Avanco, Spitfire into gold projects

Subiaco-based minerals explorer Avanco Resources has signed an earn-in agreement with Canadian Jaguar Mining for the Gurupi gold project in Brazil, while Spitfire Materials has acquired 100 per cent of a gold project in Western Australia.

The Gurupi project is at an advanced stage, according to Avanco, covering about 137,000 hectares, and the company has initiated a scoping study to reassess its economics.

Avanco will win a 2 per cent stake by paying a $US2.2 million fee to Jaguar and spending $US300,000 to fix up regulatory and access issues around the site.

The next step will be completing a reserve estimate, where an estimate of more than 500,000 ounces of reserves will earn Avanco a 31 per cent stake in the project.

A further 29 per cent will be earnt by funding and starting a production plant with a 50,000oz per year capacity.

If Avanco fails to reach that threshold, Jaguar will have the opportunity to buy the 31 per cent stake back.

Finally, Avanco will be able to buy out the remaining 20 per cent interest in the project for the greater of $US6.5 million or a formula based on the gold price.

Avanco managing director Tony Polglase said it was a reasonably priced entry into Gurupi.

“The transaction is structured as a staged earn-in to ensure there is no material impact on the Company’s cash reserves or current development plans for Pedra Branca,” he said.

“This acquisition broadens the company’s exposure to gold and once in production, provides for a more balanced revenue distribution between copper and gold.”

Avanco already holds an interest in a number of projects in Brazil.

They include gold-copper project Antas North, where the company mined 260,000 tonnes of ore in the first six months of this year, and Pedra Branca, which is at the scoping study stage.

Meanwhile, Spitfire has bought 100 per cent of the England gold project in WA in exchange for 2 million shares, with the vendor undisclosed.

Shares in Avanco fell 3.2 per cent today to 6 cents each at the time of writing, while Spitfire was up 12 per cent to 5.6 cents per share.