De Grey Mining, which is already on track to produce more than 500,000 ounces (oz) of gold per annum from its Hemi project in Western Australia, is keen to further boost its output.
The company could do this through a $30 million acquisition of Kalamazoo Resources’ Ashburton gold project (AGP), which has an existing 1.44-million-ounce gold resource and spans 217 square kilometres of exploration tenure nearby Hemi.
“Since acquiring the AGP in 2020, we have added significant value to the project in a short period of time and should De Grey exercise the option and acquire the AGP, Kalamazoo will receive a total of $33 million in cash and/or De Grey shares,” Kalamazoo executive chair Luke Reinehr said.
“On completion, this will be an excellent result not just for our shareholders, but also for De Grey and it’s proposed Hemi gold project in the Pilbara, which we identified as the natural regional processing facility for the high-grade sulphide gold contained at the Ashburton gold project.”
De Grey has an exclusive 12-month option to acquire the Ashburton project, which can be extended by a further six months if desired.
During the option period, De Grey expects to complete metallurgical drilling and testwork at Ashburton’s Mount Olympus resource, remodel geological mineralisation, alteration, weathering and geotechnical domains for processing and mining purposes, and run open pit optimisations.
De Grey is also required to spend a minimum of $1 million on exploration and assessment activities at the Ashburton project and must share all results with Kalamazoo.
The emerging gold miner sees the Ashburton project as an opportunity to consolidate regional opportunities surrounding the Hemi gold project, which is on track to produce 553,000oz of gold in its first year of operation at an all-in sustaining cost of $1229/oz.
If De Grey chooses to acquire Ashburton, Kalamazoo will have the financial means to aggressively advance gold exploration at its assets in Victoria and WA. Funds could also support further acquisitions that best position Kalamazoo’s portfolio.