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Venus/Rox breathe new life into old Youanmi gold mine

Small cap listed explorers Rox Resources and Venus metals have joined forces to breathe new life into the historic Youanmi gold mine in a deal that looks to be a win for both parties.

The old Youanmi mine in the Murchison region of WA was closed in 1997 when the gold price was hovering at around A$400 – A$450 an ounce.

Surprisingly however, it still houses almost 1.2m ounces of gold going very nearly 3 grams per tonne – and that’s before any near mine exploration successes that are now looking increasingly likely after Spectrum Metals recently drilled 100 gram plus dirt just 25km south of Youanmi on the same shear zone.

Last year, Venus cleverly brought together two warring parties to get its foot in the door at Youanmi in a deal that would see it stitch up an option agreement to pick up the entire project and surrounding leases from private owner Oz Youanmi Gold Pty Ltd for around $4.8m in cash and scrip.

At the time, Oz Youanmi was under plaint from a third party, St Clair Resources Pty Ltd who will be paid a further A$650,000 in go away money by Venus to get the deal done.

Venus has teamed up with the cashed up Rox to fund the deal which could ultimately see Rox end up with around 70% of the key Youanmi project with Venus holding 30%, a net smelter royalty of 0.7% and the non-gold rights to the wider regional tenement package.

Rox Resources has been looking for a smart way to deploy its nearly $8m in the bank that it picked up from the $15.8m sale of its share in the Reward Zinc project in the Northern Territory to Teck Australia. Teck long dated some of the monies from that sale which means that Rox still has more to bank from it in the coming years.

Venus and Rox will initially form an equal joint venture to develop the mine, which has a current JORC 2012 resource of 12.4Mt going 2.97 g/t for 1,190,600 gold ounces.

Rox will acquire its initial 50% interest in the Youanmi mine by paying $2.8m in cash and issuing Venus with $200,000 worth of Rox shares priced at 0.8 of a cent each.

Rox is also obliged to spend at least $2m in exploration over the next two years. 

At any point up until June 2021, Rox may increase its stake in the mine to 70% by paying $3m in cash and shares to Venus. Venus will retain a 0.7% royalty over the project and the non-gold rights to the wider exploration play in addition to its 30% interest.

Rox said that it plans to carry out an aggressive near-mine exploration and pre-development program at Youanmi once the transaction is completed later this quarter.

In addition, the two companies have also entered into separate equal JV arrangements for the gold rights within Venus’ significant regional tenement holdings and Venus’ existing 90% JV with a third party. These JVs will initially be managed by Venus.

Before being mothballed decades ago the old Youanmi mine achieved historic production of 667,000 ounces of gold grading a very respectable 5.42 grams per tonne gold from open pit and underground mining operations.

Notably, the Youanmi operation also plays host to an existing but mothballed 600,000 tonne per annum CIP processing plant and associated mine infrastructure.

Whilst it will definitely require a bit of TLC to become operational again, the presence of infrastructure on site adds a touch of excitement to this deal and could see Youanmi ride again without too much difficulty.

Rox Chairman Stephen Dennis said: “The acquisition of the Youanmi gold project is consistent with the company’s stated objective of acquiring near-production assets within its financial capacity.”

“Since our new CEO Alex Passmore joined the company, our efforts to identify a suitable development project have increased and we look forward to realising the potential we believe exists at Youanmi.”

Venus Managing Director Matthew Hogan added: “Joining forces with Rox Resources at Youanmi is a great deal for Venus, in regard to the way in which the company has managed to arrange the settlement of the Youanmi gold mine acquisition which is with minimal dilution to VMC shareholders coupled with mitigating risk.”

“… significant drill testing programs will commence as soon as possible on numerous geochemical and EM anomalies identified along strike to the north and south from the recent Penny West discovery site by Spectrum Metals.”

Venus recently completed a review of five prospective looking EM targets centred about 5km north of Penny West that were delineated from a geophysical survey last year.

The review outlined exploration targets similar in size to the historical gold lode mined at Penny West and located on the same prospective Youanmi shear zone corridor.

Going forward Venus will now acquire Oz Youanmi for $1.8m in cash and $3m in Venus scrip and pay St Clair $650,000 in cash. It will then vend the project into the JV with Rox.

Separately, Rox will earn a 50% and 45% stake in the two regional JVs with Venus by contributing a further $1m of exploration expenditure.

It also has the option to take over management of both regional JVs from Venus, if it moves to 70% ownership of the Youanmi mine JV.

Rox’s foray into the Youanmi gold mine and the regional exploration tenements appears to be a natural fit for its new gold focus following the appointment of ex-Patersons Head of Research Alex Passmore as its CEO earlier this year.

The transaction is a solid win-win for both companies with Venus able to complete the acquisition of the Youanmi mine with minimal dilution and Rox able to deploy its capital into a project that at face value looks to be a real chance of getting into production.

Watch this space.

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Top 10 Shareholders

Substantial shareholders as published in the annual report.
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Total Shareholder Return as at 31/10/19

1 year TSR5 year TSR
63rdRox Resources120%-10%
496thNex Metals Exploration-16%22%
620thAurora Minerals-38%-16%
721stMEC Resources-53%-28%
730 WA (and selected non WA) listed companies ranked by 1 year TSR relative to other companies with similar revenue
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Share Transactions

26/07/19
$60k Bought
27/06/19
$42k Bought
15/05/19
$100k Bought
Total value as at the date of the transaction
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Revenue

167th↓Aurora Minerals$355k
168th↓Rox Resources$349k
170th↓Nex Metals Exploration$343k
171st↑MEC Resources$339k
485 listed resources companies ranked by revenue.
Source: Morningstar

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