Middle Island Resources has sold its Sandstone gold project and processing plant to Aurumin for $6m cash and $6m in Aurumin shares. Post the deal Middle Island will hold approximately 18.5 per cent of Aurumin’s issued capital, allowing it to maintain some upside to the project via its Aurumin holdings. Middle Island is looking to take its $6m in cash to up to Tennant Creek in the NT where the company is planning to hit the turbo charge button on its Barkly copper gold portfolio in that region.
Aurumin already has ounces of its own in the ground around Middle Island’s Sandstone project which it says will provide the shot in the arm needed to scrub up the economics at the project.
Tennant Creek shot onto the market’s radar last week after ASX-listed Emmerson Resources drilled a bonanza 117m intersection grading 3.38 per cent copper from 75m - and that was just 5 kilometres from Middle Island’s tenure. Notably, that hole ended in mineralisation and is yet to be fully tested and even included a 30m hit going 7.25 per cent copper and 2.69 grams per tonne gold.
Middle Island originally acquired the Sandstone gold project for $2.5 million in 2016 and has increased the indicated and inferred gold resources at the project significantly from 480,000 ounces of gold to 785,000 ounces of gold.
A feasibility study conducted over the Sandstone project by Middle Island in 2021 showed the Sandstone gold project would be profitable however not as a stand-alone asset.
Aurumin has additional mill feed options from its significant exploration ground around Sandstone that could create enough value to make the Sandstone project profitable.
The project houses a sizeable resource of 22 million tonnes going 1.1 grams per tonne gold for a total 784,000 ounces with a lot of potential exploration upside according to Aurumin. The project will add to Aurumin’s nearby 64,700 gold ounce Johnson Range resource grading 2.5 g/t gold.
Importantly, Aurumin says the Sandstone project has over 1,300 ounces per vertical metre in underground resources. It plans to drill the area further with the aim of increasing the grade and subsequently upgrading the prospectivity of the resources in any future feasibility studies.
Aurumin has a range of permitted infrastructure at its fingertips at the Sandstone project including a 500,000 tonne per annum processing plant that is upgradable to 750,000 tonnes per annum. Additionally, Aurumin will gain access to camps, offices, airstrip access and bore fields at Sandstone.
Middle Island developed a range of 11 satellite deposits that Aurumin plans to assess for production in addition to five new exploration targets that could potentially provide supplementary mill feed.
Middle Island Resources Executive Director, Brad Marwood said:
“The transaction structure allows Middle Island’s shareholders to retain a significant indirect interest in the upside potential of the Sandstone Gold Project via the Aurumin shares to be issued to Middle Island. That equity component, also offers shareholders considerable exposure to Aurumin’s existing significant gold project interests in the Johnson Range, Southern Cross and Kalgoorlie regions of Western Australia.”
“The consolidation of the projects around the Sandstone assets has been a core focus of MDI for the past three years. We believe that Aurumin has the team with talent to roll up the projects around Sandstone and we retain exposure to this significant upside potential.”
“Completion of the transaction will allow the Company to fully focus on expanding and developing its Barkly copper gold super project in the Northern Territory where recent drilling has confirmed the excellent prospectivity of the region.”
At face value the deal between Middle Island and Aurumin looks to be a win-win situation for both parties. Middle Island puts $6m in the tin alongside a healthy clutch of Aurumin shares and Aurumin will get to realise the value of its existing gold ounces that it will use to take another look at the economics of the Sandstone project.
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By Matt Birney
