the inventory of Kalamazoo projects is the 100 per cent owned Castlemaine goldfield project, which had historical production of 5.6 million ounces of gold, the South Muckleford gold project south of the Maldon Goldfield which produced 2 million ounces in its day together with the earlier stage Myrtle, Tarnagulla and Mt Piper gold projects near the world class Fosterville gold mine in Victoria owned by Canadian-based Agnico Eagle.
If De Grey pulls the trigger on Ashburton and pays Kalamazoo another $30m, it will forever change the completion of the junior explorer. Kalamazoo has a solid rolldex of projects in the wings and could do some real damage if it had another $30m to throw at them.
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