Aurumin (ASX: AUN) has bolstered its financial position at its Sandstone gold project in Western Australia’s Mid West region, with a refreshed “drill-for-equity” agreement coming hot on the heels of it closing out on a convertible note.
The company last week signalled it was primed and ready to get back to the drill rig at Sandstone after paying the final $1.07 million owing on a convertible note related to the project that is estimated to hold 946,000 ounces of gold. Now, its rekindled deal with drilling contractor Topdrill will give management crucial choice and flexibility to increase drilling while preserving its cash.
The agreement will allow Aurumin to satisfy up to half of the drilling costs from Topdrill by issuing the contractor with ordinary shares worth up to $1 million in the company under its 15 per cent placement capacity. The issue price will be determined by the five-day volume weighted average price (VWAP) immediately before each Topdrill invoice and the shares will be put under escrow for six months.
The agreement is set to expire on September 30 and will enable the company to iron out bumps in its cashflow – of which drilling can be a significant component.
Following recent divestments and share placement, we are now debt free with a strong cash position, having transformed the balance sheet. The drill-for-equity agreement gives us more flexibility, and we can use it, or not use it at our discretion, to either preserve our cash position or drill more metres.
Aurumin managing director Brad Valiukas
Valiukas said the recent financial moves had allowed the company to sharpen its focus on its flagship Sandstone gold project that sits 520km north-east of Perth.
Management recently sold a suite of 13 Mt Dimer tenements to Beacon Minerals for $3 million in a strategic decision that brought it closer to wiping out an overhanging $6.4 million convertible note debt related to its acquisition of Sandstone last year.
The company then continued its strategic and financial consolidation with the $250,000 sale of its iron ore rights at four of its Mt Dimer tenements to Polaris Metals – a subsidiary of WA giant Mineral Resources. However, it retains exposure to the iron ore upside at Mt Dimer through a $1-per-tonne export royalty and a MinRes commitment to reimbursing its expenditure for approved exploration on the four tenements.
Aurumin wiped out the final amount owing on the convertible note earlier this month and immediately declared a commitment to get back to drilling and “pouring gold bars”.
The company also put its foot on a new exploration licence over the remaining portions of the local greenstone trend that hosts the significant Bellchambers and Bulchina gold occurrences. The area also contains three historic gold mines that were worked in the early 1900s, producing 197 tonnes grading 10.58 grams per tonne gold for 67 ounces, 376 tonnes at 27.45g/t for 331 ounces and 82 tonnes at 5.92g/t for 15 ounces, respectively.
While the historic production in the old workings seems low by modern standards, the mineralisation is geologically significant and Aurumin plainly sees additional potential in the area. Since the discovery of gold in the area at the end of the 19th century, the Sandstone greenstone belt has produced more than 1.3 million ounces of gold from many underground and open pit mining operations.
The company’s rock chip samples have assayed up to 8.5g/t gold, while soil sampling has also highlighted anomalous gold around old mine workings that remains to be tested by modern methods.
The granting of the new exploration licence highlights the company’s gradual expansion of its Sandstone footprint, which now contains a mineral resource of 881,000 ounces of gold in its central portion. That is bolstered by the nearby Birrigrin and Johnson Range operations that make up the remainder of the project.
Aurumin now has the bit between its teeth and it will be interesting to see what those “old boys” left behind, especially now with the current gold price at a record $3133 being more than 150 times what it was “way back then” – at $20.67 per ounce in 1900.
Is your ASX-listed company doing something interesting? Contact: office@bullsnbears.com.au