ASX listed gold producer Southern Gold looks set to fast track development of its underground gold resources below the Cannon open pit mine near Kalgoorlie in WA, after executing a strategic agreement with heavyweight Northern Star Resources.
Northern Star will directly transfer its existing mining lease and a miscellaneous licence to Southern Gold, which lie adjacent to the latter company’s own mining lease covering the Cannon gold resource.
Notably, the transfer of the two tenements and all associated technical data comes at no cost to Southern Gold and lines Northern Star up as the obvious customer for the Cannon underground gold mine ores, if these materials prove economically viable for extraction.
The beauty of this agreement is that Southern Gold can now commence a resource definition drilling program down-plunge of its existing underground gold resource at Cannon, which presently terminates at Northern Star’s mining lease boundary.
The new agreement replaces the existing 5 year right-to-mine agreement over Cannon that Northern Star inherited when it took over the assets of Westgold Resources earlier this year.
By consolidating the two valuable, adjacent granted mining leases under Southern Gold’s ownership, company management said that moving the Cannon mine forward for potential development as a standalone asset or monetising the project in its own right would become easier.
In addition, the underground mine design can also be optimised to ensure that mine development is be established in the most beneficial location across the leases.
The company said that it believes the plunge of shear-hosted gold mineralisation trends to the north into the existing Northern Star ground, so the agreement feels like a win-win situation for both companies.
Southern Gold is presently working on a new development scenario for the proposed Cannon underground gold deposit and will look towards producing an updated mineral resource for the combined leases and then prepare an ore reserve statement to JORC standards in early 2019.
The current mineral resource on Southern Gold’s mining lease alone sits at just over 142,000 tonnes grading 5.17g/t gold for nearly 24,000 ounces of gold.
Under the new agreement with Northern Star, Southern Gold has agreed to assume all the environmental rehabilitation liabilities associated with the acquisition of the two leases.
Southern Gold Managing Director Simon Mitchell said: “The execution of this agreement with Northern Star is an important development. It enables Southern Gold to move forward with the asset where there is considerable value to be unlocked by a small underground mining operation.”
“Cannon is a very well-defined orebody at excellent grade and represents a very good development opportunity. With the addition of the mining lease to the north it also enables Southern Gold to have unfettered access, simplified and better optimised development scenarios and potential upside in the longer term should the Cannon orebody continue to plunge to the north.”
“We can now drill the structure without restriction … given the quality of the deposit mined during the open pit phase ... ".
By Matt Birney
