Forrestania doubles down with second 2Mt WA gold ore deal

Forrestania Resources has secured a significant ore supply stream for its Western Australian gold processing hubs, executing a deal that gives it the right to purchase and process up to two million tonnes of ore over the next two years.

The company has struck two key agreements with MEGA Resources, underpinning its strategy to build a regional processing business around its Edna May and Lake Johnston facilities.

The first deal, an ore purchase agreement, provides Forrestania with the right to process up to two million tonnes of MEGA’s material over 24 months, in campaigns of between 50,000 and 150,000 tonnes. The ore can be processed at either of the company’s plants at its election, giving it significant operational flexibility.

Under the terms of the deal, Forrestania will take ownership of the ore on delivery and pocket all the gold recovered through its processing circuit. The agreement outlines a commercial pricing formula linked to a baseline of $155 per tonne at an ore grade of 1.43 grams per tonne (g/t) gold with a 91 per cent processing recovery rate.

The company says the first ore to be sourced under the agreement will come from current stockpiles at the Taipan open pit, which is operated by MEGA Resources.

In a parallel move, Forrestania has also signed a five-year master services agreement with MEGA, establishing a preferred framework for the contractor to provide future open pit mining, drill and blast, and other mining support services. Importantly, the company says the agreement provides a mechanism to deploy services quickly without renegotiating a full contract for each project.

The savvy deals slot neatly into Forrestania’s stated strategy of building a significant WA gold business by developing two complementary processing hubs at Edna May and Lake Johnston. Management sees the hubs as a scalable platform for future production and regional consolidation, a strategy now underpinned by a global mineral resource estimate of 58.6 million tonnes grading 1.1g/t gold for a hefty 2.08 million ounces.

Forrestania Resources executive chairman David Geraghty said: “The execution of both the Ore Purchase Agreement and Master Services Agreement with MEGA Resources represents another important step in advancing Forrestania's processing hub strategy and restart readiness initiatives. The agreement provides a commercial framework to source and process third-party ore through our Lake Johnston and Edna May facilities, whilst the master services agreement establishes a long-term strategic relationship with an experienced mining contractor and provides Forrestania with flexibility and optionality.”

Refurbishment of the 3.2 million tonne per annum (Mtpa) Lake Johnston mill is expected to be completed by year-end. Additionally, to get the recently acquired 2.8-million-tonne per annum (Mtpa) Edna May processing plant match-fit for its planned 2027 restart, the company has now ordered key long-lead items, including replacement mill liners slated for delivery in November.

The MEGA deal is the second major ore purchase deal the company has locked in recently, following a similar arrangement with ASX-listed First Au. That agreement provides for another two million tonnes of third-party ore from First Au's Gimlet nearby project to feed Forrestania’s processing network. Together, the two deals appear to be cementing Forrestania's foothold in the prolific Southern Cross-Kalgoorlie gold district.

Forrestania has been busy securing its consumables supply chain and operational readiness. Just last week, it announced a five-year sodium cyanide supply agreement with Orica for the Lake Johnston facility, a haulage agreement with Campbell Gold Haulage and a framework for laboratory services with SGS Australia.

Forrestania has also beefed up its financial firepower, appointing seasoned mining finance heavyweight Tom Plant as chief financial officer from January. Plant brings 30 years of resources, banking and corporate finance experience to the table, spanning project funding, capital markets, treasury and major transactions.

Most recently CFO at Australian Vanadium, Plant played a key role in its $230 million merger with Technology Metals Australia and helped advance government funding initiatives for critical minerals projects. His arrival looks particularly timely as Forrestania moves from assembling its gold portfolio towards the considerably bigger job of funding, developing and filling two processing hubs.

With two separate third-party ore purchase agreements now in the bag, critical supply and service contracts falling into place and a 2-million-ounce-plus resource to draw from, Forrestania isn’t just talking about a two-hub processing strategy; it’s now executing a series of deals that look set to bring it to life. The company appears to be methodically stitching together the key ingredients for its transition from explorer to producer.

Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au