Classic Minerals has its sights set on production at its Lady Ada and Lady Magdalene gold deposits in Western Australia after tabling a mining lease application for the Forrestania tenements that contain the two projects.
Once approved by the Department of Mines, Industry Regulation and Safety, the licence will allow the company to mine all the gold resources at Lady Ada and Lady Magdalene, which currently hold a combined 311,050 ounces.
Management says it plans to process ore from the two deposits at its Kat Gap processing plant, which is set for an upgrade following the execution of a binding term sheet with Swiss-based AuResources.
The agreement with the international fintech is for an initial US$10 million (AU$15.3 million), but also provides for the advance of a further US$50 million (AU$76.5 million) in five tranches of US$10 million (AU$15.3 million) each, subject to previous advances being repaid in accordance with the terms of the deal.
Classic says it will use the first tranche of funding to build production capacity at Kat Gap, in addition to developing the Lady Magdalene and Lady Ada deposits.
In October last year, the company announced the purchase of Forrestania from Reed Exploration, a wholly-owned subsidiary of ASX-listed Redivium. Before that, back in 2017, it acquired 80 per cent of the gold rights on the Forrestania tenements from a third party, with Reed retaining the other 20 per cent.
Management now says that once all conditions of the deal have been satisfied, it will have the rights to explore for gold and all other minerals, including lithium and nickel, at the operation.
According to the agreement, Classic paid a $50,000 non-refundable deposit to Reed on execution of the binding tenement sale. It will pay Reed a further $200,000 as a cash consideration, in addition to issuing 500 million ordinary shares at a deemed price of 0.1 cent each.
The company also agreed to pay Reed $106,196 as reimbursement for maintaining the Forrestania tenements in good standing. However, due to delays in satisfying some of the conditions of the deal, both parties have agreed to extend the deadline to the end of April or such other date as the parties may agree.
Forrestania sits near Southern Cross in WA and combined with its Kat Gap project, the company’s total resource comes to 8.41 million tonnes at 1.45 grams per tonne gold for 391,417 ounces.
With the initial funding from AuResources, Classic plans to spend $7.3 million on expanding plant capacity and $5 million on its operations including machinery hire, wages, consumables and camp extensions and costs. A further $1 million has been set aside to develop the Lady Magdalene and Lady Ada deposits, $1 million for mining studies to define an ore reserve and another $1 million will be set aside for contingencies.
The Kat Gap operation is a shallow, previously unmined gold deposit that was first uncovered in the 1990s when the now-defunct Sons of Gwalia completed a resource estimate and scoping study at the site.
Management says it plans to kick off mining operations at Forrestania during the upcoming financial year, subject to approvals and scheduling.
Is your ASX-listed company doing something interesting? Contact: office@bullsnbears.com.au