Aurumin Ltd has wrapped up a 54-hole reverse circulation program at its Central Sandstone project in Western Australia’s Mid West region, designed to test a clutch of high-priority iron-rich prospects that are key to a proposed exclusive option agreement with private entity Newcam Minerals.
The drilling program, for 1826 metres, zeroed in on seven priority targets identified by detailed surface mapping that laid out a series of banded-iron formations up to 40m wide over a 6-kilometre strike.
Previous rock chip sampling over the outcropping formations netted grades of up to 67 per cent iron alluding to the potential for the project to produce direct shipping iron ore.
The priority target areas are characterised by shallow dipping banded iron formations with high-grade hematite close to the existing infrastructure. Conveniently, the project area lies on a pre-existing transport route from other operating iron ore deposits in the region.
The latest samples are being prepared for laboratory analysis, with the results expected in late March. Aurumin is also going to re-assay historic pulps where available in its priority target areas.
The drilling campaign is part of a due diligence process Newcam is undertaking to decide whether it will take up an option to form a joint venture for the iron rights over three mining leases within Aurumin’s Central Sandstone project, which is 495 kilometres east of Geraldton.
Aurumin managing director Daniel Raihani said: “The potential joint venture with Newcam could be worth up to $7 million in project funding and will accelerate our activity, remove logistical hurdles for export and de-risk the project overall. Importantly for Aurumin shareholders, by joint venturing the iron ore we maintain far more upside and potential profit compared to a royalty-based transaction.”
Newcam already mines and exports iron ore in the Mid West region from the Mt Gould and JWD Wiluna mines through to the Port of Geraldton, where the company has already established site-to-port haulage routes, a long-term lease on bulk storage capacity and access to ship loading.
The two companies signed a deal in October last year giving Newcam a six-month option on a 50 per cent interest in the iron ore rights at the Central Sandstone project for a $500,000 upfront payment. Newcam will pay a further $500,000 if it exercises the option and stump up a $5 million loan to start up production. The money would be repaid from operating profit.
The private company will throw a further $1m into Aurumin’s bank account if a 2012 JORC-compliant resource is released for more than 3 million tonnes grading an average 60pc iron. That could be handy fillip for Aurumin, which has a portfolio of WA projects where it is on the hunt for gold.
It is also paying for half of the agreed drilling program.
Newcam makes for a strategic bedfellow as Aurumin looks to add value to its Central Sandstone Project, which also hosts an 885,000-ounce gold resource, a 500-kilotonne per annum carbon in leach processing plant in need of refurbishment, permitted tailings storage, a bore field and camp facilities.
An iron ore price hovering between $90 per tonne and $120/t over the past year has probably dampened the enthusiasm of even the most stoic iron ore explorer. In comparison, the gold price is continuing its stellar run closing at $4623 in yesterday’s trade.
Aurumin says it wants to advance both its gold and iron ore projects in parallel. Commodities can be tricky – but the junior explorer looks to be playing it smart with a starter on both sides.
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By Helen Barling
