Corazon Mining has cemented its transformation from explorer to emerging developer, completing a company-making acquisition of the Chalice gold project in Western Australia’s prolific Higginsville district.
The deal will also see former owner and major gold producer Westgold Resources emerge with a strategic 19.9 per cent stake in Corazon, a strong show of faith that aligns the two companies with Chalice’s future.
The deal marks Corazon’s third WA gold project purchase in less than a year, following Two Pools and Feather Cap, and importantly, now hands the company an advanced development asset on a granted mining lease.
The company is now cashed up and ready to get cracking after settling a corresponding $16.5 million placement to fund an immediate drilling program and technical studies at Chalice.
The project comes with a JORC-2012 mineral resource of 191,000 ounces of gold at a solid grade of 2.74 grams per tonne. Notably, the mineralisation remains open along strike and at depth across all four of its defined zones, pointing to clear potential for Corazon to rapidly grow the resource.
However, the real allure may lie in the numbers behind the numbers. The company says the current resource was calculated using a conservative gold price of just US$1700 (A$2450) per ounce. With bullion prices now trading materially higher at US$4065(A$5866), there is a significant opportunity for a near-term re-optimisation of the resource.
A simple rejigging of the pit shell and cut-off grades against today’s gold price could potentially add fresh ounces hiding in plain sight, although previously considered outside the historic economic boundaries.
Corazon Mining managing director Simon Coyle said: “This is our third WA gold acquisition in under twelve months, and it cements a deliberate strategy to build scale in the best gold address in the country. We will waste no time moving straight into an aggressive resource growth drilling program.”
Chalice is no stranger to production, with a significant history of delivering 645,000 ounces at an impressive average grade of 5.4 g/t gold.
The historical performance, well above the current resource grade, highlights the potential scale of higher-grade material that could be lurking within and beyond the existing resource envelope.
The total consideration for the acquisition is $25.7 million, comprising $8 million in upfront cash, 47.6 million Corazon shares issued to Westgold - representing 19.9 per cent of the company’s expanded capital - and up to $11 million in deferred cash payments tied to resource expansion milestones.
Strategically, Chalice sits on a granted mining lease just 22 kilometres down a sealed road from Westgold’s 1.6-million-tonne-per-annum Higginsville processing plant.
Westgold is planning to expand that facility to 2.6 million tonnes per annum, offering Corazon a clear and logical pathway to production that is already taking shape.
With the deal now done and a strengthened balance sheet, management says it will waste no time getting the drill bit spinning. The company is already progressing plans for an initial 10,000-metre phase-one drilling campaign, slated to kick off in the third quarter of this year.
The program will initially target priority near-surface mineralisation above the Kronos zone, one of four known gold zones at Chalice, before testing a 700-metre untested extension of another zone, dubbed Olympus and a largely unexplored structural corridor two kilometres to the east.
In parallel, Corazon says it will continue exploration at its other WA gold projects, Feather Cap and Two Pools.
The company now features a high-grade system on a granted lease, a major producer on its share register and cash in the bank to fund an aggressive drill campaign.
It looks as though Corazon has timed its run perfectly to capitalise on a strong gold market. All eyes will now be on the upcoming drill program to see if it can quickly expand on Chalice’s golden pedigree.
Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au
By Murray Ward
