Kalamazoo Resources (ASX: KRZ) has moved a step closer to selling its 1.44 million-ounce Ashburton gold project (AGP) in Western Australia’s Pilbara region to De Grey Mining after the latter completed a metallurgical drilling program as part of its due diligence.
It marks a key requirement by the $3.3 billion market-capped De Grey as part of its $33 million option to acquire the project. After signing the 12-month option agreement in February, the WA mining giant has been conducting its due diligence studies at the AGP, including a 10-hole, 2152m diamond metallurgical drilling campaign at the project’s biggest deposit – Mt Olympus.
Kalamazoo says samples have now been sent for laboratory analysis to characterise the refractory nature of the ore. Select samples have also been despatched to ALS Metallurgy as a part of a multi-pronged due diligence approach.
The process also includes the re-analysis of historical drill core and other geotechnical studies as De Grey considers whether to exercise its option to purchase the project. The deal would be split into two tranches of $15 million, payable in either cash or De Grey shares.
The company has already paid a $3 million non-refundable option fee to Kalamazoo and has exclusivity on the project for 12 months, with an option to extend for another six months. If the acquisition goes ahead, De Grey will also take on Kalamazoo’s deferred consideration and royalty obligations tied to the project.
Should De Grey exercise its option and acquire the AGP, Kalamazoo will receive a further $30 million in cash and/or De Grey shares, which would be an excellent result not just for our shareholders, but also for De Grey and its proposed Hemi Gold Project in the Pilbara.
Kalamazoo Resources CEO Dr Luke Mortimer
The AGP hosts gold resources across four main deposits, including the more than 1-million-ounce Mt Olympus deposit, and sits at a total resource of 16.2 million tonnes grading 2.8 grams per tonne gold for 1.44 million ounces. Kalamazoo stands to benefit from the sale, while also avoiding the long-term development risks commonly tied to such a large-scale project.
Management says its focus remains on advancing its exploration efforts at its 80 per cent-owned Mallina West gold project that sits just 50km south-west of De Grey’s flagship Hemi discovery.
Kalamazoo recently identified several gold targets along the same major shear zone as Hemi using magnetic and gravity surveys and 3D magnetic modelling from previous work done at site. In particular, one such target has married up with an earlier high-grade bottom-of-hole intercept of 10.35g/t across a 1m width at the Wattle Plains prospect.
The company has also expanded reviews at its Victorian gold projects, which have freshly been pored over in a search for historic records and its ground’s potential for the critical metal, antimony.
The news of De Grey’s progress is another step in the unfolding of the AGP purchase option. If the company decides to finalise the acquisition, Kalamazoo will be significantly cashed up and ready to accelerate its exploration activities across a portfolio of Australian precious and critical metals.
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